All Forum Posts by: Eduardo Zepeda

Thanks for the post, @Shiva Bhaskar! This is great insight into a market that, just like you said, is attractive to Californians based on cash flow potential. Curious what opinions @Lesley Ray might have?

Hi everyone,

I'm looking for recommendations for a door entry intercom system for a multi-tenant office building that utilizes a data network vs a traditional phone line. The phone lines in my area have become unreasonably expensive (AT&T) and we'd like to switch out Door King door entry system that uses the phone line to IP / data since we already have an ISP connection. If you have any good ideas please let me know.

Thanks!

Thanks, everyone, for the suggestions! It's very helpful to hear your perspectives on this. I agree that I shouldn't nag them or press them too hard, which I haven't been doing. My subject line was misleading since it was accidentally cut off before I posted and then I couldn't edit it after. It was supposed to read "How much should I tell them they should lower the price and accept for their house?" I've politely given them my thoughts when they've asked me for my opinion :) 

Hi everyone,

I'm hoping to either get pointed in the right direction for a lender, or get some feedback on a question of whether I should consider "trading up" out of the property I own.

I own a duplex in Richmond, Ca that I purchased in March of 2017 for $362,000. As part of my career advancement in real estate investing, I'm looking for access to more capital to reinvest and fund deals. I've been fortunate enough through my research and what I learned here on BP to have bought a solid investment property, which of course started with having the knowledge to identify and recognize the opportunity for what it was worth and act on it. The duplex currently grosses $3,600 per month. The property currently cash flows me about $790 per month after debt service and all expenses and the property management fee. Honestly, it's been a great property to own so far (I know the time is limited)  and the current tenants, on top of paying their own utilities, handle a lot of their own maintenance, too.

As an investor I'm in full acquisition mode and looking to acquire additional properties, deal permitting, and scale up swiftly. What I'd ideally like to do is tap into the equity in the property so that I can retain the property. Currently there's about $345k left on the loan balance. The issue then with refinancing and getting cash out is that the max LTV on a multi unit investment property is 70%, from what I understand. Similarly, the lenders I've researched that offer equity lines on investment properties are limited in their combined LTV. While I know the property has appreciated based on the market, I'm not sure what the property would appraise for, but I could tell you what I think investors would pay for it based on an NOI of ~$33,000 at the cap rates properties are trading at in the bay area.

So, if I can't borrow against my theoretical equity, the thought of selling and trading into a larger property had come into play to put that equity to work in a better way. I'm thinking that if I could trade up into another property that yields at least $800 of monthly cash flow, then that's probably worth it assuming I'll be rolling it into a larger property with either more scale or opportunity for appreciation. Let's assuming that after backing out commissions from a sale at $520k, I use that since price since that would make it a 6.4% cap, then I net a gain of $155k, then I'd need to target a cash on cash return of 6.1% or higher (my current return on equity). Am I right in that logic? 

For the record, I'm not claiming that I believe the duplex would sell at that price. I know that sort of appreciation in 18 months might seem crazy, but then again, maybe I just bought at a significant discount ;).

I'd love to hear what you guys think. Thanks in advance.

Hi BP community,

I'm hoping I might be able to get some feedback and clarity on a situation I'm providing help and moral support on. During the last cycle, circa 2004, a close and dear family member purchased a single family home in Sacramento, CA. As we all know, that market got hammered during the crash, but they were able to hang on to the property, even in a negative cash flow state for many years. Here we are in 2018, approaching or at the top of another cycle, and they still own the house and would now like to sell in hopes of finally making a small return. The home values in that area, though, have not really surpassed their previous highs. Here's a summary of the economics.

They purchased the property for $280,000 in 2004.

The loan balance is about $178k.

Monthly principal and interest payment is about $1,265 with $709 currently going to interest

Property taxes are $4,116 annually and insurance is $1,000.

Currently the house is vacant for the sale so there's no rental income.

Therefore, the monthly burn is -$1,135 (ouch).

For the sale:

Property was originally listed at $335k and they received 0 offers at that price. They've dropped the price twice since then and it's currently at $318k. It's been on the market for 66 days as of the date of this post. They've received one offer from what I deduced to be from a wholesaler for $275k. My advice to them at the time was that they should counter slightly higher and sell it for what they could and just get out. They passed.

Here's the thing. Just like many others, they're fixated on getting a price that to them makes sense based on what they paid for it. They say that once they pay commissions and closing costs, they don't want to accept a price in which they'll "lose" (chuckles slightly). I've explained to them that it doesn't matter what they think it's worth or what Zillow says it's worth. The market will tell you what it's worth. I took a look at the inventory in the area, and there are a lot of other homes for sale in the same area around the same price or lower. Many are more updated, and those seem to be the ones that move. There are many stale listings in the area, also, many of which have been on the market for over a month. It's just not a "hot" submarket in Sacramento.

My advice to them has wholeheartedly been to take whatever price you can get and get the heck out while they can. The opportunity of renovating the home just wouldn't pencil. It would take probably $50k-80k to get the home to a condition that it may sell in the high $300's - maybe - not at all worth that high of risk in my opinion. The market rent for this 3 bd 2 ba house with the level of finishes in this area is ~$1,500 if they were to keep the house and rent it. This would leave them in a break even at best once you factor in other operating expenses.

What do you think? Do you agree with me that they should sell at essentially any "reasonable" price? If so, what information would you give them to make them see things for the business reality of the situation, which is that they're realizing an economic loss every month they continue owning the house? Or, is there some other exit or possibility that I'm not thinking of, like maybe a lease option? Truthfully, I'd just hate to see them in which market conditions change, which they may in the near future, and they're stuck with this bad investment losing money that they then couldn't exit all over again. I look forward to hearing your thoughts and feedback!

Adding a few others to the thread that have attended in the past or that I've interacted with here.

@Lesley Ray @Bruce Santos @David Weintraub @Sean Kim @Tom McCutcheon @Betsy A'Neals @Abe Ajlouny @Evan Turner @Nathan Ku

Looking forward to seeing everyone tonight at 1st Wednesday!

Hi Jemp,

I'm an investor and I live in SF. My investments are in the east bay as of now. I think the answer to you're question is everyone's favorite "it depends" response, but it really does. How active do you want to be in your investment? Do you have the time and willingness to rehab a SFR or a distressed multi-unit building? Or would you just like to invest in a stabilized property with good income and relatively good cap rate and go for the steady cash flow? Depending on what you're objectives are, as well as what strengths and unique skill sets you may have, that would most likely dictate the type of investment and property that would take you the furthest. Happy to provide further info and local market knowledge from my experience.

Are you licensed in California?

Thanks, @Katie L.. Yes I believe I do mean a partnership agreement. I'm unsure what the legal implications and differences are between using those two terms. Because of the due on sale clause, we were not planning on transferring to any separate entity, but we do want to have a written agreement between the partners. 

Hi BP'ers,

I'm in contract to purchase a property in the Easy Bay and I'm working with several partners on the deal that are contributing capital. I'm looking for an attorney that can help with setting up a joint venture / partnership agreement between the partners. For those of you who may have entered into this sort of arrangement as well, any advice you can offer would be a huge help, too. As of now, we plan on having a robust written agreement and I'm looking for advice on the proper structure (LP, GP) and how it plays into the mortgage, liabilities, holding title, etc.

Thank you in advance for your help!

PS - I've also posted this in the Oakland forum, but here also since I live in SF.