All Forum Posts by: Andrew Karpman

Hi,

I'm am located in an expensive real-estate market (Los Angeles) so my options for buy-and-hold SFRs or MFRs are slim-pickings. As a result, I have to consider buying and renting out a condo. My question is, what are the capital expenditures that I have to account for as an owner of a single condo unit in a multi-family unit condo building? Do I still have to allocate funds for roofing, water heater, HVAC, gutters? I understand that some CapExes such as flooring, plumbing, windows, and paint I have to cover but which of the following CapExes can I omit when doing my analysis?

Roof, Water Heater, All Appliances, Driveway, HVAC, Flooring, Plumbing, Windows, Paint, Cabinets/Counters, Gutters, Structure/Foundation, Landscaping, and Components (garage door, etc).

Thanks,

Andrew

Hello All,

Ever since I had realized that the 10% rule for CapEx estimation is not always a good estimate, I've done my own estimations as to how much money should be allocated for CapEx in the Los Angeles metropolitan area.

In the CapEx calculations, I had accounted for the following: Roof, Water Heater, All Appliances, Driveway, HVAC, Flooring, Plumbing, Windows, Paint, Cabinets/Counters, Gutters, Structure/Foundation, Landscaping, and Components (garage door, etc).

Please refer to the questions below:

1. My total monthly Capital Expenditures came out to be about $280/month. Does this seem about right for Los Angeles?

2. Initially, according to my research and people's comments, the roof replacement would cost on average about $10K. I reached out to a local roofing contractor (Supreme Remodeling Inc.) and got a quote that was $15-25K for Asphalt Shingle and $25K and up for Tile for a 1,450 sq.ft SFH. Therefore, in my calculations for CapEx, I ended up using $15K for roofing. Does this price seem right for a property of the size mentioned above?

3. Some CapEx items such as the Driveway or Windows I am planning on not accounting for when analyzing properties that were built in the year 2000 or later. Does this practice seem OK since both the driveway/parking lot or windows are all items with long lifespans (I assumed 50 years for both)?

Thank you for your responses in advance.

Andrew

Brandon, 

What confuses me about the 10% rule of CapEx is the fact that it's a percentage of the gross rent. To be more clear, I'll give you an example. I live in Lancaster, CA, which is a town about 70 miles north of Los Angeles. Both, Los Angeles and Lancaster are located in the LA county. However, since rent in Los Angeles is about twice the rent in Lancaster, according to the 10% rule, I'm supposed to allocate twice as much for my CapEx. This doesn't make sense to me because a roof is a roof, a parking lot is a parking lot, and HVAC is HVAC no matter whether I'm in Los Angeles or in Lancaster. Is it wrong for me to assume that all of these grand expenditures would cost about the same whether I'm in Los Angeles or Lancaster? If this argument makes sense to you, then is the 10% CapEx allocation really a good number to use universally, i.e. for all properties in all the different sates?

My name is Andrew Karpman, I'm from Los Angeles, CA but currently reside in the Antelope Valley, CA (~60 mi north of LA). My wife and I initially attended a few local RE Guru seminars and then somehow stumbled upon the BP site. Since then, we've been educating ourselves by reading Brandon Turner's books and other BP blogs, and found out a lot of great information. We are seriously wanting to invest in RE (both have well paying jobs and savings) but as many other newbies we are very conscious about the first deal and lack connections. We are looking for advice from local experienced investors about the greater Los Angeles RE market, and some other general questions that we think would build our confidence to invest.

We look forward to reading all of the posts from anyone who can offer a helping hand and/or mentorship here in the Los Angeles area.

Thanks,

Andrew

We truly appreciate everyone's inputs. 

Just FYI, I learned about the concept of Creative investing from an online lecture which can be found in the link below. It talks about the pros and cons about both the Creative and Traditional investing. Of course, the famous lecturer in the video, Phil Pustejovsky, leans towards Creative investing. If anyone has any comments/inputs about this video, please share.

http://courses.freedommentor.com/courses/creative-...

Thanks,

Andrew and Irina

My wife and I are just starting out in our education in real estate investing, and are trying to understand and ultimately decide whether we should be Traditional or Creative investors. Can anyone offer the pros and cons of both, what method of investing you prefer and why, and any other relevant information?

From what I was able to find, it seems like for Traditional investing you have to have either a lot of money or be able to get loans, and that it's not as easy as told to find people who are willing to provide you with their hard earned money. For Creative investing, it seems like you only have to have money to pay education and a mentor, which I understand may cost thousands but is still much cheaper than Traditional investing. I also found a source that stated that Creative investing is much more stable than Traditional because Traditional investors now more than ever have much more competition because of Hedge Funds and other institutions that heavily invest in real estate while the Creative approach is driven only by motivated sellers. 

Do bigger pockets experts prefer one method over another?

Thanks,

Andrew