All Forum Posts by: Tyler D.

Do you invest in PA? It seems like you have a few markets there where you can achieve both.

I'm particulary wary of the advice online to buy in heavy cashflow markets, many of which are depreciating and losing population. I currently own properties in one of these markets and while I doubt I will lose money, I think it could be better spent elsewhere.

I'm also wary of the heavy appreciation, negative cashflow markets like SF/NYC. I may be missing something, but I don't see how you can expect 6%+ appreciation to continue forever when inflation hovers around 2-3%. It seems more like speculating than investing to me.

I'm thinking the smartest strategy is to pick an area with good fundamentals for future growth, and bank on an average appreciation rate, while at the very least breaking even monthly. So I'm pretty solidly in the "both" camp as well. 

Here is an example of my line of thinking:

Certain markets, like Orlando, Tampa, etc, are growing incredibly quickly, but there are close to no 1% deals. 

For comparison, you could buy a 1% deal, or even 2% in a town that is losing population. Take most markets in the midwest for example. You can expect little to no appreciation on most of these houses. 

Assuming 3.8% appreciation over 30 years (which is average), our Orlando/ Tampa house will have tripled in value. It's logical to assume that rents would follow, and now our Florida house is performing much better than our midwest house whose value and rents have risen much more slowly.

That being said, this is all in theory, but the logic seems solid. Given a long enough timeframe, would you rather invest in the place that people are going to or the place that people are leaving? It seems like the smarter option to buy properties that scale up into progressively better and better investments over time, than to buy one that starts out better, but fizzles out or stagnates.

Appreciation can't last forever? Maybe not in many midwest markets where property values have remained stagnant over the past 20 years.

Most places experience some level of appreciation. The example you mentioned is not the norm, as most places are not affected by IPO millionaires bidding up $3million homes. 

Which part, specifically?

Interesting. Do you think that permanently locking interest rate increases in OR will cause them to lag behind? In CA you could see nieghbors paying drastically different taxes, because of the 2% rate lock.

Hey BP,

I'm considering buying a property to first owner-occupy, and later rent out in the Bay Area. I'm looking to accomplish a few things:

1) Take full advantage of Prop 13, by buying a fixer at a low price and locking in my tax rate at a low value.

2) Buy in an undervalued area that is expected to grow in the future. I'm looking at the East Bay, in particular.

3) Not buy at the top of the market. I am wary, seeing the amount of people leaving the bay area, at the current sky-high prices. The alternative would be to simply rent in the Bay and invest elsewhere.

4) Deal with the minimum amount of hassle with rent control/ tenant protections. For this reason, I am thinking my best option would be to buy a SFH and rent out rooms.

What are your thoughts on this? As said in #3, I am very wary given the current market conditions. That being said, I would like to take advantage as historically, the Bay Area has been an excellent place to invest. Should I go for it, and if so, what would be the best strategy to use?

Hey BP,

I'm looking to invest for the long term, and am considering buying a fixer in California to lock in my property taxes with prop 13. It seems like an excellent long-term play.

I'm curious on if any other states/ cities offer a similar benefit? I've been told that Oregon might, but have not found any proof to back that up.

Hey BP,

I have read a myriad of articles talking about the various tax benefits, but I am unclear on how they apply in the real world. 

Say that you are a high earner, earning $500k per year. The top end of your income is being taxed at roughly 50%. What would be the best way to lower these taxes? Which Real Estate tax deductions apply to personal income, and which only work for income from the Real Estate itself?

Would it be smart to target areas with high property taxes, for that deduction, or to buy negative cashflowing properties in high-appreciation areas?

Let me know your thoughts on this.

To be clear, I didn't say anything about refi'ing. I was saying that I wouldn't pay down already existing debt when that money could be reinvested elsewhere. If the interest rates were higher, it could make sense to pay down debt early, but with the current rates of 2-3% I'd much rather put that money to work elsewhere. 

If I were to buy a property today, and the rates in 30 years were once again at these historical lows, I would absolutely refi that money to put it to work elsewhere. There is a reason that most RE investors prefer to leverage vs buying properties with cash.

I suppose it could be that way, if taken to the extreme. I don't know much about I/O loans, but don't they typically come with higher interest rates? That would sort of defeat the purpose, as you can certainly beat a 2-3% interest rate with other investments, but higher rates are more questionable.