All Forum Posts by: Becca F.

 For the same reasons @Bradley Buxton listed above with Reno. I've learned to follow the Bay Area money - many of them moved to Sacramento and out of state (this may be changing with return to office since COVID and people not being able to work remotely as much). I didn't do a deep dive into Reno and MTR possibilities with the property manager I communicated with. 

For Las Vegas: our Oakland Raiders (football) and As (baseball) moved here, big entertainment city, tourism, people that travel there for business for mid-term rentals (maybe need to buy higher end with nicer house and possibly a pool than a Long Term Rentals). STRs are very restrictive so I wouldn't do AirBnbs and it's more labor intensive no matter what market than LTRs. People do illegal AirBnbs which is a very bad idea if they get caught. I choose to follow laws to not create more problems.  I talked to an agent who said new builds would have lower interest rate. 

Some people are also leaving California for retirement since Nevada has no state income tax and CA taxes pensions and any IRA/401k withdrawals, stock dividends (CA doesn't tax Social Security income for now).

The tenants will likely a different base than lots of Bay Area tenants. Many of the new tenants here are tech workers/engineers (I do have 2 long term tenants here in multi-unit, great tenants). Tenants in Vegas may be more service workers, relying on tips, not people earning $150k+ in like Bay Area income, not sure about Reno. The school districts in Nevada, I'm less knowledgeable about. I know people in the Bay Area will pay higher rent or mortgage payments to be in a high quality school district. 

If you're in SoCal I'm not familiar with rental markets there. I've poured out so much money into Indiana properties so I'm trying to problem solve those before making an offer on a Nevada property. 

I talked to a few California investors who bought in Vegas and their different strategies as well as strategies from agents from Vegas to reduce the negative cash flow issue (not eliminate it). I can also give you contact information, which I don't want to post publicly on a forum. 

I also know two CA investors who bought in Utah, both new builds. I can also share numbers with you in my DM. 

Rather than typing out a 5 page essay on here, could you DM me? :) 

Great topic. Looking forward to the webinar. 

I was informed by a couple of investor friends that they don't raise rents on their good existing tenants. I was completely shocked - this was coming from people in California, one who has kept the rent the same for at least 10 years (probably 15 years now). Their reasoning was: I bought the property in 2008 or in the 1990s, no mortgage now or very low mortgage payments, tenant is great and I don't them to lose a place to live. I appreciate that they're being charitable but this isn't a good business decision. 

Don't they have increasing insurance payments (that's hitting us in fire zones especially) even though property taxes might be low (Prop. 13 is max 2% increase a year in California since 1978 unless a significant renovation with permits is done causing the property to be re-assessed)? Also deferred maintenance if a tenant has been living there for 20+ years. 

So I kept the rent the same on my Indiana property for the next lease renewal while my property taxes increase significantly each year. I increased it the following years. I'm slightly under market now. 

I'm trying to find a balance of how much to raise it: 3%, 5%, 6%, 10% (which is a lot for Midwest) but I did raise it close to the max allowed by local laws for my California properties. 

I agree with Nicholas and Jay's comments. I'm in the Bay Area and invest here and Indianapolis metro area. For context I did live in Indiana and rented out my home when I moved back to California. 

The example Jay gave of a $650k mid term rental with $2600 property tax, I'm pay close to $6250 on my Indiana Class A (nice suburb with great schools) current market value around $300k (I bought it in 2013 and did a cash out refi during COVID with lower rate). On my $150k Class C property, property tax is $3440. 

I'm not trying to criticize the Midwest but the property tax rates are higher even though purchase prices are lower. I think it's a fine place to invest for people who live there.  For me it's not worth it to buy there anymore, doing the slow exit. We Californians get plenty of hate on BP for investing here but we have appreciation and Proposition 13 (property taxes go up max of 2% a year) so I'm stating the opposite in the nicest way possible. 

If you absolutely cannot invest locally, my vote is for Nevada. Reno, which is closer to those who live in NorCal and Vegas which is closer to LA area. The property taxes are one of the lowest in the country. Nevada is also much more landlord friendly than CA. I looked in Reno and will look in Vegas. 

In full transparency I think would have been better off buying one high quality property in Reno or Vegas in late 2022/early 2023 than buying two Class C Indiana homes (sold one of them to cut my losses). I'm not an agent or trying to pitch a market and would only suggest a market that I would personally buy in. 

 Your other comment said you're looking in Tennessee, Georgia and Oklahoma. I know California investors who own properties in those markets but they either bought in that 2011-2018 time frame or are experienced investors. I considered Nashville (and Franklin and Brentwood) but it would have taken many months to research those markets. I did visit those areas long ago before I was interested in real estate. 

I invest in the Bay Area and Indianapolis metro area. For context I did live in Indiana and rented out my home Class A (in a nice suburb with great schools) when I moved back to CA. I made the mistake of buying Class C "cash flow on paper" - those are the homes I've put in $70,000+. My property tax increases were 17%, the last round on both the Class A and C, are reducing my cash flow.  

I've been looking in Nevada (Reno and Las Vegas), which has some of the lowest property taxes in the country. You would need to go above $200k to $300k on your search, unless you buy a distressed property to BRRRR (wouldn't recommend that to a first time investor). I won't even BRRRR out of state. I'm not an agent or work in the real estate industry in any way other than my own properties. I'm not trying to pitch a certain market but Nevada is where I would buy. Las Vegas is drivable from LA area or a short flight. Maybe look at new builds there.

I would have plenty of cash reserves to pay for repairs, capital expenses, and vacancies. And to fly out to the areas you're considering and get to know those areas in detail. Don't buy sight unseen - that was my mistake too. The numbers might look good at first but add in increasing property taxes and insurance costs for each additional year.  Then you have to balance how much you'll increase the rent each year. It depends on the market but if you increase the rent too much the tenant may say they can't afford it and move out. Now there's a vacancy. 

Feel free to DM me if you have further questions :) 

@John Russo

I agree with the other comments about it being difficult to cash flow. You don't mention where you're located. Where are you looking for these long-term rentals for $200k-$300k? In your local area or within a 2 to 3 hour drive?

I would suggest NOT to buy out of state/unknown markets for sub $200k properties. I've posted about this many times. Any "cash flow on paper" will be eaten up by repairs, capital expenses and potential tenant issues. One of these days I'll add up the all money I've put in on these Class C type properties - so far I'm out $70,000+ with uncertainty about appreciation (I have a lot of passive activity losses on my tax returns so that's the only bright side). 

I've talked to recent California investors who are buying high quality properties in appreciating markets, some are ok with some negative cash flow.  To reduce negative cash flow: rent by the room (called co-living by some people), medium term rentals, STRs, new builds where the builder will offer a lower interest rate. 

I wouldn't focus so much on cash flow but look at the overall big picture: economic growth of the area, rents increasing, appreciation, property tax increases reasonable or extremely high, insurance costs skyrocketing in those areas (or worse not being able to get insurance) and other factors. 

In my several years of buying property, I haven't signed any Buyer's Agency Agreements, except for starting in 2022 where I signed a BAA specific to that property. After talking to a couple of agents, I was asked to sign a BAA for 6 months. I understand spending time with a buyer, researching, and looking at properties, an agent wouldn't want someone to jump ship to a different agent. 

With the NAR ruling, if I'm interviewing agents, I asked how the commission works out if the seller isn't willing to pay the buyer's agent commission and if I need to cough up the 3% for the total 6% which is split between selling and buying agent.

Example: One way to structure when I asked: Compensation is coming from the seller, not the buyer. If the seller is paying 2% or more, we will not ask the buyer to pitch in the difference to make up 3% compensation. If the seller is paying at least 2.5%, we will purchase a home warranty for the buyer up to $550 (copied and posted this from the agreement). Are there any holes with this language? 

For me to pay 3% on a $400k to $500k+ property is a good chunk of money, if seller isn't willing to pay any part of buyer's agent commission. What additional questions should be asking them? Other ways to structure this, build my cost into closing costs and do some kind credit/debit with other things? 

If it matters, the market I'm looking at is Nevada, flying out to Vegas soon and already looked in Reno. So far numbers aren't  working with traditional LTR but I'm exploring all avenues (rent by the room, MTR, new build with lower interest rates etc ). My investor friends referred me to a couple of agents. 

I just sent you a detailed DM. I forgot this in the DM but both CPAs do free 30 minute consultations so maybe write down all the questions have you for them. 

I know a CPA in the Bay Area who works with a lot of real estate investors and does tax strategy. He's even doing an educational webinar soon. You could probably meet him in person since he does in-person workshops for free sometimes.

I could also give you the name of another CPA (not local) that I talked to extensively that I think would do a great job.

DM me if you would like more info. 

 100% agree with this. To the OP, Shyla, I invest in California and also out of state, in the Indianapolis metro area. To put this in context, I also lived in Indiana so I didn't just pick a random market 2000 miles. I rented out the Indiana home (Class A, nice suburb with great schools) I lived in when I moved back to CA. This went well then I started making mistakes. 

I wanted to scale faster and bought "cash flow on paper" Indianapolis properties (Class C) in 2023. To be fair, I'm not dogging on Indy but I should have bought higher quality properties. I have literally put in $70,000 or more that I regret, two 20% down payments (about $58,000 total) and all the repair costs and capital expenses (stolen AC unit, new roof which was partially paid by my seller, new water heater). I've posted about this many times. I'm uncertain of how much this property will appreciate (sold one recently to cut my losses sooner). I think these types of properties are better suited for locals who can be hands on, do their own repairs and check on them frequently. I would have been better off putting that money into a HYSA earning 4 to 5% interest or some index funds for far less stress. 

I don't know SoCal very well but some of the more affordable areas in California: Sacramento and the Central Valley, Fresno, like Nicholas mentioned but these might a little far for you. You will care about and take care of your property more than an agent, property manager etc. who's over a thousand miles away. 

I'd recommend attending local meetups in the LA area to ask other investors where they invest in with SoCal and OOS. I have nothing to sell you and I don't  benefit financially in any way from helping you.

Feel free to DM me if you have questions. Good luck!