All Forum Posts by: Tom Kastorff

@Josh Quinn, What @Adam Gilbert wrote is pretty spot on. It's probably worth a call to pick his brain. My current PS agent has disappeared a bit on me, I may have to do the same!

Regarding the many various rental restrictions in PS, scroll up page 1 to my detailed response, as there are many restrictions, especially depending on SFH vs. condo and how often you can nightly rent them, permits, taxes, etc. I can PM you the town ordinance contact if you want to reach out to him directly, but I pretty much asked him every question possible and posted most of the relevant notes above. I would echo Adam that a $500k budget, while may sound big in some parts of the US, is below median for CA. Especially for a rockin' SFH in PS that needs no work. I'd probably push to $600-700k and per some of what Mike G has alluded to in his notes, often in high-end locales like PS, while scary, the more expensive homes can be easier to rent. Do your homework, interview a few PM's, and do the math. Also agree that the $150 for gardening and pool is about right. PM's are running 25-35%.

Lastly in the current environment we are in (speaking mostly to the outrage by many towns / NIMBY neighbors hating on airbnb's), I think there is inherent risk in every single town that things could change on a dime. You have to do your homework and assess your own risk against the answers. PS has largely gone through it, they consider themselves the toughest town in the US for this, so not sure how it could get worse. It would crush the tourism market if they outlawed it completely IMO. Not nearly enough hotels in town to support tourism if you had no STR market.

@Kacie Benson   Most of your basic assumptions are right, but if you haven't already, I would really sit down (virtually, phone call) with a lender and model these out with real hard numbers. I just refi'd with @Chris Mason (no relationship, no stake in the game, met him on BP on Jan 29 and closed a refi a week ago) and recommend him for CA loans, he has a handy google sheet he can web share with you and walk through all the numbers and scenarios. Then plug into BP rental calculator to add all the other ongoing costs.

You can buy whatever first property you want, be it FHA house hack or rental prop in PS or triplex in Ohio. Really personal preference, and probably comes down to the best deal. In the last couple weeks I've made offers on everything from a small condo in PS (per our other thread) to a triplex to a russian river house to a ski condo. I would have taken which ever one gave me the best deal. None bit. I move on.

I am curious where in town here you plan to buy this mythical $350000 condo that could also warrant a $1000/mo room rent? Am I missing super cheap condos in Little Italy? I will buy 4 at that price! Also a $2435 payment I assume you are not adding insurance, utilities, capex, maintenance, etc. The average monthly cost will be higher. But as a house hack you do have benefits of tax write offs, mortgage pay down, and after 13 months capital gains exemption.

And where is this $180000 rental that can support consistent $1600/mo rent? (I assume Socal from your threads, harder to get close to 1% rule here). Maybe in downtown PS where you can walk to the ACE and Lulu's, but even that seems a little high. I would call 2-3 top rental prop managers in PS and take a poll. When I was in negotiation on the triplex I was not seeing market rent that high (although rentometer tried to say it was) based on real world feedback, and that was in prime PS. And if you are talking Palm Desert or Hemet, I really struggle to see that. And is that $1223 monthly payment counting HOA, insurance, any utilities, capex and maintenance reserves? IMO some of your numbers seem close, but at these small purchase points, being off by a couple hundred bucks can make the difference between somewhat profitable and in the red.

I am playing a bit of devils advocate here, to make sure you're tight on your numbers, and different folks have different views, just offering you mine. Go with the best deal first, and go from there. Don't look at it as "one or the other" in my view.

Lastly to your question of "Can you buy another property after using an FHA loan?" this is why my first recommendation is to talk at length with a lender. A lot of these answers depend on your income and DTI levels. If you make half a million a year, you can do a lot of things very fast because your statements and DTI limits are large. If you make $35k a year as a digital marketing rookie, your allowances will be much smaller. You have to pencil these all out with a lender, that is the sole person that can tell you firmly yes or no on these things.

"there might be a law against this? " not sure what this pertains to, nothing you wrote is against a law. Talk to a lender about your options on every scenario you are posing. 

Good luck!

@Kacie Benson just be sure to have question #1 to any seller/agent in PS proper be "does this complex/HOA allow STR's" because so far I have found 97% don't. Some really nice units in Smoke Tree came up recently for under $200k, but the HOA no longer allows <30 day rentals. Boom. Dead for Airbnb unless you want to try and do monthly rentals, which is much tougher. Most listings do not call this out.

I have no interest in Hemet or any of those neighboring hoods, just not attractive to me as an owner or user. I want to use my vacation rental too. Hence my radius is very small in proper PS walkable to all the shops and restaurants. But many folks do very well in Palm Desert or Indian Wells or Coachella, like John I tagged above, but he goes with big party houses, a different approach. I have no idea if a sub $200k condo in those areas will have any success at all. I recommend you reach out to him if you want to focus on those areas. 

It really depends on your goal and your budget. Often the bigger more expensive properties can pencil out easier than the small ones, but that requires a lot more capital up front. 

 This is exactly what I just did. Closed a cash-out refi at 3.65%, put the cash in HYSA to park, and have been investigating 3 different markets and have made a couple offers. I want to both lock in the low rate, and have the cash ready to move. The the folks saying "wait till you need it" that is bogus, as it takes weeks to complete a refi. You could miss the target opportunity tomorrow. Then what do you do? If you're ready, go execute, and get your cash ready to go. I am pulling cash from all corners of my accounts to hoard in my HYSA "war chest" ready to move on at least one or two props rest of year. With the COVID scare, stock market crashing a bit (for any savvy long term investor, who cares, but regular folk get scared any time they see red), election causing uncertainly, it is inevitable that people will look to sell their extra property, and also likely scare away half the buyers. I think this is what you are prepping for OP, so am I. 

For sure. Up in bay area for work, you available Fri? Or early next week. 

I thought this as well after reading her initial posts. Pseudonym profile name, no pic, no data in the profile. Not surprising folks are not rushing to answer high level questions. 

@J Val - Yes, that's the big mountain. Do some research. Lot of properties on the market, but IMO most are overpriced. I am waiting for the market to cool, either during the offseason or because of economy or other factors. Very few properties work via the standard metrics you read on BP (ie "1% rule"). My property is doing great, has appreciated tremendously in a couple years - via finding a deal (low acquisition cost) and forced appreciation (nearly gut remodel). Hard to find up there right now. If I could find more of these I would buy a half dozen. 

While you didn't directly ask anyone to decide a budget for you, you didn't state one. You asked John what was realistic. How is he supposed to know that? Does he know you? Or your finances? So many people come on this site and just throw out extremely generic and basic open ended questions without doing any research or homework of their own, or providing any specific details or metrics. People are here to help but we have to know what you're working with. A $300k budget in PS or Palm Desert is vastly different than a $1M budget. Hard to make --any-- recommendations without knowing that. And frankly as John replied smartly, go do your homework on what you can buy for $300k. In PS specifically, for a SFH, I am not sure you can find anything. Most SFH that hit the right metrics of price - location - bedrooms - pool and so on will start at $500k and get to $1-1.5M really quickly. I can barely find a viable condo in PS under $300k that is legally allowed to STR.

SFH in PS (unsure about Palm Desert and other neighborhoods, @John D. would have to chime in) require someone to meet every guest at the door for every rental. Pretty much requires a property manager or someone you employ to do this. These costs add up. I believe this is what John is alluding to with this suggestion for you to pencil out homes at various price points. Sometimes the higher price points actually pencil out better because the gross income outweighs the costs, it's about advantages at scale. If you have the same costs at lower price points, it can often be tougher to pencil out because you can only charge so much per night.

Help us, help you ... good luck

@J Val up to you on what is a better "first time option" - certainly if you can successfully navigate buying and operating a rental in PS, you can do it anywhere, so I wouldn't let the restrictions stop you if that's a location you want to invest in. Just have to really do your homework and know the market and limitations. If I find a great deal, I have no hesitations to jump in, but it makes finding a great deal a bit tougher. 

My first STR is also in a ski town, but not BB. I can see the attraction there, since it is close and popular, and there are also some threads you can search where folks discuss successful STR in Big Bear recently. As a snowboarder personally I no longer frequent BB because it's overcrowded and a bunny hill. I prefer to take the longer drive up the 395 to the big mountain.

Your comment to John about a "realistic budget" again is all personal preference. You can buy $200k condos or million dollar houses, how can anyone decide your budget for you? John references a property that does $500k/year so imagine the acquisition cost of that property. There are options for everyone. You have not yet stated your target zone of condo or house or MF, and what your target budget is. Hard to give recommendations without that. The guy owns a ton of property in Palm Desert so one can assume his experience in the area has been good. Be more specific. 

@Erik Grahn sounds like this plan could work for you then. The devil is always in the details. If you can find a viable MF home in the SFBA in an area you're willing to live in, it could work. Especially if you remodel / forced appreciation on the unit you'd live in, so when you moved out in the future that unit would rent for more. You wouldn't cash flow on it while living there, but that's what house hacking is. But, this is a much higher cost business model vs. using that money to buy more volume in cheaper areas. Only you can decide which model you want to start with. 

I'm not a golfer, so likely not me. I will DM you, would still be interested in grabbing lunch late next week (out of town Mon-Wed for work) if you want to spitball ideas and contacts. I will DM you @Chris Mason's info or you can check his highly-detailed profile for his website and direct contact info. He is hyper efficient with running you through his calculator of numbers and scenarios.