San Francisco and Kansas City Investor - New to BP

27 Replies

I recently joined BP at the suggestion of a friend who has been following the forums and podcasts for some time. I currently hold two rental properties - one in San Francisco, and one in Kansas City, MO. I ended up with an investment in Kansas City primarily because of some social contacts I have there and the more favorable pricing available there vs. the Bay Area. 

I have owned my San Francisco property for about 7 years. I purchased it as my primary residence, but after 6 years, I moved out and kept it as a rental. Despite the high costs of doing business in SF, it is cash flowing. I was looking for another investment in late 2013, and ended up with a SFH in Kansas City, MO, which is also cash flowing - much better than the San Francisco property, both in nominal and real terms.

I'm primarily interested in Buy & Hold (or Rehab & Hold) for long-term wealth building and passive income; however, I am also very entrepreneurial, so I am always looking for the best strategy for current market conditions.

By day, I run a web design and development company here in San Francisco, and at the moment my goal is not to quit my day job any time soon.

I'm looking forward to getting more involved here at BP and getting to know everyone.

Lance

Welcome Lance, it sounds like you've already gotten your feet wet in real estate investing, but you will be able to find a lot of great information here on BP and great people that will hopefully allow you to take your investing to whatever heights you desire.  Best of luck! 

@Lance Johnson   Welcome and hold on to your San Francisco rental as long as you can.

Stepmother who resides in Kermen, CA has a 2 story flat/duplex with separate entrances on Treat St between 24th & 23rd St which she purchased back in the 60's and she's been holding on to these for quite awhile. Comps in the area are $1.9 - $2 million but the bldgs are dated and I don't know if she's brought the building up to code standards. Seeing there's major rent control in the city she's had her current stable tenants at least 10 years. Yes she could raise the rents but seeing the building is free and clear do the math.

She tried her hand as a landlord in Kerman or Fresno county for that matter but the area is so spread out and her tenants were not as as reliable with rent and would move/quit if her tenants found a better offer and it could have been the job prospects in the area as opposed to the city were people need a place to live..

Again welcome and good luck...

Mark (N-CA)

Sac/Placer county

Hi @Lance Johnson  and welcome to BP.  I'm pretty new to RI and BP, but this is a great community to learn.

What part of KC are you invested in?  Are you looking to invest more in the same area?

Rob Scarborough 

Thanks for the warm welcome, all!

@Mark Pedroza - at the moment I'm not actively looking to sell the SF property. The biggest issue with it is that it is a condo, and the HOA dues put a big hit on the cash flow.

@Rob Scarborough  - I'm definitely interested in exploring other opportunities in the Kansas City area. Right now the property I have is in the Brookside area. I am open to that area, or others, though I have been to Kansas City frequently enough to know that there are some areas I want to avoid.

@Lance Johnson welcome to BP!  What price points are you looking at in Kansas City?  What amount of cash flow are you wanting?  There are several areas in Kansas City that are hotbeds for investing, depending on your strategy.

 

@Chris Dawson  - I'm definitely interested in higher quality rentals, which will inevitably result in higher price points. Since I'm looking more at long-term strategies with higher quality properties, I know that annual cash flow as a percentage of purchase price might be lower than some other opportunities. I'd be interested in learning more about your strategies and what you see happening in the markets there.

@Rob Scarborough  - I'd also be interested talking to you and learning more about what you're doing and some of the opportunities you're seeing. I haven't spent a great deal of time north of the river, but I have heard similar things about the deals there.

Hi @Lance Johnson  

I recommend you see the chart and read the following post about SF/bay real estate. The short of it is: cash flow pays the bills, but appreciation will make you rich. You're fortunate to have purchased already in SF with two big benefits: 1- you can pull cash out with your appreciated value and buy more RE. 2- condos are not under rent control in SF, so you can keep your rent at market rate (cha-ching!)  There are several of us in the Bay Area that favor investing locally due to the incredible appreciation rates. Here's the post:

http://www.biggerpockets.com/forums/99/topics/135352-why-appreciation-matters-in-the-sf-bay-area

@Lance Johnson  ,

I was just going to tell you to look at some posts from @Amit M.  , @Minh L. , or @Jay Hinrichs  on appreciation vs cash flow, especially when it comes to plans for your SF property. I agree with @Mark Pedroza  . Don't sell it!

I plan on keeping all the properties I've purchased in the East Bay for a very long time. And the historical chart and future prospects look promising. Calculate how many years of consistent cash flow you would have to get to equal the same amount of appreciation returns for the dollars and invested, and it's a bit surprising.. We'll see how well it holds up in the future, but I'm getting a bit of both, so I think it's promising..

Except for a very few years in some areas leading up to the crisis, ask anyone in CA if they are happy that they sold that property (primary, investment, whatever) so many years ago, and they will cringe, before acknowledging they would have been retired by now if they had kept it.. Just IMHO.

Just posted on another of your postings I think, but welcome! And hope to see you at one of my meetups here in the Bay! (next on Wed in W Oakland fixer)

Welcome to BP. I think KC is a great investment market (although I'm biased of course), but I'm also not a fan of out-of-state investing. So be careful if you want to pursue more here.

@Jay Hinrichs  ,

You're such an active RE investor, you probably already rolled that money into millions more!... so I think only you can answer that question. Would those assets had been better protected sitting in the Bay Area? Maybe.. would it have been worth it for you at the time, given the circumstances..? Impossible for me to say.

Let me bounce this question back at you.. if you could have kept it by getting some cash out, or arranging some financing for your next deal instead of selling.., would you have been upset today if you had kept it? Not sure where/how big it was. But the sales price might have an extra zero on the end of it today..

I just think the leveraged long-term build of equity is such a strong return factor in RE, that I'd rather hang on to everything, rather than "trade up" to avoid taxes - when I can just get cash-out financing, and not pay taxes on the appreciated capital anyway.. (at least about 65% of it..)  Just my 2cents though. Everyone's circumstances and strategy is different. I just think it's so beneficial to hold on to everything you can if you like the long-term prospects..

Originally posted by @Jay Hinrichs:

@J. Martin  

  So  J.  you think I should have kept my palo alto house I paid 180k for in the day?

That's a big YES.  

I had this conversation with one of my investment partners.  She sold her 1st house in 1987 to buy her 2nd house.  Then she sold her 2nd house in 1993 to buy her 3rd house where she currently lives.  Had she kept her first 2 houses, her real estate networth would be close to $3M now.  

I've talked to enough older folks to get a long-term perspective on real estate.  Everyone said they wish they had kept all of their real estate holdings.  The appreciation and equity build-up is far outweighed the small landlording hassle.  How much cash-flow does one need to build up several million dollars worth of equity? One gentleman has been renting since 1976.  In hindsight, he wish he had put all of his money in real estate in the Bay.  

One thing I got out of these conversations was that, real estate in the Bay has always been expensive.  It looks expensive at the bottom; it's more expensive now; and it's so expensive at the top of the market.  It never seems like a good time to buy until it's in the rearview mirror.  

@J. Martin  

I did not have to sell that house to buy my house up at Silverado.. I was afraid of the 300 a month negative cash flow and I just could not see how the house could keep going up 3 to 5k a year LOL.... Oh well..... I could have also bought McQuen condos in San Jose for 5k a door FHA 500 down and 175 a month that rented for 250.00 and they of course are probably worth 250k a door or more... Lots of shoulda woulda coulda when it comes to BAy area RE. But life is good. I was young then too the McQuen condos I was 18 to 20 selling real estate and having fun really did not want to be tied down to owning much of anything I was like all young kids with more money than sense I bought nice cars.. an airplane and took great vacations :) stayed in aviation though since then and that has been a great life experience that I would not really trade for any amount of money

Thanks, @Brandon Turner  glad to be here.

My plan is to hold on to the San Fran property for now. It is cash flowing, and I hope appreciation will come at some point - it's mostly recovered from the 28% drop in 2010, so hopefully now it's time to go up.

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