All Forum Posts by: Brian Tremaine

welcome to bp @Mansoor Fazel

I'm a buy & hold investor in the SJ area. I want to tell you a cautionary tale. Be careful where you invest and don't get caught up in the rising market never falls. One of my few ventures outside of Buy & Hold was to finance a 2nd on a home in Brentwood (between SF and Sacramento). I thought I was okay holding a note in 2nd place because there was a 15% cushion. Anyway, 2008 came and prices in that area dropped 40%. The bank holding the 1st foreclosed and I lost by 2nd. Lesson learned, the inflated prices in outlying areas don't have legs. When a frothy market slows down those areas will fall. In this example I think Brentwood was just to far from the major metropolitan areas. 

@AdamCraig

How can it be valued at $70k if the replacement cost is $169k? What is the market value less the land cost?

Brian

I would suggest using an on-line broker. I posted earlier and mentioned a name but my post was deleted as self-promotion, which it was certainly not. Some on-line broker sites will charge a small fee and give you 100% commission. Most importantly, they hold your license. That is what my wife is doing.

Best of luck,

Brian

I imagine with new tenants you were able to get current full market rates, that's a positive :)

Also, it sounds like it was a good thing to get rid of your existing problem tenants, another good thing :)

We all make mistakes, I've certainly had my share.

Hang in there and stay on top of expenses. Can you re-fi to a lower rate?, get lower cost insurance? Lower yard maintenance costs? When I'm not actively working on a project I always closely manage my balance sheet and income statement.

Best of luck,

Brian

The Schiller Index does look good and I can attest to buying my first SFR in 1985 for $97k and today the market value is $670k (yes, I still own it). What troubles me is the affordability index in the BA is only 21% for Q12015. I know most my friends kids cannot afford to rent or buy in the BA. For a long time we have been seeing larger extended families living in homes together in order to afford the rents. This has to be putting some eventual limit on the appreciation growth. The modest 3/2 house for $670k rents for $2800/mo. It wouldn't make sense to but it today as a rental, even at $2800/mo, but as a buy & hold from 1985 its doing okay.

Personally I would be happy with 4-5% appreciation. 

I have a question how you handle improvements or rehab.

I have several SFH that are long-term rentals and I'd like to bring the designs more up to date to get current market rates. I'm talking flooring, kitchen, bathrooms...

How much is too much renovation? Everything is kept in running order but it is 1970-1980's vintage except for appliances replaced as needed & painting. On the other hand if I make it more functional & up to date I could eventually sell at a better price. The homes are already close to neighborhood comps so doing a major upgrade wouldn't be worth it I think.

Do you hire a general contractor or do you act as the contractor and hire subs as needed? Any contacts in the San Jose area?

It's risky to count on historical appreciation without paying attention to the current dynamics. I see you are in HI. Is the property in a tourist area? If its multi-family I guess not. Then what is going to sustain rent increases? Is the job & wage growth that good?

Here in SJ rents on a so-so SFH are averaging $2900/mo minimum. I don't know whats going to sustain this because middle income wages are not growing as fast as rents.

If there is a dynamic such as high immigration rates then maybe it will be okay.

I would agree if its not a good deal today I wouldn't count on it being a good deal in 10 yrs.

I have bought two rental properties in HI (SFH) and we visited for a week with the sole purpose of locating a property. We dealt beforehand with a local broker via email then got house tours during our week stay. I wouldn't do it any other way.

Another no!!! I learned by experiences many years ago. They can end up staying 2-3mo rent free before you evict.

Thanks for all your advice and good wishes. I really feel good about joining BP.