All Forum Posts by: Arlen Chou

@Lisa Hill have you considered placing a HELOC or even a cash-out refi on the property and turning it into a standard rental? San Jose is a big place but the housing shortage in the region should allow you to find good tenants quickly. Most investors who leave the Bay Area look back years later and regret the appreciation that they will no longer enjoy.

@Anthony Dooley your fundamental premiss on the lack of cash flow in hot markets like the SF Bay Area is incorrect. Perhaps you are considering immediate cash flow as your key indicator, but the real analysis should consider an overall calculation leading to wealth. Cash Flow + Appreciation = Wealth. It would be absolutely a waste of resources to do a deal that has either cash flow or appreciation = ZERO over a long hold period. Both @Amit M. and @Account Closed have been extremely successful in this market and I am certain the cash flow more than $100 a door per month.

The fundamental rapid appreciation of "A" markets allows an investor to take a short term hit on cash flow. Based upon the down payment size and price negotiation the property can be cash flow neutral at initial acquisition or in many cases cash flow positive. Through appreciation, forced or otherwise, the property can be refinanced to pull most, if not all, of the initial investment out. With proper management and business plan structure, a property can produce an essentially infinite ROI allowing an investor to roll funds into the next deal while at the same time being able to show an increase in assets and income.

To be honest, I have no idea what the market in Columbus Georgia looks like, so I cannot comment on the application of a Bay Area strategy would be in that area. More than not, my strategy would not work in Columbus... but it might, I don't know and I will probably never find out. Cats and lions are both felines, but taming them takes different strategies.

@Wenqian Guo if you are single, doing a house hack is the simplest and most tax-efficient way to start building your wealth here in the SF Bay Area. You will be able to get a lower interest rate. You will be in full control of your assets. You will learn the basics of being a landlord. Just don't tell your tenants you are the landlord. Get housemates and just let them know that you will be handling the master lease and that all issues will be flowing through you.

Good luck with your next step in your real estate adventure!

@Jay Hinrichs look on the bright side, your sale back in '79 has to lead to your success of today! Still a win in the big picture.

@Ishmael McClinton Is this a single-family home or a duplex/triplex/fourplex? Did the complaint come from him or from the rent board? Out of curiosity what rent did he have before and what is he at now?

@Chris Mason I think that was a compliment or you were calling me as old as dirt! Just kidding, I appreciate the shout out my friend ;-) I am not as well versed in many markets like @Jay Hinrichs but as an older guy who has seen a few ups and downs but only in the SF Bay Area I can throw in my two cents. In this market, rent rates and appreciation typically outpace short term downward pressure. Meaning, I have seen my portfolio rise in both the rent rates and property valuations at a high enough clip that only an extreme meltdown of over 50% drops would effectively push me into the red. But I am very conservative in my DTI on a whole portfolio basis.

I will also say that as a long term buy and hold investor the short term downward trends in rent rates are actually opportunities in disguise. Because of the rent control status of several of my properties, I am hoping that some of my tenants will actually leave in search of less expensive units. This would allow me to do upgrades/renovations and then re-introduce the unit to a different market segment with a higher entry point. Additionally, downward pressure on rents will also put pressure on landlords who are highly leveraged and create the opportunity to buy additional doors. I am already seeing longer days on market and price adjustments through many cities in my target markets.

@Michael Myers it will be 100% easier if you buy them out and do it yourself. I know of too many people who are infighting with family members because they fell into exactly your situation. It is really hard to get everybody on the same page if they did not start out on the same page. Do your brothers even want to be in the real estate space? Do all three of you have the same strategies in mind? When partners go into a deal, they should all be on the same page because they discussed it before going in. With your situation, it sounds like the three of you have been forced into a position of doing business together before any groundwork was laid. Either take full control or let one of your brothers buy you out. Holiday season sucks when siblings are fighting among each other.  

@Antonio Pican don't worry if people call it an asset or a liability. The discussion of asset vs liability will go on forever because there are too many variables in every person's opinion. If you go straight with accounting rules it is an asset, but the line of thought in Rich Dad Poor Dad is to think outside of the accounting rules. The bottom line is, does it or will it make you money. 

As an example consider 2 different scenarios:

1) you buy a home and live in it but it never appreciates. Potentially the "value" of it goes down. That would just suck...

2) you buy a house and it appreciates a ton. You pull a HELOC out of it and buy additional rental properties that cash flow. That would be great...

Don't focus on the words so much. Focus on the direction the money is flowing.

@Kumar Gaurav that is my guess, but I am hoping that a more basic understanding that the lower part of the building is an actual unit will be enough for the City. At least that is what I thought it use to be...

@Kumar Gaurav all building over a single story need to be "verified" to be structurally sound. But from what I understand, anything that has carports on the first story will need retrofitting. Other buildings, you have to prove that they don't. I just received a letter from the city about this for a 6 plex that I have in Oakland. My units do not have a carport underneath but it looks like I have to "prove" that I don't need to do anything. I plan to go to the city directly and sit down with them to clarify this issue. But the building in the above linky from @Account Closed is definitely a "soft story" building. 

@Kumar Gaurav when you are looking at buildings like the one my buddy @Account Closed pointed out, you need to keep in mind that you will be on the hook for an earthquake retro-fit because this building has a "soft" first story. Make sure you work that into your cost analysis. This might be a little concerning, but oftentimes these types of things will scare off many investors and you can pick up a deal.