All Forum Posts by: Al D.

@James Wachob Hello, James.

Would you please clarify some facts about your post?

I was able to figure out that this property is 6913 Century Oaks Dr in Cordova, which allowed me to look for associated public records:

You are saying that you bought it for $108,000 with no money down, presumably recently.

But public records show that you bought it for $135,000 (recording date: 8/5/2021) and have a note for $108,000 (signed: 7/15/2021,) which is exactly 80% of the purchase price public records show you paid for it.

Can you please explain the difference in stated price from the public records and how you were able to get it with zero down in that condition, and could do similar for a new client of yours today?

Thank you.

I have not been following any news on MI, but just came across a post in the “Completed Deal Diaries” section. The poster only has two posts here and both about the same deal.

@Jeremy Schmidt (Looks like you made two posts about this, so I’ll ask here, too.) Wait! You bought from Morris Invest? As in Clayton Morris? I haven’t been following the news, but had no idea (that) Morris Invest was still doing business.

@Jeremy Schmidt Wait! You bought from Morris Invest? As in Clayton Morris? I haven’t been following the news, but had no idea (that) Morris Invest was still doing business.

@Stephanie Gledhill The credit union you found looks like a great option. You may also try to stop by your local Bank of the West branch - better than trying to establish a relationship by phone - to see if they offer investment HELOCs in TN. They do where they have physical presence, for sure. I don’t recall them having subordination concerns for a California property with first mortgage.

Don’t delay reaching out to them, as their offerings may change, due to having been acquired recently.

@Feng Ye I bought a brand-new townhouse inland from Tampa in 2016. Not a flood zone. A 2017 hurricane resulted in a window screen disappearing. Since the place was still under the builder’s warranty - and a couple of other, unrelated, repairs were already pending - I asked the tenant to ask the warranty repairman to check on the screen issue while there... The builder also replaced the screen at no cost - and not a word - to me.

Insurance: I have had the same policy since 2016. While individual preferences and property-specifics vary, the following should still serve well for basic math purposes: in 2016, my policy cost just over $500/yr. My 2021 renewal invoice was for over $900/yr. Asking my insurance broker whether I have the best possible price for my needs resulted in a “yes.” I found another broker to make sure: Through her, I got a quote for a similar coverage with another insurer for less than $700/yr.

However - surprise - as I was in the process of binding the policy, the broker advised me that (to her surprise) the insurance company no longer issues policies in my zip code. I did not ask when that changed. (A couple of things about the zip code - and apologies that I don’t get more specific, for privacy reasons: a good majority of properties in the zip code were built in this century. As stated previously, this is inland.) Her next-best carrier would be $1,100/yr.

(My property has a potential option of getting an HO-6 policy, currently quoted at just under $800/yr. But - due to certain specifics of the property - I choose to not go that route for liability considerations. For a comparison point on this: a CA rental condo’s HO-6 policy at latest renewal cost me under $200/yr.)

Remote management: I have had properties in other states that I manage/d myself remotely. In fact, I still have not even seen this very property since before the foundation was even poured. I use a local - licensed - RE agent for lease-ups. I am on my third tenant in this property. In another market, I use an unlicensed - but recommended/trusted - person to show my properties, while I do the (phone/email) interviewing and approval. That has even included two Section 8 tenants over the years. And most of these properties are far older and didn’t have builder’s warranty at purchase. This is 21st century; more things are possible from a distance. The only thing that has mattered to me is whether the location is good. Based on your intended target price, I imagine that you should not have a problem finding respectful tenants - but this is certainly not an axiom.

@Neera Melwani I just checked the RWN website: OmniKey is listed for (at least) Dallas - you just have to log in with your RWN credentials to see who the provider is. From personal experience - and despite numerous attempts of providing various evidence of another affiliate’s deception (using a kinder word here than in my correspondence with RWN) spanning a couple of years - it may take an act of God for RWN to sever ties with an affiliate. I learned that I am no god. (Besides initial consideration, I have no personal experience with OmniKey.)

OmniKey was also a guest on GRE (episode 337) earlier this year. I have no recent experience with Keith Weinhold’s recommendations/guests.

I have learned/confirmed that word of mouth from victims - ahem, former customers - is the best way to avoid a problem in this business. If someone stands to make a gain from a referral, they are not likely also your fiduciary - RWN or GRE is not.

@Akshay Jay Sorry: Out of state. I see the term used here often…

I was able to ride the Bay Area property values wave up. This is not to say that it will not continue to increase - I have no idea. I just felt the need to reallocate my investments to places (states) that are more affordable (when measured in relation to local incomes,) growing population, less regulation (I made up my mind to sell when the latest state-wide rent control measure was being debated.) I invest for cash flow - it is something that I can calculate today. This does not mean that - over time - you will not come out ahead of me on the equity growth. But, to me, that is gambling, especially with today’s property prices in remote CoCo.

@Akshay Jay

First of all, I am not a fan of negative cash flow. But I have to assume that you believe that you can carry the losses for the next ten years based on your other income. If so, ten years from now should be safe enough to at least break even if there is a market downturn after you buy the property. Or not. I’ll say it again: I am not a fan of negative cash flow *investing*.

Now, there may be a genuine tax play where you own a bunch of gainful rentals and could use another property that wins on depreciation that you *know* will at least appreciate in value, especially if you are doing a 1031 exchange and can’t find anything better. Based on what you said about yourself, that is not your situation. But you must have done the math since you are ok with the likely “slightly negative” cashflow.

You say nothing of the state of this 1991 construction, so I’ll presume it does not have deferred maintenance. I also presume that you will self-manage it, and are mentally prepared for that.

To answer your questions:

1. I have not looked at Oakley in close to 20 years, but know that it has grown, and will likely continue to grow. Some perspective from the last housing crash:

Sometime in 2010, I was considering buying condos in Vallejo, Antioch, and Hayward. Some 1Bd/1Ba were going for as little as $15k/$30k in Vallejo and Antioch, but for $50k in Hayward. Craigslist was a popular website back then. It showed a whooole bunch of “first month free rent” ads in Vallejo and Antioch. Hayward had none of that. I did not look at Oakley or at SFRs... That’s the past, and may never happen again. But you should consider this for your math. Of course, had I bought everything under the sun back in 2010, I would have come out a much richer person in ten years. But if I had bought in 2006…

Like Antioch, parts of Oakley have an additional property tax called Mello-Roos - make sure you check and calculate for it. Make sure that you calculate the property tax based on your purchase price, and not on what the current owner is paying.

Is this SFR within an HOA? Make sure it is well funded - in an economic downturn, some members may stop paying their dues, causing the HOA to increase the dues on the other members if some special community needs should arise in an already stretched budget. (Foreclosures - with lower property values - may also follow.)

2. As someone who got rid of his last Bay Area/CA rental earlier this year in favor of OOS - and do not intend to look back unless there is a crash - I can’t answer this question.

3. Some parts of Oakley are in areas of elevated flood risk - make sure to check on this. Consider that if it is already in such an area, but flood insurance is not yet required, FEMA may yet elevate the level of risk with time, so that it may be a requirement in the future. Politics/economy may also play a role in this, as Congress has had to reauthorize flood insurance subsidies annually. Consider the cost of that insurance and the hit to the property value. Consider that general property insurance prices are likely to continue to rise due to certain natural disasters, especially if CA fires continue to be costly.

Your agent should be able to guide you on most of the above. Make sure you are using an agent.

@James Wise

1. The OP is starting out in REI.

2. The property is marketed as “turnkey.”

3. I can close my eyes on certain flagged issues, but non-working and clearly old HVAC is definitely not a turnkey in any sense of what a turnkey is. Again, that is closing my eyes on other stated issues. The property is clearly not ready for a tenant - until the buyer invests additional funds (after the purchase?) Then let’s define “turnkey.”

Having been marketed similar “turnkeys” in the past (even by licensed agents,) I do not understand how the word “turnkey” can belong to the current conditions of the property. I think we have enough facts - as stated by the OP - to advise the OP to back out of this starter property.