All Forum Posts by: Carlos Ptriawan

@David Lao I disagree. What you need to worry more about is only price appreciation and cap rate. I'm sorry but based on the question I think you're worrying too much perhaps because of some reading material. I will worry more if the house is broken or the tenant not paying.

you can check from title history, sometimes they bought after rehab is done by a turnkey company and would like to free up capital, sometimes it's pop and mom investor that would like to cash out. The key is in title history and property management.

One thing I agree with @Lane Kawaoka is that we need to prioritize CF first. Especially when I found this definitive information :

Within three years (2020-2023), rental yield in some CF market will decline between 0.9-1.2%.
while in San Francisco/San Jose market, within the same period of time, the decline is only 0.3%.

Hence if you invest the same $100k in both markets, the return in CF market *could* outpace SF/San Jose number after 5 years ( 2025), and you have cash-flow.

Is $2k net after PM fee or before PM fee ? If it's after PM fee, it's decent number. But 8 unit with only this return is actually not too exciting. You can have the same with duplex/triplex with the same return profile.

You should care more about future prices rather than the declining population. A population can go up and down but that doesn't mean the price will go down too. I see the decline population in PA is not a big issue, sometimes, a boring market is the best.

Class A property right now is higher risk right if you buy it for rental, not just if there's market turbulence you'll be the first to hit and appreciation is much less compare to buy multiple class B/class C. If you want to buy rental, buy class B-/class C makes much more sense regardless it's in Ohio or Palo Alto. Again what you buy is number and cap rate, you don't buy house.

Few things that common investor make mistake are the following:
- they think California and Bay area are never cash-flowing. There're so many area still cash-flowing but it's outside the city and you have to be willing to manage in Class C property.

I give you straight area: Concord,CA still has so many opportunities.

- When you invest in 3% cap rate, be extremely careful between SFR vs MF. In another area, large MF can be more profitable than SFR. In this market, it's not. Run your number.

- There're always special condition house that's being priced low in this area (eg: it has tenant problem,etc)

- Especially in Bay area, the rate of acceleration is faster in East Bay and North Bay compare to South Bay.

- Many folks underestimate the purchasing power of people in Bay Area. The $3000 rent is currently very common to be paid by the blue-collar workers. Not much difference when the same rent is paid by common engineers

- Average wage in this area is $125K. Expected to grow in parallel with rent growth and appreciation. Home appreciation is also growing at slow pace of 2%. The affordability index is 33%.


- If you want to buy good Class A/B property with good cash flow (rent value 1.0) and relatively good appreciation, there're a bunch of newer class A /B in Fort Wayne Indiana.

- Due to the low-interest rate, the home suddenly becomes very affordable even when the price is going up because we finance it for 30 years. In my calculation pre-covid. To reach DSCR 1.0x (just to breakeven), the downpayment for the typical house is 40% ! Currently, with just 25% down and sub 3% rate investors can already breakeven/slightly CF. Amazing, houses that were almost 'forced to sell' 2 years ago suddenly becoming slightly positive cash flowing after refinance.

@Brian Thomason : for market cap rate, there's excellent market research for both SFR market and Multifamily/apartment.

Jay has good point here "Don't go into a market with a 150k median price and buy a 75k house thinking your going to get rich and retire"

I totally agree. The 75k OOS max cash flow is $400. These $400 cash-flow could cover 1/5-1/6 of mortgage rent that we've for typical bay area homes. 

However you can't count this as retirement. Your retirement comes from a property in Bay Area (just like what Jay mentioned), while OOS rents will pay your bill.

I give you a straight number. If you buy A GOOD quality duplex now in San Jose with 25% down (price per unit 500-600k), even with OO property, the other unit mortgage that you need to pay is around $2200/mo. But you can rent it out for $2500-$2600 only.

If you buy SFR/condo in A class neighborhood in East Bay for $750k , the mortgage is $2200-$2300.

The quality of the house , environment and relative to value...East Bay is much better than South Bay. 
So run your number and do a lot of simulation.

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Regarding out of state, when looking at for future projection, a higher-than-normal multifamily cap rate return such as 9% in out of state , within 5 year return CAN outpace max-7% return appreciation of bay area home (which has 3%-4% cap rate).

When we're buying investment property there're two things that we actually buying:
1. we're buying today's the cap rate
2. we're speculating future cap rate

Which means between point A to B , we're hoping there's accelaration of cap rate declining when selling. People that bought in bay area 20 years ago, their purchase is succesful because the cap rate is decreasing overtime. 

Now, it's easier for a property that was in 8% cap rate, to be in 4% cap rate within 10 years. That's what happens in bay area, but to move from 4% to 3% will be much more difficult because rent growth need to catch up as well. So understanding the cap rate and the future potential cap rate is key.

So if you have money in a place you could create portfolio where your egg is divided between mostly CF and mostly Appreciation(+cash flow). What you don't want to buy is you buy in market where top ceiling is almost reached (like Miami).

If I have to buy, my priority will be buying SFR or condo in Bay Area.

Pro of the turnkey company: everything is good when they're honest. Vice versa.

I've bought turnkey from different places and don't have an issue but when I bought the inspection report comes up very clean.