All Forum Posts by: Brent Seehusen

I would echo what @Account Closed is saying. Campbell's book is a good starting point for learning this topic, but Bruce Norris is much more nuanced in his analysis. I saw Robert Campbell speak at the FIBI meetup in Orange County about a year ago and I have to say he is the worst speaker I've ever seen at any REIA meeting hands down. He is scatter brained and mostly wanted to talk about owning gold and the coming financial collapse, blah, blah, blah... Not what I was looking for at a real estate meeting.

The book by Craig Hall looks interesting.  I'll have to add that to my list.

Ok, I see what you're getting at @Christopher Brainard.  Yeah, the exemption in California is $7k so it's pretty easy to forget that it even exists.  I remember hearing that this was a bigger deal with out of state properties awhile ago, but I had since forgotten about it.  Since I'm considering embarking on some out of state investing, what is the best way to determine the non-homestead tax rate? Do you typically call the county assessor?

 Hi Spencer - Can you elaborate a little more on this point?  Maybe it's because I'm in California with our unique property tax system, but I really have no idea what this means.

 How are you getting returns of 25% or more with hard money lending?  I thought the going rate was between 9-12% depending on location.

 Joe you have to understand that what you were doing was not investing.  You way overpaid for a property that was to be used for your primary residence.  Using that as a barometer for investing in an entire state is absurd.  Some of us have done well in California, not by gambling or being stupid, but by picking up bargains when they present themselves and sitting the market out when there are no deals to be had.  That's what investing is... paying a reasonable price for future cash flows, whether that be from rents or appreciation.  If one market doesn't offer compelling deals, then find another market that does.  Unfortunately, overpaying for a primary residence at the top of a bubble does not count as investing.

Those numbers look good but you need to ask yourself why the current owner is looking to sell at that price, and if it cash flows why are they selling at all?  There could be good reasons like the owner is retiring or it could be a sign to avoid the area.  I look for properties that hit those kinds of numbers but I makes sure it meets other criteria as well, such as will I feel safe visiting and managing this property, and will I feel comfortable with the tenant pool that will be renting the property.

@Matt R. This deal was a fix n' flip so I don't see how it qualifies as a negative cash flow investment in the sense that we were debating.  Most flips are going to be negative cash flow by default because of the high vacancy and upfront rehab costs, but I thought we were debating a buy and hold strategy.  Did you read DL Martin's comment on that thread?

I hate that complex and everything about it. Trying to gain access after a shooting or stabbing is a nightmare. Kicking on the door and/or adjacent window until a tenant or resident drug dealer opens the door for you was pretty much the only way to gain access. (The KnoxBox key was so high that it was impossible to reach without a ladder). And the elevators are dreadfully slow.

On the positive side, all of the interior walls are concrete block which limits peripheral damage when shooting occur inside the buildings or tenants set their units on fire.

I am amazed that you had the guts to take that on and I admire your determination to see it through until a successful sale.

At $68,750 per unit, I do not envy the new owner. 

Not exactly a ringing endorsement of negative cash flow is it?

@Omid Rabbani

The cap rates in Orange County are 3-4% for 5+ unit apartment buildings.  2-4 unit buildings don't trade on cap rate but they are still priced similarly high.  I would imagine San Diego has similar pricing but certain pockets might offer better deals.  Awhile back I was looking in your neck of the woods in Oceanside and I was able to find some condos that met the 1% rule.  I think it's one of the best priced beach towns in SoCal with strong rental demand from Camp Pendleton.  I almost pulled the trigger on one of those condos, but ended up going in a different direction, investing in 2-4 units in the high desert instead.

In 5 years, when I've left my job and I can devote 100% of my time to raising them and attending school activities and sporting events, I would hope they would say the properties paying a 20% cash return and not some cash flow loser that I have to hold for 30 years in order for it to pencil out.  Can you imagine them thanking me for never being there because I had to keep working to cover the negative cash flow on multiple investments?  Sure, I'll be able to pass a fortune on to them when I die, but they will resent me for not being there when they needed me the most.  No thanks.  The opportunity cost is too big.

I think title insurance is ripe for disruption.  Something like only 10% of the premiums collected are ever paid out as claims.  Not only that, but every time a property sells a premium is collected by the title company.  There are no prorations for owning less than a year.  So in the case of a flipper, they need to pay title insurance when they buy and then 60-90 days later they sell to somebody that also has to pay the full title premium.  No discounts.

In this day and age when everybody has access to the same county records online that a title company does, it seems like you aren't getting any special expertise from their ability to search title.  Therefore, if only 10% of premiums are paid out as claims, it seems that the premiums could be reduced by 70-80% and the title companies would still be making a profit.  They could charge more for more complicated commercial or land deals, but standard residential should be much cheaper IMO.

In general look for where consumers are being gouged and that is likely to be the place most ripe for disruption.