All Forum Posts by: David Schach

That TV show is staged and for all intents and purposes is faux reality TV. Nothing in Vegas exists like that. Margins are squeezed extremely thin on flips. I havent come across a single wholesaler thats showed me any deals that werent already on the MLS or priced at market value. Its not 2011 anymore, and from what my research is telling me, its a buy and hold environment because prices are still decent, not great, and interest rates are so LOW. Getting a home that might be 10-20% over priced at 3.75% on 30 yr fixed that can cash flow nicely isnt the worst thing in the world.

Where do you practice real estate? in SF? Your last question seems a bit odd, asking me if its a good idea to invest in a condo. Let me pose some question that might help you answer that for yourself....You mentioned you were in a low rent apt, how much more will it cost you to live in a condo. PITI + HOAs? Is that delta small enough to afford you the same lifestyle? Is there a chance you would need to sell in the next 5-7 years? I think we are at the top or getting near the top, maybe we have another 1-2 years left? 3? who knows... If I knew the answer to that I wouldnt be at my desk today, I'd be surfing in Indonesia on a boat with my GF!!! :) Right now my worst case assumptions going in are 10 yr hold to break even. Can you be happy with a RE purchase that you might be underwater in for 10 years?

I think Condos are a great option in SF, the HOAs can be brutal though. But if you think you might get a 100K bump in 6 months, i think that you might want to take a deep breath. Take a look at 5175 Diamond Heights Blvd # 108. Look at the price history, sold in 2010 for 425K, listed 5 years later at 675K will most likely close over 700K. That 2010 buyer pulled in 275K in profit in 5 years. The previous owner purchased in '99 at $325K sold in 2010 for $425K, they made 100K in 10 years. 275 in the last 5, 100 in the 10 years before that. Do you think that property can jump to $1MIL in the next 5? It could, but i dont think its probable.

What are the main drivers right now in SF? App/Mobile tech bubble, Web 2.0 bubble, finance, international trade, foreign money, etc. What happens when the tech pops, market corrects, dollar continues to rise, interest rates tick up. What happens if ALL of those things occur at once. Then toss in an earth quake! WHOA.... yeah, scary right?!?!

My advice is worthless, you dont know me, or anything about me. I am just telling you the questions I keep asking myself and the answers are always changing. Keep challenging your ideas, keep thinking worst case scenario, I think you know what you want to do! Just hope for the best, plan for the worst.

 I have been researching many options over the last few months here in San Francisco vs bay area, vs out of the area/state. I have built a huge majority of my working capital through real estate in the bay area and SF specifically. For me what it comes down to today is this, almost EVERYWHERE is over heated. All those markets you keep reading about at, are peaking in this current cycle. Any place you invest you need to have one of the following be true in my opinion:

1) purchase considerably below market value (very challenging in a red hot market)

2) force appreciation though increase rents or rehab (easier if you have skills/desire/patience)

3) be able/willing to wait for the next cycle (5, 7,10,15, 30 years, think Texas in the late 80s)

4) have great positive cash flow that you can weather rent loss or massive reductions in rent to the tune of 30-50%. (yeah, think 50% drop in rents on your cash flow statement)

5) not worry about losing all your money and going into foreclosure and starting over (hell, its only time and money)

Having said all that, I am constantly circling around to this: San Francisco in specific, NOT the bay area, is so unique and so politically and geographically constrained that if you live here, you would be foolish to not focus a HUGE amount of your REI time and energy looking right here. Fortunes are made in SF and can be made very quickly. Yes you can lose your shirt, but only if you are forced to sell on the dips, if you can ride out the dips you can break even at worst. And its SF, its the greatest city on earth. People WANT to live here, they come from all over to live here. Demand will always outpace supply, always. They aren't able to add much supply here, in most places we cant go up any higher. The only inventory is coming in SOMA and parts of mid-market where apts or condo developers are getting over 15+ stories. In contrast look at Denver, they can add 10s of 1000s of houses in a heart beat, all over Texas the same, Utah, Indy, Ohio, heck, almost without exception everywhere in the US you can add inventory and LOTS of it. Yeah, basically everywhere but SF and NYC. Here we are 75% an island. Take it for what its worth, I live in SF, I love SF, its VERY VERY expensive for three reasons. LOCATION LOCATION LOCATION!!!!

You make a very interesting and compelling argument for tax free gains. Lets say for sake of argument, you knew you planned to sell a property in a short time that had $500K in profit coming. Since you can take $250K in profit tax free if you have held for 2 years?...Lets assume thats correct. Could you cash out 250K in equity, then have 250K left in the property, sell it and take the remaining 250K tax free. Essentially bringing the entire 500K into your bank tax free? Assuming of course that the LTV ratios remain inline with lending guidelines etc.

 I think thats very true, where do you see the entry into LV if you are looking for rents 1300-1500?

 We have prop13 in CA, so your property taxes essentially stay fixed until you sell or refi (i think, not sure on the refi part)

I think its absolutely clear that we are approaching the peak of this real estate cycle. are we at the peak? how much is there left? we can only know after the fact, but i would say that right now i see 2 options. 1- long term buy and hold for cash flow if you are liquid enough to get there on the rental side, ie- having a very small or zero mortgage by coming in all cash or nearly all cash 2- buying distressed properties that need lots of labor to bring them to market value, and even if the market is sliding, make sure your purchase price is so amazing that you can weather a declining market situation.

Whats your opinion of MFR in LV vs SFR?

I am in a similar boat, not with a father in law though. Most CA people are telling me to stay local, RE wealth is made on appreciation, not on cash flow and forget about LV, too much boom and bust. But there are some very compelling arguments in favor of LV. low taxes, favorable landlord/tenant laws, better price to rent ratios. What it seems to come down to for me, is predicting the future....

1- if you choose CA over LV, will prices continue to rise enough to buy now and sell down the road to eventually have enough cash/capital to lower or eliminate your mortgage so that wayyyyy down the road you can retire and live off rents. Because unless you are coming to the table with over $1MIL in cash, nothing will cash flow well in A, B class properties. You can find C, D class and play in that market with a lot less money

2- if you choose LV over CA, will rents be stable enough in the long run that you can keep having that renter pay down your note and also put some money in your pocket. LV is a cash flow play today vs appreciation. I think...

message me and i will send you some links that a local LV real estate broker/investor sent me. And sunrise manor is C class for sure. rents are $400-500 for 1beds.

I dont know about PA, but in CA you need to pay $$$ to access MLS, it isnt free. and i also think you need to be affiliated with a broker.