All Forum Posts by: David Song

Kind of interesting to look back at what people said in 2015. How many people actually sold their ca properties and bought Midwest in 2015? How are they doing ? Do they believe that was a correct decision?

@Hanan K.

I like those areas, especially Napa valley. I looked at a few REOs in 2012-13 in Napa and American Canyon, much better price than peninsula.

Flips require the ARV to be as high as possible, Napa meets that criteria. I am just too far away to flip there. You live there, good for you.

Another advantage for Napa is that less competition than peninsula.

jeff:

I have been waiting for the correction for about 2-3 years now. But it has not come yet. LOL.

I am still buying, but much more careful now. Keep some cash on the sideline waiting for the next correction, which may or may not come in the next 5 years.

best luck with your midwest adventure. I personally have also contacted several columbus area turnkey providers, also texas. The reason I did not go is:

1. Since I am OOS, I have to rely on other folks on the ground, which takes time to find and screen them, and carries some risk by itself.

2. The cap rate i got from those OOS deals, are not really a lot better than what I can find locally, within 1.5 hr driving distance. I will have to pay retail price, which puts me into a disadvantageous position compared to their local folks. I am looking at 7-9% cap properties in Modesto area, whereas midwest can provide maybe slightly higher cap, but not a whole lot more. If there are properties with cap rate (not rent ratio) above 13-15%, i might go, assuming the area is not war zone and there is no significant population loss. I have not found any yet. 

3. I will have to spend a lot of time managing those properties, and the people on the ground, which I can not easily get hold of. I would rather be able to see them face to face, when a problem arises.

4. I will lose my advantage of holding a CA broker license, a 5% margin each deal in and out.

5. For smaller capital, midwest SFR might be an option. For a couple M, SFR will be hard. You need to buy hundreds of SFR to invest all your capital, that is really not what I am looking for. Furthermore, I will lose the mortgage leverage, I have to invest mostly cash.

6. Commercial properties in Midwest  does not seem to provide much higher Cap rate above 12%.

7. Mobile home parks: I may invest in those in any area in the country. However, the rap rate from midwest is really not that higher than CA, if you do your own search.

8. Large apartments: Maybe, I need to find 2-15 M value apartments, in case I want to move my assets OOS. Again, with the price increases in the last few years, the cap rate on commercial properties have been squeezed badly. Hard to find, especially OOS.

9. Tax: The OOS local property taxes will be a lot higher than my current CA property taxes, since my portfolio were bought at much lower prices. The Property tax are locked for life, which is a tremendous advantage for holding them long term.

In terms of lack of funds, I do not fully agree with you. Any savvy and capable investor in RE will find money coming their way. Money is looking for higher return with lower risk. There are tons of people with cash over 1M here, sitting in the bank depreciating everyday. They are eager to find a secure investment vehicle with higher return than their CD. A lot of those turnkey providers are taking this opportunity to get those funds.

My own REI generates much better return for me than CD, turnkey, or stock. So I am sticking with my strategy and my personal advantage. In 2009, I started with less than 1M cash, today, I am holding

15M assets, with 4.5 M loan, net equity over 10 M. Not including 1-2 M cash on the side, and retirement accounts. If I invested in midwest in 2009, I will also make some profit, but unlikely as good as CA.

Jeff Petsche I read some your posts. It looks like you have profited about 400k from CA market appreciation already. If you decide to move your capital to Midwest, that is certainly your own decision. Only time can tell if that is a smart move or not. A lot of people in CA, including myself, have thought about selling CA properties and move funds to Midwest. It would be interesting to see how that strategy compares with just holding the CA property over the period of 5-10 years. If there is another crash in CA, which does not affect Midwest, your strategy wins. But there is also a chance that CA does not crash as expected. Or a Midwest crash? Who knows the future? Any investment carries some risk. You are betting on Midwest higher cash flow, whereas I am betting on CA lower cash flow plus appreciation. In 5 years, 2022, let us compare notes and find out which strategy works better. There is nothing right or wrong in investment, just a bet.

Wes Butler What is your point? Land value may increase or decrease, depends on its location. House structure value depreciates no matter where it is. Are you disagreeing with that?

Joseph M. Are you familiar with 91733, south El Monte area? Any rent control? What is a typical 2 bed rent there?

Joseph M. The San Gabriel and neighboring cities, IMO, are prime targets for appreciation, with solid cash flow. I eat there every time I go there. Love their restaurants. The price is still not very high. If I am living close to there, I will definitely buy. I think the cash flow in LA is better than Bay Area. Population is much bigger, with great potential. Olympic is coming. There are so many diverse neighborhoods in LA. Creating diverse opportunities, in terms of flips and cash flow. San Gabriel area has already appreciated quite a bit. But I believe there is still a lot room there. They are roughly half the price compared to top cities in LA Area. I might move there someday. LOL.

Andy Chen I do not get on here very often. Recently I got more free time , so I was browsing here. You can pm me if you want.

Good luck, andy.

Andy Chen Addition projects are key to flipping in expensive areas, because of the high price/sf finished product. This is especially true when the house has some previous illegal additions, and under city code violation case. We have a few property purchased with code violation before. You have to know what to do to correct those deficiencies, add addition, increase the overall value. However, the time span will be significantly longer than a rehab. Risk is also a lot higher.