All Forum Posts by: David M Trapani

Invested in Sacramento and El Dorado Counties 2001 - 2018.

Condos, single family homes, duplexes, office condo.

Had a great run. Saw the rent control thing beginning to happen - then it happened - Sacramento and Statewide.

Exited Sacramento 100%. Prefer not to hassle with rent control.

Did 1031 to STR's and NNN retail. Some in Cali. Some out of state.

No more Calif LTR"s for me.

If Cali goes STR unfriendly, prepared to 1031 equities to friendlier states and business climes.

Hi Rahim,

I agree with Alan here. 

Depends on the laws of your jurisdiction, but if you have a lease with option to purchase, the buyer cannot purchase the property from you - and the deed will not pass - unless he/she fully performs all the requirements of the lease-option and duly exercises the option.

Under the seller financing scenario, if buyer defaults you should be allowed to foreclose and take back the collateral - that is the real estate.

The efficiency, ease or challenges of doing that will turn on the nature of secured lending and foreclosure laws in your state.

Probably worth a few hours of your attorney's time to explain the pros & cons of these alternatives under your particular state laws.

LLC's can be challenging because as pointed out, some lenders don't want to lend to them. Also, for those of us doing STR investing, seems many jurisdictions (cities & counties) don't allow LLC's to get an STR permit. They like to know who they're working with. I agree with Haythem often best just to purchase good insurance (for STR must be STR insurance) with lots of coverage. Also recommend, as he does, an umbrella policy which can cover all of your properties. Umbrella policies are cheap and provide more comprehensive coverage than most underlying liability / fire policies. Plus, helps you rest easier at night.

Depends on your market and cash flow. Generally agree with others here, avoid HOA's, gates, 55+ only or communities w/ "rules". Too much STR risk. Fewer restrictions the better. That said, operated one w/ HOA (condo) in San Francisco. Dues weren't crazy (by SF standards) about $400 mo & covered water, sewer & garbage. Expenses you're going to pay anyway. Huge world-wide STR demand for SF condo with views - it rented constantly.

Although that particular building permitted STR's, many HOA's or condos do not. Must be looked into before purchasing.

It's also true this can be a "hot button" with other residents, and yes, the board of directors can (and sometimes will) ban STR's down the road. SF has difficult STR ordinances. Another issue to consider at the City, County level. As it was located in a high demand area of SF, cash flow and appreciation were very good. After 4 years, City regulatory climate (and HOA board) were becoming more difficult. Ended up with a1031 to single family STR in fast growing community outside Cali.

Was able to cash out refi one property at 10 months and another at about 18 mos, nearly simultaneously.

Hi Anna,

If you're interested in STR's Palm Desert is out. Palm Springs is great, however, pricing is higher (almost double) and you can only have 1. La Quinta is hot. You can still get a pool house near downtown LQ for $375k-$400k. I don't think this will last long at these prices as folks from LA and San Diego (and other places) are on the track and it appears there's upward pressure on appreciation. These should generate around $50k per year gross per house.Permitting is user friendly. As you've intimated, want to avoid 50+ communities, and I would add - avoid gates and HOA's. The less restrictions the better. I know some very good agents, if you wish a referral, please let me know. Cheers & good luck.

Hello Kyle,

Yes, it is doable.

Recently did cash out refinance on two STR's (nearly simultaneosly). One in Palm Springs, one in La Quinta, CA.

The PS house appreciated (per appraisal) approx. $150k in 1 year. Appraisal on the LQ house was a bit underwhelming
(low compared to comps), but still enough for cash out.

Lenders are shy of STR income (as my lending broker expressed). Solution was to "snooze" the listings during application and refi process. Technically, not operating as STR at that time.

Generated $117,000 cash out PS house, moved it with the existing PS private lender $250K note to acquire additional STR LQ pool home.

Approx. $68,000 cash out from LQ #1 for reserves.

Results so far very good. Now back to desert for 30 days to ramp up LQ #2 (furnish, decorate, lighting, light comsetic reno, obtain permit, photograph & launch) to get the cash flowing.

Hi Peter,

I ran a similar (condo) property which I owned in El Dorado Hills (Eastern Suburbs of Sacramento, CA) 2006-2010 or so.

We had 8 doors, reception, kitchen, conf room. Also, in common areas a much larger kitchen, bathrooms and conf. room.

Will you be occupying one of the office spaces?

That's the way I did it. 1 year leases with CPA's, lawyers, insurance folks, stock brokers, realtors and the like.

Met most of the folks thru Rotary or Chamber of Commerce.

It worked quite well and we were booked solid (strong positive cash flow) through about 2009 when the Great Recession hit hard. If you can offer amenities (which you charge for) such as reception, mail handling, copier, water, coffee, etc. or just a flat rate for some of this stuff, it helps with revenues.

Enjoyed it very much. It's a good business model, especially for one who also needs office space. A bit like "office hacking"/

Cheers & good luck!

Good question Bryan.

How much you spend on upgrades (or reno /rehab) depends on your objective.

For those flipping houses, it would seem spending less and going with the "basics", is a good approach. Flippers want to make the best ROI in a the shortest time-frame possible.

If you're into buy & hold investing or plan to attract quality tenants, it may be worth it to put some extras in. This seems especially true if you're in a high demand area which is growing.

For example, we did full-on upgrade on a 1910 duplex in Midtown Sacramento about 4 years ago. Paid $350,000 and put another $100,000 into it. All new bamboo flooring, interior paint, granite counters, all stainless appliances, barn doors, new (old-fashioned) claw foot tubs, etc. Each unit had it's own washer & dryer, dishwasher along with standard appliances. We immediately rented both units for max rent. When the tenants on one side "broke up", they said they loved it but couldn't afford on their own. The rent went from $1,350 to $1,750 when a professor from Brooklyn came to teach at the local university. We had ZERO vacancy, great tenants and good rents, largely - I believe - because of the upgrades.

We did a 1031 exchange about a year ago for $650,000. So, made excellent rents and appreciation. In this instance it worked splendidly. However, we were in an up market with high demand. This is also before the most recent City of Sacramento and State of Calif rent control laws. So it may not work the same now, in that particular area.

I generally believe investing in "better than average" upgrades is a good idea if it's a longer term hold. That way, you have less vacancy, higher rents and better re-sale value.

I would avoid gated communities and HOA's. Often they do not allow STR's in the governing documents - even when the City does allow them. That means you cannot have an STR in those communities, which disallow them. Also, HOA dues are often problematic / prohibitive on cash flow.