All Forum Posts by: Garmeon Y.

Garmeon, I think that's exactly how you should figure the cost. Don't base the management cost on how much you would pay someone else to do it. Base it on the opportunity cost for having to do it yourself. So if you make $100/hr then you need to figure out how many hours a month it might cost you to manage the property. And if you can find cheaper management than that, it's worth hiring them instead of doing it yourself.

And even if you figure you can manage it at night when you're not getting paid $100/hr, you still have the opportunity cost of not being able to do something else at night... like maybe find new real estate deals. 

That's common enough if you're dealing with smaller properties that are being run by mom & pop shops. They don't keep records well and do a lot of the work themselves and never account for the time and money that would cost if they had hired a professional. So unless you plan to do all the work yourself then expect your expenses to be higher than what they claim. Even if they gave you actual numbers, you need to underwrite it based on how you're going to run it and not how they ran it.

It might just be a rule of thumb but generally it's close. Do you think you can raise the rents for increased income? Run it more efficiently to lower expenses?

SFH rarely, if ever, have those expenses the responsibility of the REI. For multi family, all of those mentioned should be documented. Those expenses you mentioned would have invoices/bills that would come from the city , or utility company...that the seller should have no problem producing for you.

 How do you get what info?

@Wes Blackwell Thanks for sharing the various data points about Sac.

As some one who is actually considering the Sacramento area and have not seen anything that has yet convinced me makes me want to invest there in this part of the real estate cycle. Sacramento has also appreciated quite a bit from 2012 so I am not convinced that it will keep going up much more.  

I fee  that you are pushing Sacramento too much and painting only the positive and not including any negatives that go along with it. I have seen many post from you over the last month and you bias for Sac is showing :)

@Tim Jones the fear of investing exists at every point in the cycle, they are just different types of fear.  You just have to decide if you are capable of dealing with those fears and the worst case scenario in each part of the cycle.  I am personally a "generational investor" looking past the remainder of my life, so stabilization and appreciation are large parts of my strategy.  So I use the same strategy in acquisition of stocks, called "dollar cost averaging".  I don't believe that I ability to predict peaks and troughs in the market.  Frankly I am just not that smart!  I look for good products that I want to hold for a very long time and evaluate each for its intrinsic value.  If my evaluations are correct for each deal, I will have some deals that will turn into home runs, but others that will be singles or doubles. But as a total portfolio I should come out ahead.  There are deals still out there, they just have to be dug up.  You have taken the first critical steps of getting your finances inline.  That is the most important action you could have taken.  Now you are in a position to jump if you find a true deal.  I personally do not let macroeconomics out shadow my microeconomics analysis of a deal. Don't get me wrong, macroeconomics is very important, but the fact that we are near or at peak of the market does not stop me from looking or moving.

Regarding your question about off loading your primary residence, I don't know your market so it would be foolish of me to make any type of comment on a strategy for you. However, I can tell you that for my primary residence I pulled a first position HELOC and used those funds to buy a 6 plex in Oakland last year. My new rate is prime minus 1%! The property I purchased covers all of the costs for it AND my primary residence. Take it for a grain of salt, but Zillow is showing that my house has tripled in "potential" value since I bought it 14 years ago. Last year people were saying the same thing about being near or at the peak of the market, but I made the move because the deal made sense.

There are many who would say what it is crazy to put my primary under a HELOC to buy a rental. There are others who think it was brilliant to leverage my primary home to generate cash flow. At the end of the day, I made the move because I was comfortable with my macro and micro economic analysis along with my analysis of the deal itself and my overall cash flow.

I guess the point to my ramblings is that don't let the "sky is falling" herd mentality keep you hiding inside.  Get out there and look for the deals, and when you find it analyze the crap out of it and then make your decision.

Good hunting to you

-Arlen