All Forum Posts by: Aaron Gordy

wraps aren't bad at all. I have used them a number of times. Sometimes its advantageous to use a wrap. I need more information in order to help. What is the sales price? Did you have it under contract to be sold at $110k. I understand that the first mortgage or the underlying mortgage is $70k, right? I don't understand where you owe $18k. I presume that you bought it for $88k. That is, 70k$ plus 18k$. Correct? 

Well, I know first hand two people that have investment properties that are doing very very well. Must I say another very. And no they aren't crack dealers nor are they robbers of any sort. They are just two very nice people that are doing well in real estate. But i don't live there personally and I just travel through there going to friends houses or the new bars in the area when i go to the Oakland.  There may be other areas for sure that may be more enticing. I don't know. 

@Wilhelm Nothnagel 

Since you are an architect then you probably like to get dirty too. I really enjoy getting involved with fixing up houses. On the job site I will do anything and everything to help the project along and to make it smooth as possible. Here in Austin, one doesn't need to be a gc to pull permits like one does in SF or Oakland. So, its a bit easier to take on a project. So, I will pull permits, make runs to home depot/lowes or wherever is necessary, pick up materials in my truck, do carpentry, do electrical work with a buddy and plumber or just about anything. One can save a ton of money if you work on the site too and the folks that are working for you will appreciate it 100% and work even harder. Also, you will probably be able to fix whatever issues that invariably happen on the site, immediately instead of the next day or the two or three days later. Time is money and so I try to get the project done asap. The contractors are very much appreciative too! 

You should look into the fha 203k loan for a fixer upper. Its a really really good way to go! 

East Bay is happening. The last time I was there in December I was blown away with the work happening in the east bay.  I saw some really cool work there. Idk anything about the schools there or other possible drivers of value but I do know that I liked what I was seeing. Do yourself a favor. Ride a bike and go from the west oakland station to Emeryville. Lake Merritt is also very cool but looked expensive. I did hear of folks that have done very well there though.

But if you have ideas of flipping, I have learned the hard way about taxes. Talk to a Cpa especially one that is knowledgeable about real estate and real estate investments. I think it makes sense to buy and hold for 2 years so that whatever gains that you make you aren't taxed on the capital gains. 

Whatever you do though don't fall in love with your project so that you forget the end result: selling it on the market for a profit. I have seen architects fall in love with their projects and go way over budget, unfortunately!

I hope this is helpful!

@Hitesh Deka 

Hi Hitesh

That is really a numbers question. If you are living in the Bay area and paying rent then I would suggest buying there. I keep up with both markets Austin and Bay Area and travel back and forth. The Bay Area is exploding and rents are going up so high. I know that Oakland is rapidly gentrifying and rents are being pushed up high. That entire area is doing really well. 

Austin is also doing very well with some areas producing 20% plus returns. City wide, I think the area appreciated by around 8% from last year to this year. Its doing really well but the prices aren't nearly as high as the Bay area, thankfully.

Here in Austin, one can buy a rental property and produce rental cash flow due to the low interest rates. Of course, with the higher down payments one can make even more cash flow. 

Of course, being a real estate broker in Austin, I am going to say invest in Austin. But, truly its a numbers game and what works best for you. 

Also, don't feel like you are Christopher Columbus discovering a new world. There are many many investors from California that have invested in Austin, I think over a 1000 the last time I checked. 

If you want to know specifics in terms of appreciation rates, rents, typical property management problems, etc. please feel free to reach out to me. There are some investors where I manage their properties whereby I rarely talk to them. I simply send them statements, manage their properties efficiently and profitably for them, deposit monies, tell them what is going on via voicemail and/or emails and that is it. Its when something is problematic with the property that there is substantial communication, usually.  

If I can be of assistance please let me know.

@Kyle D. I would also say that the repair costs are low given that there is one turnover a month. I would suggest looking at the cost of a typical make ready and budget that in. I don't believe that $300 is adequate for a make ready even if you are super cheap. If you have to replace the flooring then that would easily go over the $300 allotment. I would really look at the cost of the make ready if there is that much turnover. 

Two, I would try to figure out why there is that much turnover and see if you can limit that turnover. Sometimes it makes sense to keep the rents a little lower to keep good paying tenants and not spend money on the make ready. 

Third, what are the costs of leasing out the unit? Do you plan on leasing it yourself? Is that part of the mgt fees? 

Are the tenants paying the water/sewer bills? If not you can increase your noi by making the tenants responsible for their own usage.

My two cents.

I hope that helps

@Belle Tseng 

Looking forward to it. Thanks for the opportunity.

Respectfully,

Aaron

Hi Belle,

Yes, the Cedar Park area has alot to offer with great schools and even more importantly a nice appreciation rate from last year to the present at around 13%. 13% is super!!!

I run an property management company. I would love to try to get the business of managing the property and maximizing the rents and value of your property. Yes I do have a handyman that can do most anything reasonably. In fact, I have a long list of contractors that can do anything that you want from building to a simple remodel. Please feel free to contact me and I will do my very best to help you. 

Have a good one!

Aaron

Why don't you just go the hard money route? I think it would be more profitable instead of splitting the profits for all the work. The hard money is considerably cheaper than 50% or more. At least that is the route I would take for just one house. Now if we are talking quite a few properties at one time then maybe the jv is the best way to go. Its all in the numbers. 

Its all about the competition. If your property is the worse one in the submarket then you will probably get less quality tenants. If your property is the best one in the submarket then you will get better quality tenants. I suggest looking at the competition to see if it makes sense to upgrade. I would never put in high end finishes or anything for that matter that has a short term life. I would suggest making your property one of the nicest in the area so that you get better quality tenants. Better quality tenants are usually less headaches. 

In all the properties that I manage I rarely get calls or emails with issues. It can be super easy if the upgrade work is done properly and expectations are set correctly. Also, keep in mind that the saying "its cheaper to keep her/him" is applicable here too. That is, always look for good tenants that have the intention of staying in the area for a very long time reducing the turnover costs. With a property that is out of date then you will have to sacrifice rental dollars to keep that tenant from going to a classier property.

I think its better to keep the place nice and clean not fancy. Thus, don't be putting in granite counters, top of the line wood flooring, etc. Most folks don't know the difference between high end Moen Faucets and American Standard anyways. So do keep in mind that one can do cheap upgrades to make it look nice.   

I say all the above with the thought that you are going to keep the property for a very long time. Sometimes it makes sense to make really nice upgrades if you have intentions on selling the property. If you are able to get an extra $100 rent by making the upgrades an investor will pay a premium that will sometimes exceed the costs substantially for that extra rent. It really depends upon your goals.