All Forum Posts by: Arlen Chou

@Charles Ho diversification is a term that people use loosely.  If you and your wife are actively managing your investments in the stock market that might be a wise choice to spread between the market and real estate.  In my case, I am from the tech industry, so I only invest in that sector.  Even within that sector, I only invest in a very narrow field; I know the companies and the technology behind their products.  I have very little knowledge about pharmaceuticals, apparel, software, mobile devices, music, precious metals, etc... so there is no way that I can make an educated investment in those other industries.  My belief is that portfolio/fund managers push diversification because they know the average investor cannot have the depth needed to invest wisely in multiple fields.  Therefore, the average person will pay fees to investment firms for their expertise because they have been lead to believe they "need diversification".  

"Wide diversification is only required when investors do not understand what they are doing" - Warren Buffett

As many have pointed out, REI is very focused investing with a great amount of control, especially if you invest locally.

On the liquidity side of things, there is some merit to her concern. If you need cash tomorrow for some emergency, stocks can be liquidated with a push of a button. But remember, depending on your basis, your tax ramifications could be painful. In your case you own your primary home free and clear... Go get a HELOC and sit on it. Sure there is interest that you have to pay on that money, if you use it, but you need to compare that against the potential taxes you would pay in selling shares. There is a pay back time component in this equation, but I think the general idea of what I am saying is clear. With the HELOC, if you need cash for an emergency you have immediate access. If you get more comfortable you can also use that HELOC money to invest in future properties. Personally, I would leverage the equity in my properties by getting some conforming loans. But I think your wife might be financially conservative, so I would not push her at this point in using the HELOC to buy other properties.

But at the end of the day @Account Closedis right... "happy wife = happy life".

  @Benjamin Muellerfor something that small, I use the lazy-man version of what @Account Closed has described. I usually don't have extra sheet rock laying around, so I go to Home Depot or any hardware store and by a metal mesh patch.  You can cut it down to size/ shape for various holes.  It is a self-adhesive mesh patch that can be placed over the hole. After that you just mud over it and feather around to match the rest of your wall.  You should be able to find packs of these in the drywall supply area of your hardware store for a couple of bucks.

-Arlen

@John Eckerman I think a little more information is needed to make a decision. 

1) How much did you buy the place for?  You are referring to appreciation, but there is no reference to how much you can potentially gain.

2) Is there a reason you don't refi? 5.125% might have been good 3 years ago, but you should be able to get something lower then that right now.

3) What are market rents in your area? Have you raised rents over the past 3 years?

4) More importantly, what kind of property is this: house, condo, etc?

5) Is it possible that you will live in it again in the very near future?

Keep in mind you have already passed the point where you can shelter your capital gains, so you will get hit big time if you do see appreciation gain at the time of sale.

If you can get it to cash flow, IMO that would be the best option. But if you cannot cash flow and you are not going to live in it in the hear future to take advantage of the tax shelter, I would go with @Joe Villeneuve and @Jane A. and take my lumps...

Let us know what you end up doing,

-Arlen

@Erin Cassidy welcome to BP.  You should connect with @Mel Selvidge she hosts a meet up in Oakland.  

Good luck to you!

-Arlen

@John G. yeah, I am hoping the days of swinging a hammer will come to an end soon! I am just getting to old for that kind of stuff. But in the case of this property there are things happening around the situation that make this the proper strategy for this specific situation.

-Arlen

@John G. I am doing most of the work myself on some units that were purchased a few months ago: demo, making smooth textured walls, painting, kitchen cabinets, flooring... You name it and I am doing it. When man power is the most expensive item on your budget, some thing needs to be done to address that line item. Many people will argue that an investors time is worth more than $15/hour for labor. However, the circumstances behind these units dictate that speed of renovation is not necessarily of the essence and budget protection is of a higher priority. PM me anytime and you come by and see my handy work and we can talk shop.

Hello BP community,

I had lunch with a fellow BP'er and the topic of property management costs came up.  I realize that there is a fairly wide range of work a PM could do for an investor, but I am just looking for a general data.  Please tell me:

1) Where is your property?

2) How many doors do you own?

3) How much do you pay per month per door?

4) What is the percentage of rent?

I am a buy and hold investor, NOT a property manager.  Being in the SF Bay Area I am curious to know where my local PM cost stacks up against other regions of the nation.

Thanks for helping me address my curiosity!

-Arlen

@Ana Marie B. I agree with @Steve B..  If you can do this with permits, you will be increasing the value of your own SFR at the same time entering into the REI world. Management will be substantially easier on your backyard AirBnB than dealing with an out of state investment. You will also get a taste for property management by handling the unit yourself.

Good luck to you!

-Arlen

@John G. That is probably the best intro I have seen in a long time.  You definitely have put some thought into your plan.  @Account Closed is a great no-BS gem of knowledge, so definitely meet up with him when you get the chance.  Also @Jeff Pollack has a great meet up in the South Bay that is very informative. I am by no means in the same level with these guys but I am closer to the "serious" start-up side of my REI carrier. I am often in Oakland on the weekends working on my units, feel free to drop me a line if you want to sit down and chat.

Good luck to you!

Arlen

@Jonathan Payne welcome to the forum.  You should contact @Mel Selvidge, she has a meet up coming up in Oakland, I am sure you will be able to connect with like minded people.

Good luck to you@

-Arlen