All Forum Posts by: Collin Chan

My tenant is moving out of a property in CA.  Planning to take the equity and 1031 out of state.  

Short answer is it depends on location.  Some are doing really bad, some are better than ever so picking the right location matters.  Take into account seasonality, current competition, states not likely to implement restrictions as much, locations that will continue to do well post Covid (some are doing well since local travel has gone up vs flying), etc.

Yup, so for a 5bedroom house, target 250k.  This might be a stretch now with prices going up in 2020 but I've seen some new construction still at 370k as I started looking last night after reading your post.  I just ran the quick Redfin calculator with 3.5% down.

Mortgage $1612/mo

Property Tax $400/mo (maybe find another area since i've see property tax usually around $200/mo so might be some melaroos type taxes in certain neighborhoods)

PMI $224/mo

Homeowners insurance $99/mo

Total ~$2335/mo

With 5 bedrooms, try to rent out the Master ($600/mo) and 3 other rooms ($400/mo/each) and you can cover most of your basic expenses while you live in the 5th room.  New construction can help minimize initial maintenance and replacement costs.  It doesn't work out to free but your own portion of rent will be really low but you get the advantages of principle pay down, appreciation, tax writes offs (depreciation), etc.

Keep looking as there are deals that can  net you 0 rent for yourself in the greater Phoenix surrounding area.  Try to find value add also like lofts, dens, or third car garage you can convert later to add bedroom.  A loft or Den conversion will only cost you 5-10k in AZ but can increase your cashflow another $400/mo as well as forcing appreciation through adding the bedroom.

PM me if you want to chat more.

Collin

My recommendation is to read up on FHA loans so you can put 3.5% down. Then house hack all the other rooms out to cover your mortgage. With that low down you can get a nice house in AZ and find one with the most rooms you can fit (target $50k/room). You might need to convert a loft or den in the floor plan to get those rooms but it can help you cashflow!

Welcome to BP!  Always willing to connect with new individuals if you want to PM me to set up some time to chat.

@Sayantan Satpati. There are many modular/pre-fab home companies servicing CA now and many are newer having popped up since the laws changed in CA. That has introduced competition and options. I believe finding the right ADU is key and i searched a long time going back and forth between modular and custom build ultimately going back to modular when I found a 3/2 in 1000 sq/ft that didn't feel small. The price is reasonable and less than what you're quoting.

Custom will cost more but add more principle potentially in appraisal although that's still an area being figured out since there isn't much precedence for appraisers to evaluate ADUs right now but that could change in the next few years. Modular could cost a lot less and be of equal quality but return higher ROI and cash on cash return.

PM me and I can share as I'm not sure if I'll violate any policies on here by posting in the public forums.

One other point is that margin accounts don't appear as accounts on your credit report which is great when doing simultaneous deals since it's against your portfolio.  Check with your individual banks to confirm but this is consistent with information I've seen both online and from my bank in particular.

Collin

@Steven Nguyen Great comprehensive post!

I also am building an ADU but taking the pre-fab route. Our lot allows a trailer to pull into our backyard which allows us more flexibility to do so.

One item to add is if you have a sizable stock portfolio, you can use that as a portfolio equity line of credit much like a HELOC but instead of a property, you can use a different investment asset which might be a path for some without equity to borrow against their home. 401ks and stock investments especially if you consolidated with a major bank (Morgan Stanely, Schwab, Fidelity, etc). Interest rates are fairly low and you can do interest only until your property is completed to pay off construction costs.

It's another great tool I'm just learning about but for many, it might be a great way to be making money for real estate or hard money lending if you can get 8-10% but only pay 2.5% interest.

Search "margin portfolio line of credit".

Collin

Hey Drew, will ping you.

Collin

Hi all, always willing to connect.  I think now is a great time to meet more people to network and build relationships.  Ironically covid has forced all meet ups to go online but that has opened up smaller local ones to wider participation.  I'm usually just available weekends but feel free to add me if you'd like to chat more!

Currently investing in: SFH, BRRRR, Rent by rooms, ADUs, Syndications.

Looking for: Out of state investing or anyone interested in the above.