All Forum Posts by: Brent Seehusen

If everybody is overpaying for apartments right now, then are you guys thinking about selling your holdings?  @Ben Leybovich @Serge S.

Does anybody have thoughts on who the best portfolio lenders in SoCal are?  

There are so many small banks and credit unions that encompass the 5-6 counties in SoCal that it would take many hours to research them all.  I'm hoping some of the members here on BP can comment on who they've found to be the most investor friendly.

Who allows the most loans?  Lowest down payments?  And best overall terms?

Keywords: Orange County, Los Angeles, Ventura, San Diego, San Bernardino, Riverside

@Huy Ly

The rent ratio is 0.5% when paying retail in Orange County so anything higher than that would be considered a good deal around here.  I agree with @Account Closed that it's completely dependent on the individual market.  East LA is a different market so 0.88% might be right at market, or it could be a good deal or it could be paying too much.  The more crime that an area has then the higher the rent ratio buyers demand to compensate for the headaches.  I have no idea what it's like in East LA.  So many areas of LA are gentrifying and a good strategy is to target these areas even though the starting rent ratios are low, because the improving neighborhood will increase your values.

I'm not a broker, but I've seen a lot of agents in California offer a commission split, so I would assume it's legal.  My personal residence was purchased using Redfin which at the time offered a 50% commission rebate.

It's pretty common to see a 5% total commission in our area due to higher home prices.  I would think asking her to take 2.5% for the repeat business and offering 2.5% to the buyer's agent would be acceptable to her.  If not, there are plenty of other agents that would probably take this deal.

@Matthew G. @Mark Whittlesey

The main reason I would think of selling is to lock in the tax free gain.  You could sell this place and buy the one next door if it's such a great investment, and save up to $125,000 in cap gains taxes (Federal + State, and possibly more if subject to 3.8% Obamacare tax).

The 10% return is banking on long term appreciation which may not show up for many years, so personally, I would rather not count on that.  If it does show up, then you have a return comparable to the stock market, but with more responsibility.  That might be fine if you want the diversification.  Part of the decision depends on your goals.

I hope all goes well whatever you decide!

This part of your thinking has me worried.  

First of all, ignore what Realtors and brokers are saying.  They are not investors and their job is to sell real estate, not predict the future.  Most economic forecasters whose job it is to predict the future are wrong year after year, so why would you listen to somebody that probably isn't educated in economics and has no consequences for being wrong?

Secondly, I think your numbers for historical appreciation are way off.  I'm a Huntington Beach native and also own property there.  I have many relatives that have owned in Huntington Beach since the 1970's-80's... parents, aunts & uncles, cousins, etc.  Their home values have not gone up by 6-8% over the long run.  My mom bought two miles from the beach in 1987 just before the late 80's bull run for $250k.  According to Zillow, her place was worth $800k last year.  So compounded over 27 years, the appreciation rate is more like 4.4%.  And that's with buying just before a strong bull market and counting through the end of the recent strong appreciation from 2012-2014.  If you were to calculate the compounded appreciation at the bottom of the market, it would look even worse.

Since we just concluded a few strong years, I think you should forecast below average appreciation in the coming years and see how it affects your calculations.  Personally, I would take the tax free gain and put it towards something more productive.  There might be a couple more years to this bull market, so consider letting your money ride just long enough to still qualify for the capital gains exclusion and then move on.

I think @Jay Hinrichs hit the nail on the head. I know of one married couple that attends most of the local Orange County REIA's that has owned approx. 5 out of state properties since before the meltdown. I think the locations are Texas and the Carolina's. They were all purchased at bubble prices and they all have break even or negative cash flow. Since my day job was in the distressed mortgage servicing business a few years ago, I was able to coach them on negotiating with some of their servicers to get loan modifications and improve their cash flow positions. To my knowledge, they are still holding on and hoping to regain the values that they purchased at.

So I think the problem is you aren't going to find many that have owned out of state for 10+ years unless they purchased prior to the bubble which means they would have owned for closer to 15+ years.  I doubt many people in California were looking to invest out of state back then because the popular perception was that buying for appreciation in California was a no-brainer.

Remember, the 17% affordability is for California as a whole.  Certain areas like San Fran and OC can easily go lower as people substitute down to lower cost areas.

 This is a blog that focuses mostly on OC but he does charts for all of the SoCal counties:

http://ochousingnews.com/

His report for LA county shows that it was possible to cash flow at the bottom of the prior downturn as well, from 1995-1999.  So the moral of the story is to jump in and start buying after SoCal housing has been crashing for about 5 years.