All Forum Posts by: Arlen Chou

@Megan Collins both the SF and Oakland markets are lucrative markets, if you know how to play within the rules of rent control.  Many people are fearful of RC, but the secret of RC is that it can be a great boost to landlords if you understand how to work within the system and you have a long time horizon.  RC basically artificially limits the number of of available rental units on the market.  It protects a few renters who hold on to their units for long periods of time, but it places a huge burden on people entering the rental market.  

In both of these cities, I cannot stress how important it is to know the rules of the game.  With RC in place, if you don't know the rules it will eat you alive, but if you know how it works you can make some serious long term money.

Find the niche, within the niche and you will make money.

Ask @Amit M., he knows the rules and knows his niche in SF and is killing it!  Another person who knows the strength behind a well focused RC market strategy is @Account Closed.  Minh is on fire in San Jose!

Good luck to you and your husband,

Arlen

@Darius Falahkhir congratulations on making the jump.  As @Ryan Landis had stated there are a few meet ups in the greater Bay Area that might be of interest.  Besides the one held by @Johnson H., there is also one in San Jose hosted by Jeff Pollack.  Jeff's next meeting is on January 27th.  There is also a meet up in SF held by @j martin.

I would suggest you think about the advice from @Jordan Thibodeau.  Being close to home with your first properties is a good idea.  Sacramento is an interesting city.  I have just started my recon work for the area and I have been pleasantly surprised.  Just remember that this area was very hard hit during the down turn.  You will need to take that into your analysis and balance that against your risk tolerance.  

Good luck and hope to see you around at a meet up.

-Arlen

@Amit M. thanks for the shout out.  I am not from Cal so you will have to take my views with a grain of salt ;-)

@Patrick Long

I started house hacking in my 20's with a town house in Mountain View and I am really glad I did.  Many of the concerns that are voiced today were also talked about back then, but I decided to make the plunge.  That was probably before you were probably born!  I did not get deep into the investing side of things until recently, but that first step made all of the difference.

The dollar numbers on properties will change over time... up and down.  But the location and the amenities of the condo are fixed.  

When you reference BART, I am assuming that you are talking about the current construction in Milpitas... is the building within walking distance to that location? The North SJ/Milpitas area is still on fire, but the intensity of the heat varies quite a bit from property to property, but they are all still on fire. How old are your comps for the area? What amenities does the complex have compared to the newer properties off of Montague and the surrounding area? It has been a long time since I have looked at condominiums, but $460k to $490k seems low to me in that area for a 2/2 condo. But the value really depends on the condition and location of the complex. Take a good look at the HOA. See if they have been taking care of the complex and they enforce their rules.

Its definitely still a buyers market and it might be for a while longer.  Google and Apple made announcements this week about taking up more space in North San Jose and bringing in over 10k jobs. But it is true that the gap between the ability to afford homes of first time buyers, and their ability to save for down payments is widening.  But perhaps this is a good indicator for people who want to be landlords and can afford to purchase rental properties. You just have to polish your crystal ball and make decisions based around what is going on in your target market. 

My point is that the buyers, in Santa Clara County,  for primary residences are still very financially strong.  The ones who shop this market have money, or access to money, and jobs are still being created in Santa Clara County.

If you want anecdotal evidence of this, I can give you some recent examples from this month.

Sure there is a slight possibility that tech companies will move out of the BA, but I really don't think that is much of concern. Many of these giant "anchor" companies have their own corporate buildings in the BA.  To move a corporate headquarters out of state is not an easy logistical or financial task. If you want to wait for the "down cycle", you might be waiting awhile...  

Properties that are priced right sell within 1 week with multiple offers above asking. Anything, in THIS market, that is "off market" is probably priced close to market price anyway.  Do your analysis on the comps in the area. Look very closely at the walking and biking score and most importantly get a feel for the neighborhood.

Good luck,

Arlen

@Jack M. the best OVERALL podcast for newbies has to be the one that came out today (152) with @Brian Burke @Serge Shukhat and @Ben Leybovich. This pod cast covers everything from buy/hold to TK to the importance of knowing yourself and knowing the "why" of being in this industry. The three of them speak to different types of markets and property classes and even discuss the benefits/dangers of $30k pigs. This is a must listen for anybody who is just entering or thinking about entering into REI. There is so much good information here for anybody who wants to enter or has just recently entered that this should be mandatory listening for everybody.

-Arlen

@Ben Rice if you do a search for me on BP you will find a few that I have posted with details of the deals.  One specifically applicable to your situation would be the 4 condos that I purchased in the NOBE area of Oakland this year for a total of $600k.  This was a deal I found on Redfin on the open market.  The property use to be a 5 (FIVE) unit apartment building that was converted to 4 condo's by the previous owner.  The property comes with its own set of headaches, but that is the trade off for a low price of entry.  I know of 3 duplexes and a triplex that are under the $500k mark that need help but I believe have potential upside.  They are all flying under the radar for various reasons.  I have been watching these buildings and corresponding neighborhoods for quite awhile and I am just waiting for a few more key indicators to flip my direction before making a move.  But the real key to this market is knowing how and what it will take to make a problem property into a gem.

@Ben RiceI would suggest that you expand your search area/criteria.  There are many duplex's and even triplexes under a million dollars.  Mater of fact, there are half a dozen in SF right now...  IF you are talking below $800k, you need to go to the other side of the Bay and BART into the City.  Once you are in the East Bay you can find duplexes for under $500k.  But then again, you have to look in the "up and coming" areas of the East Bay... AND to all of the haters of the EB you don't have to have a conceal and carry license where these properties are located.

Good luck,

Arlen

@Account Closed had said there are "millions of ways to do it" and it really does not matter if "some strokes are more preferred" if those techniques don't do it for you...

Then again... this is just my opinion.

-Arlen

@Alex Johnson you asked for "strong opinions" and I think you unleashed a S-storm.  If you enjoy the banter, you will find many many posts on this topic.  But at the end of the day, "different strokes for different folks" is probably the only agreement you will get from this vast group of people. As a newbie, you have to find what works for you.  Don't worry about what everybody else is making or not making in what market or what strategy is best for them.  You have to figure out what your life plan should be and move forward.

@Account Closed and @Johnson H. and a few other guys in the BA know me.  I make good money with my W2 jobs and I am married with kids, but I swing my own hammer.  When I tell people that I swing my own hammer guys on both sides of this debate look at me funny.  But it fits my life plan and I am cool with that.  I don't plan to swing my own hammer for the rest of my life, but I do have rolling 3 year, 5 year and 10 year goals and I adjust my strategies to meet those goals.  Some of those years have me swinging hammers other years with my own employees.  Some years have me investing in multi family residential buildings, other years have me focusing on commercial residential buildings and a few vacation rentals sprinkled in the mix.

My point is that you should be forming your own "strong opinion" on what works for you.  A piece of advice I give everybody when they want to invest or speculate in ANYTHING is consider the worst case scenario and work backwards from that to build your plan.  If you can do that, you will quickly form an opinion.  That opinion will get stronger as you test your plan by talking to people on both sides of the isle and getting their input on YOUR plan.  Don't ask about their plans or general opinions... focus on your own plans.

As they say "opinions are like a**holes, everybody has one" but the only one that really counts is your own.

Good luck!

-Arlen

@Christian Benitez this is a good question that gets overlooked.  I started off with doing something called "covered puts and calls" in the stock market.  Prior to the dotcom bust, I worked for a large tech company, not a dotcom company, but one that actually made silicon chips.  I was eligible for an employee stock purchase plan and bought as much as I could.  The key to the stock market is to know the market of the companies you invest in and also know the company that you invest in.  Being a low level marketing guy, I knew both sides of the equation for the specific company I was working at and the market we competed in.  So I implemented the covered put and call strategy, only on this one company, and made money while the market went up AND down.  My goal at the time was to build a large enough "war chest" so I could get into real estate and be effective.  It was very dangerous to put all of my eggs in one basket.  However, I felt that I had a deep understanding of the market, the competitors, the products and the company I was invested in to make the right decisions.  With this strategy the velocity at which you make or potentially loose money is much higher then most other strategies.  But being in a "covered" position gave me some protection.  I knew I needed rapid accumulation of cash to get to my next level of my personal plan; investing in real estate.  It was a "go big or go home" type of play for me that lasted a few years.  I would not recommend it to somebody that is considering this strategy in passing.  A deep and specific knowledge of the market and players is required.  I knew ALL of the players in this space: where they made their products, their core customers, their technologies, etc, so I could make very well informed decisions.

From that point, I was like many people on BP and did several OO purchases and finally got into long term buy and hold properties.

I wish you the best of luck!

-Arlen

@Marcia Maynard Harbor Freight has them on sale right now for $25.99.  You don't need to be accurate to the nth degree, so this should be more than enough for the occasional use.  

-Arlen