Buying in Norther California
Napa, CA · Member since 2013 · 11 posts · 3 votes
Buying in Norther California
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ voteson another thread one poster asked how to amass wealth or great wealth, with great wealth being described at net worth of 5 to 10 million.
The point the CA investor makes is that it is wholly possible to get to the 5 million mark buy buying Passive CA neutral gear to slight negative gear properties. My point that I made was what I know growing up in Cupertino in the 60's and buying my very first home in Milpitas for 70k.. during the 60's and 70's you could buy a home for the same price in Palo Alto as you could in Kokomo Indiana or anywhere else in the mid west ( were Quote un Quote Cash flow homes are bought ) And if you say bought 5 of them in Palo Alto and kept them for rentals long term One they would have cash flowed like crazy after 10 years or so. And 2 they would be worth today 7.5 million for 5 of them and you paid 30k for them back in the 70's same with ?Cupertino.
Now you could have paid 30k for a home in KC, Memphis, Indy, virtually any of the soup de jour cash flow towns.. same time frame same price points. Well those homes today are worth... Yes maybe 60k and they would not have cash flowed over time anywhere near the CA properties.
So what I tried to point out is this is just regional and in a lot of ways was just luck and passive investing to the extreme.. Just happened to live in one of the greatest place's on earth and the market took you for a ride.
@Account Closed
Bob what would you have paid for a Honolulu home in the 70's that's worth 500 to 1.5 today... I know one of my bizz partners just bought a fixer for 1.5 over on the other side of Diamond head.. right across the street from that crazy Japanese billionaire that owns all those ocean front places that sit vacant.. I heard Baldwin bought all of that for 100 mil or so..
Out of state is fine for some but as Bob points out its not a big money game its a slow cash flow game and your cash flow can go backwards on you very quickly if you don't have the right teams in place. or you guy low end C property and live in CA and expect it to perform like A or B.
One thing about CA.. the market will take care of bad rental situations over time. Bad rental situations in the Mid west cash flow market ( IE bad tenant loss of value because of trashed home or what Ali described as she lost money getting her rentals straightened out) Can in many instances never be recouped.
One must always remember that in the foreclosure epidemic half of the foreclosures came from Land lords that failed... And logic only dictates why would a land lord fail... and let a property go.. 1. because its not performing ( biggest reason) 2. strategic default property so far underwater and rents don't cover the investor walks..
I know of one Terrible turn key outfit out of Salt Lake that I did a few HML with back in 05 and then saw what they were doing with the long term buyer and I stopped after 2 or 3 loans. But someone else funded it and the owner of the TK was also a mortgage broker and they did about 100 homes in this one town ( all in the lowest price ranges) Many never got rented all of them had conventional loans on them and ALL went to foreclosure over the ensuing years as investors just walked.
Out of area investors Need to proceed with Ultra caution and make sure those they work with have impeccable creds.. And then choose the high end of the market not the low end.. Low end is just plain tough and a Huge Risk in my mind.
56 Replies
- 12yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
hit me off line if no one has helped you with the 20k I could do it if we work out terms that we both like :)
- 12yJ. MartinPro MemberRental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
Gotcha on the primary before Midwest rentals. I don't have to be sold on appreciation.. lol. I love your comment about the 350 rentals in fly-overs vs. 3 houses in Cupertino. I'm sure @Account Closed would back you up on that. He got aggressive at just the right time down on the peninsula. Wish I would have had the capital to get into the prime markets.. But very happy with all my investments too ;)
And thanks for shouting out on the $20K Jay. I haven't really asked around much, and was going to ask someone local I know, because it's chump change, and I didn't want to record.. but I'll shoot you an email, and we'll see if something might work for both of us.
@J. Martin so it looks like you're moving real quick on your renovs, except for that 1 unit. Me? I'm still working on my tenant buy outs! I'm now acting as part coach, helping them find new places. It's a relatively slow process, but I'd rather be a human being about it and resolve things amiably with these tenants. And given that the new rents (after extensive* renovations) will go up from $1000 to $2700/month per unit, it's worth to be patient!
* to maximize layout and space I need to blow out the back wall (structural) to connect these rather large and enclosed back porches. It's a pain, but will allow me to go form 2/1's to 3/1's. Plus I gotta move everything. They now have the bathroom in the back porch, but that damn porch has some SF downtown views! Umm hello...not the place for a bathroom to block the views :). Plus I haven't decided if I'm going to put in central heating or reinstall a wall heater. I think in smaller Victorians a centrally placed wall heater in the main hall gets the heat to all the rooms. I'm not in the mood to deal with central heating and all the venting. So yeah, these are going to take a few months to do right easily.
FYI, I won't be able to do the 20k loan, as I'm also hoarding cash for the expected renovations I'll soon be doing.
BTW, how do you feel about section 8 vs non 8? Do you have a definitive preference? And does your perspective differ for your Richmond vs Oakland rentals?
- 12yJ. MartinPro MemberRental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
@Amit M. , SF rent price points and the downtown views definitely support more extensive renovations. It's all about the location. Rooftop deck?
Yes, moving quickly. I have my guys in there the day we record, and start showing while they are renovating... I could put $1MM in renovations into my 4plex in E Oakland, and they would only rent for about $100/mo more per unit than with $40k in total renovations for all units, and the building. It's a different type of investment - different story - different price point. But I'll have a nice little cash cow and some appreciation ;) Sounds like you will too!
And no worries about the cash. Jay and Minh reached out. It's not absolutely necessary anyway..
For Section 8, I could get just as good of rents from non-section 8 tenants in Richmond, with good deposits, as from Section 8. So I didn't do Section 8 on new lease-UPS. Just one I inherited.. No rent control there, so not a consideration. Section 8 is exempt from rent control in Oakland, so that makes a big difference.. Has to be factored into the current rent equation.. What's more worth it? I will find out on the 10th and 12th where the numbers come in..
- Investor · Monterey, CA · Member since 2014 · 30 posts · 17 votes12y
Buying your primary, living in it and selling after couple of years and pocketing the gain tax free is a good strategy provided that you are buying in an appreciating market. Otherwise you will be holding your primary longer than you expect and waiting for the next cycle to sell. I personally have that experience where I bought my first primary in Asia at the peak, and have to sell at a loss. Although this is in Asia but the fundamentals are the same in real estate.
Many cities in the Bay Area and surrounding are heating up fast in the last few years that I will be cautious of buying primary now. I had an opportunity to buy my primary in Palo Alto in 2011, but I didn't because of a personal situation change. If I had bought it then, I would be able to sell with a nice gain today. In 2013, I bought my primary in Monterey. Monterey is trailing the Bay Area by about 12 months. Today, I see that the SFR market here starts to gain momentum and houses are selling at a higher price than a year before. So hopefully I made the right decision and caught it at the right time.
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