All Forum Posts by: Genny Li

You definitely have the drive to become a successful agent.  You should work as an actual agent and do investing on the side as you have the money. You were actually working for someone else before, even if you got paid on commission--while you were technically in real estate, you weren't an investor. And that's okay.  A lot of people have this nutty idea that they will get one house and quit their job.  And then what? Live on beans and rice forever and tell everyone they're "early retired" living on passive income? Use the job! Learn the market! Acquire the best properties for your goals over time! The world is your oyster. ;) lol

Honestly, if you got your first fourplex in 2 years...then your next one five years later...then another three years later...you'd have 12 doors in less than 10 years, which would be fabulous.  You want a lot more money just hanging out in the bank than you probably think at your age.  I personally wouldn't quit my day job until I was netting more than $100k a year on my rentals, and after self-insurance and the rest, that would be pretty beans and rice if I was still trying to save like $25k a year for more investments.  It just takes a whole lot more money than you think to have a nice life on rental income.  Like $200k a year before a big capex expense wouldn't make me groan because I'm now not able to buy my next unit when I hoped.  That can be 50 doors...or more.  50 doors gives you a very comfortable middle-class lifestyle from cashflow and then a bangin' wealth level.  A real estate millionaire is wealthy according to normal standards, but they aren't rich in terms of income.  You can turn your wealth into income, of course, but then it's not wealth anymore. lol.

People quit their jobs way too fast.  I like watching one guy who buys houses for less than $20k and rehabs them from the inside out completely by himself for less than $15k and then rents them out....for all of $600/mo, because that's the rate in that area.  Seeing all the work he does, and all the time it takes him, and the fairly low resale value of the houses, it just kills me. He's happy, he's debt-free, he does woodworking on the side for more income and youtube as well with sponsorships, but all of that incredible work for a measly $2000 a month he's up to now after years, when he's spending so much on the cost of the rehabs and so much on the houses (which is a lot when you're only making $2k per month) is just mind-blowing to me.  If I busted my butt for nearly 10 years, I'd want some actual creature comforts by the end of that, not making "bored cashier"-type money. There's nothing at all wrong with being a cashier, of course, but it's a far cry from killing yourself working 12 hours a day.

I don't really understand how people get good cashflow on SFHs in most markets, except for contractors who are great at rehabbing really underpriced houses for pennies on the dollar. While people have made a lot of money on housing appreciation, and for many, this has been their entire adult investing lives that this has been a potentially lucrative strategy, this is an extreme fluke in terms of the overall sweep of housing market history, and it's not one that I want to ride out, waiting for the next crash.

I am a boring person who likes multifamily. So I'd get out of the SFH market now and do SOMETHING else. But I got caught holding a house in the 2008 crash and only made $50k instead of $150, so I might be biased. lol.

It really depends on where you live.  The phrase, "if I find a rental property, say a duplex worth 100k" elicits wild, hooting laughter in most of the country. lol.  BTW, investment properties usually--not always--take 25% down.  (Some portfolio lenders will take even 10% down!!!)

And I'd hesitate to call anything a good deal that cashflows less than $500 on paper, bare minimum, because there's always *that thing* that bites you.  I really wouldn't want to own anything long term (I know people have strategies based on selling and make tons of money, but I mean if you intend to be a long term landlord of that specific property) that nets less than $400 a month, over the long haul, just because my time is worth too much to expend the effort of managing a property for less than that.

10% for capex, management, repairs, and vacancy together seems awfully low to me if you're buying an older duplex. Eventually, you might hit that number, especially with a lot of units in an area with really low vacancies and you're a marketing guru who can keep your vacancy rate below 3% (almost no one is), but initially, I'd expect it to be quite a bit higher, so it'll take a while before things are in the black.

I think the standard number is 10% for vacancies alone and 5% for maintenance if you do your own PM, and an extra 3% if you don't. Capex is wildly variable, but I'd go with at least 3.5%, playing off the 27.5-year depreciation rate for residential properties...but that's only AFTER the initial period, over a very, very long period, if you are tightly controlling costs. 10% is more reasonable, and some years, especially early on with delayed maintenance, it'll probably be 100%+. First year, if it ain't turnkey, you're unlikely to make any money. So now you're at at least 25% for overhead. That's mostly safe. You should out-perform that.

I think a lot of people don't look at the state of a specific property close enough.  How many years does the roof have? The A/C? The water heater? The furnace? The major appliances? The exterior siding/trim/whatever?  There's a clock on all of those things. And a lot of times if someone is selling their duplex, it's because these things are looming and they don't care to invest in them.

I think that's why so many people BRRRR. Aside from being a good strategy (which would cause lots of people to do it), you kinda have to do the rehab bit a lot of the time, and when you refi, you recapture some of the capex in a more usable form.

So I'm going to be replacing four clogging-prone toilets as I refresh the bathrooms, the first one being over Christmas because one student is leaving after finals and my own kid is actually moving into that room.

I've had good luck with Glacier Bay basic toilets in the past.  I also know I don't want a skirted toilet because you have to disassemble the toilet or lift it to get to the stupid water line at back. >:(

However, I have a question about the new mechanisms that are on the market that replace the old flappers.  They're found mostly on the push-button dual-flush toilets.  These are advertised as being more reliable, more durable, and less prone to leak.  I find in my own house that they're a bit more finicky (bad for the impatient, you really have to hold down the button for two solid seconds--I have some fancy-pants American Standard ones with the skirts and the ultralow flush and the nanofinish and all that jazz), but I haven't had enough experience with them to evaluate the claims for increased reliability and decreased leakage.  I changed my first flapper kit when I was a young teenager without even thinking about it, but I'm not sure how I'd change these fancy things. 

How expensive are they when they break? 

Do you need parts specific to that manufacturer, or can you get a standard kit like with the flappers? 

How long to they take to change out, and it is something that's super easy like the flapper, or is it hard? 

What is really the best option for a rental?  

This is what I'm currently planning on buying, unless the new flush mechanisms really are that great:  https://www.homedepot.com/p/Gl... 

Water costs are not a really factor here, BTW. A lot of the cost of water is just the base cost--$12.40 to read the meter and $21.29 for base sewer cost for 0-4,000 gallons.  Assuming we are over the 4,000 gallons, every 1,000 gallons costs $7.01.  With the wildly optimistic figure of a .92 gal average ultra low flow flush over the current 1.6 gal low flow as a baseline and 5 flushes per toilet per day with an inaccurate 365 days of occupancy, that's a "staggering" $8.70 saved per year per toilet for an ultra low flow toilet. With a more realistic alternative of 1.28 for the low flow, that drops to $4.60 per year.  At an even more realistic average of 1.1 per flush for the ultra low flow, we are at $2.30 per toilet per year.  I'm adding these figures because there are parts of the country where water prices are high and some people don't believe me when I say I don't care about ultra low flush for these properties.

So the government mandated lower flow toilets in 1994.  It took until about 2005 before manufacturers figured out how to do this without making toilets that clog all the time. I have lived in a townhouse built in 1998 myself, and it was the first time in my life that I clogged a toilet just by using it.  I didn't even just clog it once but multiple times in the 4 months I lived there.

Aaaaand my new condo was built in...1998. Sure enough, all the toilets are original. Sure enough, in the two weeks I was there doing a deep reset, I clogged a toilet and had to plunge it.  And sure enough, because I'm renting to college students and they are still babies, one clogged a different toilet today and has been texting me.  He thought that this was something a handyman needed to fix.  Um...no.  You need to plunge it, I said.

There are 3 plungers already (left by previous tenants) that I distributed among the 4 bathrooms, but of course, his is the one without a plunger.  Since he didn't have a plunger in his bathroom, he had to text me again to inform me of this. I told him to borrow one of the other THREE from one of the other guys or buy one, and that they were left behind as a courtesy.

Babes in the woods.

But that did confirm my decision to replace the toilets when I refresh the bathroom, because his response when the toilet clogged was to flush it twice more until it "nearly overflowed" and he said that he's scared to do it again in case it does overflow.  My mommy senses are tingling and I'm very much afraid that he actually DID overflow it a little and just doesn't want to admit it.

Gah.

There will be a follow-up with a question about the new hotness dual flush toilets...lol.

@Douglas Spence I stand corrected.  So what are your specific, actionable recommendations for a servicemember in Honolulu who has bad credit and no savings and wants to invest there?

I will take a crack at the same challenge:

I hadn't actually looked up Honolulu before because I have as much a plan of investing there as on the moon. I did now, and it's not half as bad as I thought. Apologies. I thought Honolulu was as bad as San Francisco, but it's really not. Not at all! There are actually condos that should easily meet the 1% rule rented out entirely that aren't that far from the base and aren't in bad areas(!!!). The big killer would be the HOA/condo board fees--you'd have to vet the condo board hard to make sure that not only the fees were reasonable but they don't have a delayed maintenance monster coming down the pike. Like this guy looks like a steal until you realize what the fees are: https://www.zillow.com/homedet...

And that's without doing any digging at all!

You also need to see if it will be legal for you to rent out the unit. Condos usually have hard owner-occupied percentages they have to meet and you might not have that opportunity, unless the condo is specifically an investor complex. I don't think you can buy into a non-warrantable condo (an investor complex) with a VA loan, but please, whoever is more knowledgeable than I am, correct me if I'm wrong.

So my own (semi-uneducated, with what I could find out in half an hour about the area) strategy would be to try to qualify for a loan for the best (numbers-wise) property that I could get with at least 2 bedrooms, with 2 bathroom preferred if I could get it, where I'd be able to rent out after I left. Then I'd take a roommate to cover a good part of the mortgage and be able to save about half my housing allowance right off the bat. After I left, I'd let my roommate stay for the full market rent and let him take on a replacement roommate. I don't like the idea of investing half an ocean away from me, so when prices got good, I'd eventually cash out and take the money somewhere else. I know people do long distance STR, but A) I bet there are lots of restrictions against those in Hawaii condos, and B) long distance would not be my preferred way to start doing STR....not by a long shot.

If you can't qualify, find out why you can't qualify.  Then do the things you need to do to qualify.

I can think of plenty of stuff that someone with a bit of a nest egg who can qualify for a VA loan and has the downpayment and a decent credit score can do in the DC metroplex where I am, because I know a number of people who have done it, and I mentioned those above glancingly. In more detail, this would be my advice, based on what friends have done: Buy a house with a lot of bedrooms and bathrooms for its price with a walk-out basement; have other people (usually servicemembers) as roommates, renting by the room; house-hack the basement into another unit, and as long as you don't install a stove you stay legal where you aren't allowed to subdivide but you can still have a large toaster oven, a hot plate, and a full sized fridge; then you have two complete units (local-style) when you are deployed elsewhere that will result in a decent positive cashflow and, if you bought in the right place, probably appreciation; cash out whenever the market surges and invest in somewhere that cashflows better with all your profits. I know people who've done something like that around here. One guy did the first bit and then switched to flipping it. There are outs at many different points in the process.

But in Fort Hood, for instance, my first choice would be an existing fourplex. There aren't basements there, and if you permanently house-hacked a duplex in Killeen in place of a SFH, you would get into all kinds of trouble.

So, what would you recommend, Douglas or anyone else? That's my best crack, with the caveat that I haven't even ever BEEN to Hawaii, much less lived there, and local knowledge is usually king.

 It's true that I've only worked with the non-high-end Sherwin Williams because I don't have any property where I'm super concerned about extreme wear and tear, but the difference between satin and eggshell in that line is as noticeable as flat and eggshell to me!  But maybe it's unfair to compare across lines or to generalize.

One trend that I will never do for practical reasons no matter how fashionable it is moving downmarket (right now, it's only high market, and I hope it stays there because I hate it) and that I will never do in my own home because I loathe it is high gloss.  They've been trying to make this a big trend for...five years now? It's gotten some traction, but I'm glad not much: 

 https://www.elledecor.com/desi...

https://www.onekingslane.com/l...

https://www.hgtv.com/sweepstak...

This is one where I want to hit the designers with a rolled-up newspaper.  Bad designers! Bad! No!

In a rental, though, or a flip, I don't do wall colors for ME. In fact, I don't choose anything based on my tastes.  My tastes don't matter. I design for mass appeal and being on trend, to the extent that it makes sense.  (Even if the flat paint craze comes back again, I'm not doing it. I know it covers a multitude of sins, but the touch ups it requires are insane. I'll just be boring eggshell.)  

My new condo was 2010 dark taupe. I could have painted it griege or maybe even gray and gotten probably...three, four, maaaybe five years out of it before I had to do a color-change repaint to keep from looking tired and out of style.  But that would be floor-to-ceiling color change repaint, not a standard touch up or even single-room repaint, and since it's being furnished, it would be an even bigger pain.  So I went with a light neutral in the new sandier shades, which is very close to the ooooold apartment Navajo white.  I don't dislike gray.  I don't even dislike the taupe.  It's fine.  I painted my flip almost that exact taupe color in 2008, and it was the hotness then. lol.

There are places where people are *still* getting a rent boost going from beige to gray, especially renting to over-30s. I don't deny that.  Heck, even $500k RVs are generally produced a solid 15 years behind the trends because their older audience prefers those styles, and manufactured homes are about 8 years behind--they'll still be making distressed shiplap 5 years from now even as everyone else goes to more elegant wood slats or more rustic bits that look like they were just hewn off a tree.  You do what your market wants.  But with the young people I rent to, they're going to hate gray sooner than most people and go "eeeeewwww." And the already-built apartment complexes are going to take a good solid decade to catch up to the change back from gray to a beiger color, while I'll already be there.  Of course, I'll have to be pulling out the faux glass backsplash I did not too long after then, lol, but that's because the faux backsplashes only come in colors long after they turned mainstream. Maybe then I'll have the time to do a real tile backsplash in whatever the current hotness is if it's a tend I think will last a good 15 years.

I'm not actually a fashion maven. I still have chevron pillows and a chevron padded bench in my own home.  (Right now, the fashionable people are wincing and everyone else is going, "huh?") Other pillows are also still riding the ikat wave. lol. I got rid of my shag trellis rug not because it went out of trend but because I discovered what people who got shag carpets in the 70s discovered--it's impossible to really deep clean! I'm still happy with them in my own home (or would be, if the rug wasn't gross), but I'd never put them in a furnished rental today, because they're dead trends. People get way too sensitive thinking that recognizing a trend and its end are an attack against their personal sense of style when it's not. I don't even have a proper study in my house (my office is under the eaves and so too dark to style like a study, even if I didn't have a modern house), but I'm ridiculously excited about the new version of dark green coming back because I never stopped liking hunter green and burgundy. If that's bad personal taste, I'm indifferent. But I'd never put those colors in a rental and then get upset if it's criticized.

Coming from the town myself, I understand the problems they caused, but the solution is to address the problems (partying, unreasonable traffic, poor upkeep) and still allow the use. :/ 

That would basically be a barndominium conversion, then?  If the toilets don't pass the ADA test, I would definitely go that route.  ADA kills so many commercial remodels. :(  I mean, I get why it's needed, but even what passed the rules in 1985 won't pass the rules now--they keep changing.  If you have a high-value business, it's no problem, but for more modest businesses, it locks them into their current state.

 Is your wife on trend with the popular wedding venue look in your area? It doesn't matter whether she makes things pretty. It matters whether your key audience will like it. 

This is something that lots of people don't realize. You're not decorating for you. You're decorating for the market!!!!