All Forum Posts by: Arlen Chou

@Diane G. Yes, I agree with you.  I wish people would be more transparent with deal examples instead of talking in generalities.  

It was on MLS then dropped off. But when I drove the neighborhood a few months later, I saw that the agents sign was still up. They had taken it down because they got no traction when they first posted it, but left their sign with the plan of re-listing a few months later. Basically I caught them between listings, so I guess it was technically "off market" but not in the traditional sense.

Yes, the building looks rough, but looks are deceiving!  I look for value add buildings that have good bones: foundation, plumbing, electrical, roof, etc.  Those are the really big ticket items. Everything else is relatively low cost compared to upside "forced" appreciation.  Full renovations of 1b/1b units have typically cost me less than $10k in materials (sample size is 10 units within a 24 month period).  I do much of my own work and I have 2 teenage kids that I "recruit" into demo and painting.

I am a long term "buy and hold" guy so no flipping for me.  The property cash flows "as is" and I know there is a ton of appreciation still to be had.  This summer, I plan to pull my money out of the deal.  It should still cash flow and I will have reloaded my war chest to go after my next deal.

Good hunting to you!

@Diane G. don't give up on the BA, deals do exist, even on the open market...  Got this deal last year in Oakland for under $700k.  Bones are good in the building, it just needs the interiors redone. Sure the Zillow estimates are not accurate, but even with a pretty big margin of error I think I have some pretty good equity at time of purchase ;-)  Keep hunting, the forest is not empty of game!

http://www.zillow.com/homes/for_sale/82843811_zpid/0-300000_price/0-1148_mp/globalrelevanceex_sort/37.783319,-122.22651,37.78203,-122.228747_rect/18_zm/

@Cameron DePaola, eviction and termination of a lease without a renewal are technically different.  Eviction is a legal process that you should use as a last resort.  What you should be looking for is a way to get them to vacate without using the "nuclear" option.

As the owner of the property you have the right to move into the space for your own use.  If you are using this as a strategy to move under market tenants out, then we are talking about something different.  However, if your personal situation is such that you need and want to live in your own space, then there is no legal reason you cannot. 

Where you might get stuck is on the point about the lease.  If the lease is from you and they signed it and you accepted it, then I do believe it is valid.  I am not a lawyer so please seek professional advice on this point.  Whether or no the housing authority wants a new document is probably not relevant to a potential legal battle.  The tenant could take you to court and tie you up because there is a lease in place.

Just be nice about it and explain the situation and provide enough notice. Most people will understand if you want to move into your own property.  

If you think your tenants MIGHT push back, take a look at the lease term.  If it is just a few months out, then just suck it up and wait till it expires to take any potential legal argument out of play.  60 or 90 days (depend on your local requirements) prior to the lease ending, send a letter stating that you will not extend the lease due to the fact you are taking the unit off of the rental market for personal use. 

Again, I am not a legal professional, please seek appropriate council.

Good luck to you.

@Thomas S. has pointed out California investors enjoy some unique tax benefits... knowledge is the key.

Just my personal opinion: ALL investments without knowledge is speculation... Investment with knowledge is called a strategy, in both cases people are trying to make/get more money.

@Tim S. the HELOC will be on your existing property, not the one that you will buy. So as long as your home is in good shape the inspection should be fine. As for what you spend the money on... I have never been asked, and I have never told. I don't think they really care as long as you are making your payments.

Good luck,

Arlen

@Wenhao Leu your question is pretty generic as each city has its own process for getting permits.  Also I am not sure what your definition of "forever" is.  But as a ball park, it will take you several months to half a year to get your drawings and your permits, that is if your neighbors don't complain.  Some areas have strict rules about contacting neighbors and having a hearing.  This can change if you decide to go with a single story vs a 2 story home.  Also your budget for buying land and building a home is extremely low I assume you are considering the East Bay.  You could pick up some land in cities like Hayward for those prices.  But unless you are building something to live in yourself, I don't think you really gain anything by trying to build a single family home for rental purposes.  Also, I think you would be very hard pressed to build even a very basic "spec" home for that budget you stated unless you were extremely hands on and brought a construction crew from out of the area.  I would budget at least double that number and have a budget set aside for contingencies... Again, it is really hard to give you anything besides a very generic answer.  Costs and times might be substantially higher but probably not lower, depending on the specific city you are considering.  If you are thinking about this strategy to make money, then I think buying an existing home and fixing is a much better use of time and resources.  If you are planning to build something to live in, then it might be worth it...

@Patrick Smith it really depends on where you think interest rates will go. The general thought is that interest rates will go up in the near future. The big question is how far will it go up and how fast. In your case you have to decide if you think the HELOC rate you can get will catch up and pass your existing fixed rate mortgage. Obviously the closer the 2 numbers the more dangerous the switch. If the HELOC rate does go past your 4.25% rate, you are in trouble and you will not be able to get that fixed rate back.

Definitely shop around for the best HELOC rate you can find. I have a large HELOC at prime minus 1%. So my current rate is 2.65%. Moving away from a fixed rate of 4.25% made sense for me. I feel it will take a while to for the variable rate to catch up to my previous fixed rate. However, I did also have HELOC offers that were around the 3% rate. For me, I would probably not have made the switch with that spread.

There is an outside chance that the bank could cancel your HELOC down the road. I have been told this can happen, but I have never met anybody that has had to deal with that issue. But again, I have not had a long relationship with HELOC investing so please take this with a grain of salt

Good luck to you which ever direction you decide to go.

@Patrick Smith one of the easiest and least painful ways to pay down a fixed rate mortgage is to make 2 payments per month.  Take your current monthly payment and split it...  Without getting into the weeds, this strategy will actually cut your actual interest portion of your payments over the long haul.  That is because you are actually paying your principle faster down faster with an additional payment over the 1 year time span.  Its a little hard to explain, but use a standard mortgage payment calculator and input your numbers.  You should see an acceleration in your principle payments as the years and months go out.

If you decide to go down the HELOC road, you are correct. If you use a HELOC to pay off your fixed rate mortgage and then pay off the HELOC with accelerated payments, in the end you would have a debt free property with a full HELOC to use as you please. Basically the benefit is to leverage the difference between the interest rates of the fixed rate mortgage vs the lower adjustable rate HELOC, and using that delta to pay down the debt as fast as possible.

@Ruben Aquino a HELOC is a great tool if you use it correctly. But like any other tool, if you improperly you can get hurt very bad. My experience in getting a HELOC is very different then @Assi S..  The process itself is was very similar as to getting a standard loan or a refi.  There are many different HELOC programs available, and it is worth the time to get to know your loan broker and also to shop around.  In my case, I had pulled several loans and refi's with my guy, so I am sure that the process was abbreviated.  

1. The first step is to get all of the standard loan documents you would need: taxes, W2, bank statements, etc.
2. Shop for the best HELOC you can find. There is a giant swing from bank to bank, so take the time to shop. I have had several banks that I do business with ask me about getting a HELOC and I laugh at them because I know they cannot match what I have... When they ask they always agree with my decision. I have a prime -1% rate...
3. Get your HELOC processed and once you have the credit line in place start looking for a property.

The process is not fast by any means. However, once you have it in place you are done with getting loan approvals. You can go out and buy a property do your renovations and increase value. Once done, pull a loan on the property and pay down your HELOC. Now your gun is reloaded for the next purchase. Basically the use of a HELOC defers the new loan process to after the acquisition, enabling you to move faster to lock up the deal.

@Jenifer Levini I don't think I deserve your high praise, but thank you very much for the extremely kind words!  What makes BP a great place is that people are willing to share varying ideas and thoughts which allow all of us to grow and become more successful.