All Forum Posts by: Carlos Carbajal

Thanks John. Been scary and exhilarating at the same time haha. 

I am being funded with a construcion loan from Community Bank of the Bay. 

One thing I have learned is if you have a construcion loan the banks do tremendous amounts of oversight on the project. This is a good thing I think even if it’s lots of overhead. 

They also make sure you have plenty of cash on hand before they lend. I would count having about 15% to 20% of liquid cash as a percentage of the project cost. So if your project is $1M to build the banks will want to see $150k to $200k in liquid assets on your end. Maybe even more. These projects are risky for the lender as there is no real collateral except the raw land so they want to make damned sure you can see it through to completion. 

I am about 75% through a 6 unit townhouse development in Oakland, CA and my hard costs are going to be about $400sf.  My all in project cost with land, fees, architect, etc is about $500sf.

@Phil Mcnally yes here is the website for applying on behalf of your tenants here in California.

https://housing.ca.gov/covid_rr/index.html

The program is not first come, first serve. They are prioritizing lower income tenants first.

Hi Chris-

I manage about 30 STR units in the San Francisco Bay Area for other people. This is a good question I have struggled with but the short answer is I supply all the "consumables" if the commission rate is high enough.

In my own business if I am getting 17.5% to 20% of the gross income then I will be happy to supply all the TP, paper towels, shampoo, soap, and cooking basics like salt, pepper, olive, oil, etc.  However, linens and towels and any appliances that need to replaced like a toaster is charged to the owner.

If I am getting 12% to 15% of the gross income then I will generally charge the owner for all of the consumable unless it is a strategic property or owner that I feel very eager to land.

In my experience covering the cost of the consumables is worth it as the items that are high consumption like TP and paper towels are not expensive if bought in bulk from CostCo or amazon (although supply chain is spotty during COVID as we all know)

One thing I have noticed is that guests will buy kitchen items like soy sauce, tabasco, salt, pepper, olive oil, etc and leave them there so in a way the kitchen items are often "self-replenishing" but of course that is not 100%.

@Jackson Andrews I live in Oakland and lived in San Francisco for 15 years.

What you are experiencing in Austin is not an increase of people leaving California but an increase *percentage* of people from California wanting to live in Austin. The bulk of the increased appeal of Austin over the last decade is the tech industry in Austin which was already strong but is now much bigger (Silicon Prairie although maybe that’s an outdated term)?

Even if net migration out of California goes down over the next few years the net migration to Austin (or Portland) will almost certainly continue to increase and maybe even accelerate as long as housing costs remains below California and Austin as a *long* way to go before it gets that high.

Hi all-

I've got about 8 mortgages (more if you include HELOCs). As many of you have already heard Fannie and Freddie are directing lenders to offer mortgage relief to their mortgages which entails a forbearance of the loan payments for up to 1 year. This is tacked on to the end of your loan term.

The news stories indicate that there will be no late payments reported to the credit bureaus.  HOWEVER, what I am not 100% convinced on yet is if there is a negative effect on my FICO score because in the past any mortgage in forbearance is reported to the credit bureaus under a different code which then in turn lowers your FICO score.

Does anyone have inside knowledge of how this actually does or does not affect FICO scores? Many, if not most of is would welcome this kind of relief but I am much more hesitant to do it if it affects my FICO scores in any way.

@Michael Baradell

Highly recommend finding Mobile Home Park University on the web. They have an awesome investing primer for mobile parks you can download.

One very key item they talk about it that when you value the park you should only take into account the income from the spaces. Not the trailers themselves!

The trailers are depreciating assets like a car.

Most mobile home park sellers want to include income from the trailers but again don’t factor that in is what the MPHU guys say because lenders won’t factor it in for good reasons.

@Yankel Raskin

In my humble opinion people who are giving you advice about doing or not doing arbitrage should STHU unless they have actually done themselves :)

With that out of the way I’ll give my 2c since I have done a whole bunch of it in the San Francisco Bay Area over the last 6 years.

- I made mad money in the first couple of years. Enough to quit my high paying tech job and go into arbitrage full time.

- in the 3rd year strict regulations from the cities in my area then forced me to close down a lot of my arbitrage units because most were not profitable enough renting them out with 30 night minimums.

- By my 4th year I was doing more managing other people’s AIrBnB units and fewer of my own arbitrage units (I charge 15% of gross rent to manage someone else’s property)

- Now about 80% of my business is managing for other people with the other 20% units I have the lease myself on

Bottom line is arbitrage in my area can still be profitable, but it’s not as profitable as it used to be. This is because the price for leases has gone steadily up and the amount of money I can make charge for my units has generally stayed flat or gone down because the supply of furnished units is much greater than it was 5 years ago.

My advice is thus:

- a less risky way to get your feet wet in this space is to offer to manage someone else’s unit for 10% to 15% as a way to gain experience

- This is way less risky and way less stressful as you are not on the hook for the lease, utils, supplies etc each month

- if you are a real risk taker by nature and really want to get into arbitrage then the most profitable unit with the least amount of risk is likely going to be smallest studio apartment you can find. Our profit margins on studios were almost always great (cheapest lease price and easy to rent to short term travelers)

- or better yet try finding someone who will let you arbitrage a spare room or basement etc. affordable housing sells fast esp. on Airbnb!

Lastly, your best source of vacancy data is other hosts as others have mentioned here. Contact them and let them know you’re thinking of getting into the game. You’ll find most people will be helpful and share some data.

Good luck it’s a lot of fun!

This is from the city government website of palm springs.  I think you are right you can have one permit: 

https://www.palmspringsca.gov/home/showdocument?id=61921