All Forum Posts by: David Song

Quote from @Lara Ishtayeh:

Hi Everyone,

I'm looking for people's takes on the market and investing at this time. With a recession creeping in soon, should I wait to invest in a duplex?  I've been looking for months but I've been told by some people that it's wise to wait right now, build more cash reserves, then make my play after seeing how the market plays out within the next year. Obviously a deal is a deal, and I'm not going to completely stop looking. However, with interest rates very high, is it wise to ease up a little bit and wait? 

 I am waiting. It is each person’s personal choice as to when and where to buy. I see a lot of turbulence in the market now. Therefore, I decided to take some time off and monitor the market for a few months, There are a lot of deals popping up now. The bidding war has stopped. Some patience might pay off.

Raise rent slowly. I would not evict any seniors at her age. Negotiate the purchase price with seller, in consideration of the situation. Had a similar situation myself a few ago. Life is not only about money.

Quote from @David Song:

Quote from @Joseph Henry:

Quote from @David Song:

Ca Bay Area is cooling down for sure. Secondary market like Las Vegas may be hit even harder, since a lot of the buyer are OOS investors. I like Las Vegas, but not at the current price point. They need to come down about 20-30%.

 David, What do you think about Sacramento and surrounding suburbs?

I do not know much about Sacramento. I like some suburbs there but have not lived there and frankly do not know much about that area.

I am checking on an office building in Yuma city, though. 

the market is impacted by rising rate, and I am waiting to see the extent of the damage, before jumping in. Unless the seller is desperate and we can get in at a high cap rate.

I feel that some high leveraged folks with adjustable loans might be squeezed at this moment. Some newbies who bought in the last few months with high debt might also be in trouble. 

 Yuba city, typo.

Quote from @Joseph Henry:

Quote from @David Song:

Ca Bay Area is cooling down for sure. Secondary market like Las Vegas may be hit even harder, since a lot of the buyer are OOS investors. I like Las Vegas, but not at the current price point. They need to come down about 20-30%.

 David, What do you think about Sacramento and surrounding suburbs?

I do not know much about Sacramento. I like some suburbs there but have not lived there and frankly do not know much about that area.

I am checking on an office building in Yuma city, though. 

the market is impacted by rising rate, and I am waiting to see the extent of the damage, before jumping in. Unless the seller is desperate and we can get in at a high cap rate.

I feel that some high leveraged folks with adjustable loans might be squeezed at this moment. Some newbies who bought in the last few months with high debt might also be in trouble. 

Quote from @Account Closed:

@David Song I agree that Vegas could be hit harder than other markets . The crazy momentum in our market over the past 18 months is unsustainable IMO. Our track home houses with block wall fences are sticks and stucco in the desert heat. 

There is a local saying that if you last longer than 3 years in Vegas you'll never leave. The next 3 years will be very telling how sustainable our local housing market turns out to be!

 @Account Closed I follow closely the Bay Area market. The price has already declined at least 10% or more. The sales data will not come out in another month or so. But cooling down is obvious. I pray for those folks who get into flipping this year.

Las Vegas is a good market to invest in, with low property tax, simple maintenance, etc. The only concern I have for LV is the lack of local buying power. Relying on OOS investor, mostly from CA, is risky.

Ca Bay Area is cooling down for sure. Secondary market like Las Vegas may be hit even harder, since a lot of the buyer are OOS investors. I like Las Vegas, but not at the current price point. They need to come down about 20-30%.

@Doris Jin Huang 10% appreciation over 20 years will be huge appreciation, about 670%. Is that calculation correct?

New York City, being the largest city, also enjoys a geological restriction. Limited land, and difficult to access. The longer the commute, the cheaper the house.

Similarly SF Bay Area also is a peninsula surrounded by water and bridges.

Where to invest is up to each investor own judgement. I invest in Bay Area with commute time around 1 hr. That will reduce initial purchase price and a little higher rental return initially. Also, those areas are usually on the path of development.

As far as tenant eviction, you just have to learn tenant management as an investor. CA is very tenant friendly but we had no issue evicting if needed. OOS tenant issues will be more headaches, if you are relying on someone else to deal with it. Conflict of interest, the PM benefits from issues, turnovers, repairs. Unless the PM is a saint, otherwise, majority will try to take advantage of OOS investors. All you can do is pray.

Originally posted by @Doris Jin Huang:

@David Song Your point is well taken. Estimating Capex is more straightforward but how would you project repair costs?

Curious why you'd stick with NYC? Based on my calculation appreciation in some boroughs in NYC averaged about 5-6% per year, but the numbers in Indy and Cape Coral are both north of 10%. Plus the tenant-friendly legal environment, I thought ditching NY was a pretty great idea?

New York City and it's suburbs are prime REI location, similar to Bay Area.

It is the center of east coast jobs, and economic engine.

Also, it is where you live.
investing OOS requires large capital, big investment and frequent trips. For property under 500k, it’s too small for all the trouble. 
About 8 years ago, I thought about doing OOS SFR and asked my realtor about his opinion. He said no one from Bay Area who did OOS came back happy.

I took his advice and simply just do local deals. Looking back, I made the right choice.

BTW: where did you the 10% appreciation for those location? We need to look at 10 years or longer.

@Doris Jin Huang

Capex and repair are dependent on the size of the house, and it's construction material and longevity, but not dependent on rental income. Using a percentage of rental to estimate capex and repair is wrong. A new roof will cost over 10 k easily. A new exterior paint of a SFR will cost over 5k. Roof has 30 year life, paint has shorter life.

Let's say two identical SFR, one in Tier 1 city rented for $3600, whereas another in Tier 3 city rented for $1200. Their capex and repair are similar, and their percentage of rent is much higher for Tier 3 cities.

Unless there is significant appreciation, this house will not cash flow much, if at all.

If I were you, I will stick with New York City and it’s suburbs. 

Originally posted by @Account Closed:

One wrinkle that needs to be acknowledged regarding comparisons is the heavily interventionist central bank that exists today. They make Greenspan look completely hands off. Can you predict what kind of Gov market meddling will be coming down the pike in the future?

 Keep printing money. That is the only thing government can do. I do not believe Biden has the political will to really tighten the money supply, neither do the republicans. Fed has become more and more controlled by politics.

If there is one thing for sure, Paper money will lose its buying power every and each day.