All Forum Posts by: Animesh Das

Condos have their pros and cons.

The cons have have been listed by the contributors above, I would like to list the pros. 

Pros:

1) Cheaper. For the price of one SFH, you can buy 2 or more condos.

2) Lower maintenance. In most condos, the majority of the big ticket items are taken care of by HOA, such as structure, roof, landscaping, gates, security etc. Also if the electrical or plumbing issues happen outside of few feet of your unit, then its not your responsibility and HOA reimburses you the cost.

3) Better amenities. Some condo complexes provide amenities like swimming pools, gyms etc. They can do that because the cost is shared between all the units of condo complex. A single residence can't afford those amenities.

So condos are not all bad as investments. They have their own set of benefits that make them good investments, provided you do due diligence when buying a condo as investment.

P.S I have 2 condos as investments.

My suggestion: Do not take money out of your 401k to find real estate financing

Reasons

1) It will be a giant hit to your 401k value when you reach retirement age. Not only the money you are taking out right now, but also lost appreciation that withdrawn money would have given you. And the taxes you have to pay reduces the effectiveness of your withdrawals.

2) You will be putting all your eggs in one basket, it will leave you vulnerable if something goes bad with your real estate investment.

3) Based on your current income of 5K per month, I assume that if you live frugally for couple of years then you can save 40K or so. And that would be 25% downpayment to a property in mid-west. And that would get you started.

Thank you all for taking time to read my post and provide awesome suggestions based on your knowledge and experience. It shows the high quality on biggerpockets forum. I wasn't even aware of few things that were mentioned in this thread.

Based on the responses, I have narrowed it down to following possible options, based on my objectives and preferences

OPTION 1: Invest in a MF in outlying areas of bay area such as Central valley, Gilroy/Morgan Hill or Sacramento. 

OPTION 2: Buy MF out of CA and hire a property manager.

OPTION 3: Syndicated investment in out of CA MF property. 

Thank you all again, for taking the time to respond to my post.

@Thomas Rutkowski I was not aware of "Monetized Installment Sale". Will definately look into it.

@Wes Blackwell @Andrew Johnson Thank you for valuable opinion. Looks like I should explain my investor profile as the few experts have mentioned it as a factor in recommending a good path.

Its tangential from my original post but I think its a valid thing to know before giving recommendations, so here it is

CURRENT STATE (Excluded Hayward condo for the sake of simplification, as it doesn't affect my 1.5M budget)

I have a paid off condo in Fremont, CA. I lived in that condo from Jul 2012-Sep-2017, so I intend to sell the condo before Sep 2020 to take all the profits tax free. That condo is valued at 480K, so I have around 450K available for investment. Considering that 450K will be used for 25% downpayment for a investment property, my budget for buying investment properties is 1.5-1.8M.

10 YEAR GOAL : To have 250K net annual income from real estate investments. 

THINGS I CONSIDER FOR REAL ESTATE INVESTMENT

1) IMPORTANT: I seek to acquire investment properties to be self-supporting at the time of purchase, i.e at the minimum, cash flow must cover all expenses + some leftover for reserve fund for repairs and rehab. Negative cash flow is a BIG no-no. I have enough W2 income to pay all my bills and maintain my lifestyle, but I don't want to put any of my W2 income into my investment properties. If there is more cash flow then I would use that to create fund to buy more properties.

2) I seek balance between appreciation and cash flow. CA is good appreciation but poor cash flow, mid west is good cash flow, but poor appreciation. Reasonable speculation in appreciation and rent increase is ok.

3) No plans for frequent turnover. I will hold a property long as the returns/appreciation make sense, that can be 5 years or 30 years or more. If the returns don't make sense or if I find a better investment opportunity then I will sell it.

4) I want to stick to residential properties, single or multi family. Don't want to get into retail commercial.

5) To achieve my target 250K/year income, I would prefer to hold less number of high income generating properties than a large number of low income generating properties.

I hope the above info gives a rough idea about my long term goals as real estate investor.

@Michaela Thank you for you advice about selling my former principal residence. I was not aware of "can do it once every 2 years" law. So thanks for making me aware of that.

 Thank you @Alpesh. I manage the properties myself, because they are just 2 condos. So I don't need to spend lot of time in doing property management. This saves me the 10% that a property manager would take. But I agree, once the unit count reaches 10 or so, then I would probably need to have property manager(s).

I buy new appliances.

Reasons

1) I am not an handyman. So even one problem can wipe out the savings made by buying used.

2) Helps to retain high quality tenants. High quality tenants expect high quality landlord. If you buy new appliances, they will appreciate you as landlord.

But how much you should spend on new appliances depends on quality of property, type of area and type of tenant. So if your property is B- with average quality tenants, then I won't buy high end stainless steel appliances. I would get white/blank appliances from mid-quality manufacturer.

Thank you @Joe P., @Chris Williams and @Gordon Cuffe for your valuable opinions and advice. 

I was looking to investing in bay area/Sacramento area/central valley because of 2 reasons

1) I know these areas. I kind of know what kind of renters are looking for what kind of property. So I can position the property appropriately so that my needs are met and also I get good tenants. I don't know about mid-west (or outside of california) enough to feel comfortable about investing there.

2) I would like to do property management myself. I have been managing my existing properties myself for past 3 years. I vet the rental applications and rent to high quality tenants, do the repairs using my trusted contractor and collect the rent myself. And I haven't faced any problems.

P.S  I have edited the original post to include that I have a timeline, and I would like to invest locally.

Hello,

Beginner real estate investor here.

I have 2 condos in bay area, 1 in fremont, and 1 in hayward, I bought fremont one in July 2012 and hayward one in Oct 2014.

I am considering selling both and consolidating into to a multifamily property ( 4 or more units) in bay area, or 6 or more units in Sacramento area.

I have 1.5M budget, with 25% down payment and and rest conventional financing.

But looking at the cap rates, GRM and net income listed on sites like redfin and loopt, I am wondering if it makes sense to invest in real estate in 2018.

The property prices are very high and there will be barely any returns after expenses.

So need the advice of pros on this forum. Does it make sense to execute my plan in 2018? Or should I hold on my existing condos? Or should I sell but invest in mutual funds.

Any advice is highly appreciated.

Thank you,

Animesh