All Forum Posts by: Dan H.

Quote from @Terra Padgett:

Quote from @Dan H.:

Quote from @Terra Padgett:

Quote from @Dan H.:

Quote from @Terra Padgett:

Quote from @Eric James:

Is this based on some data regarding actual "millionaires" or is this just made up?

Also, what people do with wealth once they have it isn't necessarily how they made it to begin with 

No, it’s not made up. There has been research done on the topic and it’s just a common theme found from analyzing financial habits of wealthy individuals. 

Can you provide the source?  There are a lot of things that people believe is fact but are not.  In sports the belief that the more times you beat a team the better chance the other team has to win.  Statistically this is false even though it is believed by many people.  there are countless other samples.

I used to see on this site that investing for cash flow was king.  There were some of us that would point out that statistically that was not true.  Today the sentiment on this site is very different than 5 years ago.

Research from the IRS, the Census Bureau, and studies on self-made millionaires. 7 streams is more of a guideline or general rule per se rather than a strict hard rule for every single millionaire. The key takeaway being that diversifying income is a common trait.

 The census bureau nor irs collect or releases that type of info.  It is not in their responsibility.   I use census data regularly (on virtually every underwriting) and am fairly familiar with their website. 

I join the others that skeptical to your list unless you can provide a link to a half way reliable source showing the data.  You may be simply passing on info you have heard somewhere, but that is NOT a reliable source   

Both the IRS and the U.S. Census Bureau publish data on income sources and wealth distribution, but they don’t explicitly release reports stating, “Millionaires have seven income streams.” Instead, researchers analyze those datasets to draw these conclusions. You don’t have to agree or believe the trends. However many millionaires do, in fact, have multiple income streams. 
Thank You for your comments and thoughts! 

 When you have been asked to provide a link to a single reputable source of one of these “researchers” you have failed repeatedly to provide the source.  I believe your post is Bs.  It may be someone’s view, but not a view from a reputable source.  

Show that I am incorrect and post a reputable source.  Otherwise realize this is only someone’s opinion with no research to support it (which is my belief and various other posts). 

Quote from @Marquis Soto:

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Hi everyone,

I'm just gonna cut to the chase & be blunt. I have NO. IDEA. what I am doing. All I know, is that I would like to start a journey investing into real estate. Because of this, I require some help on getting started. That's when I came across this website. I understand this is probably a long shot, however I believe one who has a strong desire to learn and is willing to commit, can attract those things they are looking for. So in this case I am looking for someone who can show me the ropes on how to invest into a multifamily property and/or possibly go in on a deal together in the future. Most of all, someone who is willing to provide me with the mentorship I need in order to get a foot in the door.

Thank you,

It'd be a pleasure to speak to any of you

Hey @Marquis Soto, welcome to the BP Forum! What type of MF properties are you seeking, 2-4 MF, or 5+ MF? What is your price range/down payment amount? Are you looking for turn-key properties or something along the lines of a "fixer upper"?

 Hi Jaycee,

Appreciate the welcome! If i end up going for a smaller MF, it would have to be a 4 unit. But the bigger picture I'm aiming for, is at least 5 units minimum. Not sure about prices. I'm middle class, so my only option as of now is to go for an FHA loan. In terms of types of properties, ideally one that comes with less stress and headaches. Not entirely sure because I honestly have no clue how any of this stuff works. I've only just scratched the surface.

 @Marquis Soto Here's your first lesson, FHA loans max out at 4 units. Also, to use FHA, you have to house hack. So with that, would you be looking for a 4 unit MF in San Diego?

@Jaycee Greene Yes! I remember seeing that during my research. Unless I can find the funding or someone who is willing to take part ownership in exchange for a down payment, the FHA is what I will be going for. & yes, this would be in San Diego.

@Marquis Soto have you found any fourplexes in San Diego that fit your budget?

 @Jaycee Greene not yet. The ones I have come across have been a little out of range. Gonna keep an eye out

 @Marquis Soto the cheapest I could find doing a quick search was around $850k. 

 @Jaycee Greene that doesn't seem too bad. This was for a four unit? Where was this listing posted?

 here you go: https://www.realtor.com/realestateandhomes-detail/3064-Island-Ave_San-Diego_CA_92102_M29296-76669?from=srp-list-card

@Jaycee Greene doesn't seem like that one is currently active. It's shown as pending. Since that one is a little beat up, what opportunities are there from an investor perspective?  

A little beat up if priced appropriately for the condition is one of the few ways MLS RE can work in the short term. 

but 1) Mountain View is a rough area.  I put is above Logan heights and encanto only.  2) two of the units are rented below market.   The city of San Diego rent control rules are a bit mor3 cumbersome than the state rules.  One area that would be relevant is their no fault eviction for unit rehab requirements are more complex and the buyout is higher.

San diego is a tough re market currently.  If you think you are going to buy a rent ready (minimal work required), cash flow positive property in a decent area at near FHA LTV you will be disappointed.  If this is your expectatiin, yo7 may as well save your effort.

good luck

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Quote from @Jaycee Greene:

Quote from @Marquis Soto:

Hi everyone,

I'm just gonna cut to the chase & be blunt. I have NO. IDEA. what I am doing. All I know, is that I would like to start a journey investing into real estate. Because of this, I require some help on getting started. That's when I came across this website. I understand this is probably a long shot, however I believe one who has a strong desire to learn and is willing to commit, can attract those things they are looking for. So in this case I am looking for someone who can show me the ropes on how to invest into a multifamily property and/or possibly go in on a deal together in the future. Most of all, someone who is willing to provide me with the mentorship I need in order to get a foot in the door.

Thank you,

It'd be a pleasure to speak to any of you

Hey , welcome to the BP Forum! What type of MF properties are you seeking, 2-4 MF, or 5+ MF? What is your price range/down payment amount? Are you looking for turn-key properties or something along the lines of a "fixer upper"?

 Hi Jaycee,

Appreciate the welcome! If i end up going for a smaller MF, it would have to be a 4 unit. But the bigger picture I'm aiming for, is at least 5 units minimum. Not sure about prices. I'm middle class, so my only option as of now is to go for an FHA loan. In terms of types of properties, ideally one that comes with less stress and headaches. Not entirely sure because I honestly have no clue how any of this stuff works. I've only just scratched the surface.

Here's your first lesson, FHA loans max out at 4 units. Also, to use FHA, you have to house hack. So with that, would you be looking for a 4 unit MF in San Diego?

FHA maxes at 4 units but due to sustainability requirements is virtually always limited to SFH and duplex (which does not have sustainability requir3ments) in San Diego.

however an conventional OO loan was introduced a couple of years ago that can go 95% LTV. This loan is better suited for triplexes and quads that will be OO.

@Marquis Soto have you looked into NACA loan Lots of hurdles, but could be a good option for you if your income is modest in San Diego. If you go this route make sure eithe4 your agent or mortgage broker has experience with the loan product.

San Diego is currently a difficult RE market without taking active role such as flipp8ng, wholesaling, value adds, etc,

My son is 22 and getting started in San Diego RE.  Not an easy path.  I fear I have made it look easy (and it used to be easier than now). He almost went under contract yesterday on a unit, but I am glad he did not because it was a tic/coop so had minimal exit options (but a 1/1 in hillcrest/mission Hills for $360k is tough to beat).  Perhaps the cheapest hillcrest 1/1 in many months.

good luck 

Quote from @Jonathan Klemm:

@Dan H. - Will an appraiser count them as a legal unit in their appraisal underwriting?  I could see that as one of the main reasons someone wants to legalize it when they are going to sell or refinance.

Anyone renovating a unit without a permit can still get a stopwork order by the city right?  In some areas of Chicago that is very rare (mainly the south and west sides), but on the northwest side of the city I've seen quite a few stop work orders typically a neighbor calls in which prompts the city to send someone out.

I would think a better solution would be to make the permitting process easier instead of basically enabling more unpermitted work...

 What I have seen, even before this law, appraisers typically do not check permits and if the additions look to code, then they appraise similar to if it was permitted.  

However, either the buyer in due diligence or seller in their disclosures, the buyer finds that the work is not permitted often results in a reduced price as it should.  Unpermitted work costs less to have done and has risks associated with work quality and potentially getting red tagged.  It is worth less than permitted work, but the amount less is determined by work quality, risk, market, etc.  

if you can purchase quality unpermitted work at a correct price that by law cannot be red tagged, that could provide an opportunity (especially if the reduced risk is not yet recognized by many sellers).  

Good luck

Quote from @Terra Padgett:

Quote from @Dan H.:

Quote from @Terra Padgett:

Quote from @Eric James:

Is this based on some data regarding actual "millionaires" or is this just made up?

Also, what people do with wealth once they have it isn't necessarily how they made it to begin with 

No, it’s not made up. There has been research done on the topic and it’s just a common theme found from analyzing financial habits of wealthy individuals. 

Can you provide the source?  There are a lot of things that people believe is fact but are not.  In sports the belief that the more times you beat a team the better chance the other team has to win.  Statistically this is false even though it is believed by many people.  there are countless other samples.

I used to see on this site that investing for cash flow was king.  There were some of us that would point out that statistically that was not true.  Today the sentiment on this site is very different than 5 years ago.

Research from the IRS, the Census Bureau, and studies on self-made millionaires. 7 streams is more of a guideline or general rule per se rather than a strict hard rule for every single millionaire. The key takeaway being that diversifying income is a common trait.

 The census bureau nor irs collect or releases that type of info.  It is not in their responsibility.   I use census data regularly (on virtually every underwriting) and am fairly familiar with their website. 

I join the others that skeptical to your list unless you can provide a link to a half way reliable source showing the data.  You may be simply passing on info you have heard somewhere, but that is NOT a reliable source   

Quote from @Terra Padgett:

Quote from @Eric James:

Is this based on some data regarding actual "millionaires" or is this just made up?

Also, what people do with wealth once they have it isn't necessarily how they made it to begin with 

No, it’s not made up. There has been research done on the topic and it’s just a common theme found from analyzing financial habits of wealthy individuals. 

Can you provide the source?  There are a lot of things that people believe is fact but are not.  In sports the belief that the more times you beat a team the better chance the other team has to win.  Statistically this is false even though it is believed by many people.  there are countless other samples.

I used to see on this site that investing for cash flow was king.  There were some of us that would point out that statistically that was not true.  Today the sentiment on this site is very different than 5 years ago.

Quote from @Jonathan Klemm:

@Dan H. - Your last two sentences caught my eye!  Who determines if the unpermitted work is "safe" and what exactly constitutes as safe?

Here in Chicago, there's a lot of unsafe work happening lol

The relevant ordinance is SB13.  It is not clear as to safe but certain things are obvious such as egress, unsafe electrical or plumbing, unsafe framing, etc.  Sb13 does state in general terms who gets to determine a unit is unsafe.

I have taken it to mean that if it is of the quality of a licensed contractor but simply not permitted then it is legal for 5 years (which has already been extended once).  They wrote SB13 such that existing unpermitted units were allowed, but they did not want to encourage further unpermitted units (so the units had to exist before a certain date).  However, the 5 year date was fast approaching and there had been many safe unpermitted units added after the date in SB13.  So AB2533 extended the time.  In my opinion it sets a bad example.  Knowing that it has been extended once already, is there great incentive for the additional costs associated with a permitted unit?  At the very least it makes the decision to get permits not as strong as it would have been otherwise.

Here is the original text of SB13:

"...
(2) The owner of an accessory dwelling unit that receives a notice to correct violations or abate nuisances as described in paragraph (1) may, in the form and manner prescribed by the enforcement agency, submit an application to the enforcement agency requesting that enforcement of the violation be delayed for five years on the basis that correcting the violation is not necessary to protect health and safety.
(3) The enforcement agency shall grant an application described in paragraph (2) if the enforcement determines that correcting the violation is not necessary to protect health and safety. In making this determination, the enforcement agency shall consult with the entity responsible for
enforcement of building standards and other regulations of the State Fire Marshal pursuant to Section 13146.
...."

As stated AB2533 has extended the time the unit had to exist by (originally the unit had to exist before JAN 1 2020).  The date in SB13 existed to discourage further unpermitted units, but I believe the effect of SB13 and especially AB2533 has been to encourage unpermitted units.

Prior to SB13, there were areas in San Diego county with many unpermitted units (City heights being perhaps the most obvious) and areas with virtually zero unpermitted units (Poway where I lived had stringent enforcement on unpermitted units). Now all areas basically cannot require the removal of unpermitted units (at least for 5 years and longer if it keeps getting extended).

I understand there is a housing shortage.  Removing safe units exasperates the housing shortage.  But with these rules, why get a permit (cost, time, increase to property taxes, etc) unless you believe at some point the state will require safe unpermitted units to get a permit? I personally believe the housing shortage will continue for at least 15 more years and that the state is going to continue to protect safe unpermitted units for at least that long.

I do own some safe unpermitted units, but I did not add them.  I purchased the property with the units already created.  I purchased it before SB13 went into effect but after I already knew about it.  I purchased at a price that reflected a risk that was going away in the near term (at least going away for 5 years at that time, since extended). 

If I were adding units, I would pay to have it permitted but I understand those that make a different decision in this market.  SB13 and AB2433 protect unpermitted units and that protection seems likely to continue (the Ab2533 precedent shows this).

Quote from @Becca F.:

Quote from @Steve K.:

Who buys a whole state though? Most people just buy individual properties. 

I jest of course, but it's a silly thought to imagine states appreciating. If you want useful data in real estate you have to zoom in a lot more. It is also a silly (and divisive) exercise to imagine states appreciating differently than others based on their voting results, or even states being red or blue because no state votes 100% one way or the other obviously. Most states are solidly purple. It's necessary to reduce states to red or blue for the electoral college results, but that's about the extent of the usefulness of being so crude with the data. 

Real estate data needs to be much more local than the state level to tell us anything useful, that goes without saying. For example most investors buy in cities, and just about every major city in the US is blue. So even if you're buying exclusively in "red states", you're probably still buying in a "blue city". A comparison of major red cities vs. major blue cities would basically be Oklahoma City and Fort Worth vs. every other city in the country, so how useful is that? If you really want to compare red and blue areas to see which appreciate better, you'd have to compare rural vs. urban areas because rural areas are mostly red and urban areas are mostly blue. Or you can compare the very most red or blue states to each other, like CA, VT, MA and DE vs. OK, WY, ID, and WV. It would still be pretty asinine though. Landlord/ tenant laws are also typically made on the municipal level more-so than the state level with some exceptions like the statewide rent control ban that we have in Colorado...

Sorry I just don't see how it can be useful to look at real estate from a state level and pretend that electoral college votes have much if anything to do with appreciation. There are so many other factors in play that are so much more important for appreciation than votes. Especially because the voting margins are actually super narrow in a lot of states, and really most are a shade of purple. 10 states swung from red to blue by less than ~5% of the votes in the past two elections, and a handful by less than 1%. If several thousand people had voted differently would those states appreciate any more or less?

I'll take the purplest state please.  

Appreciate the breakdown. I've been on BP long enough to read the "California is a terrible place to invest" posts.  California is a huge state - San Francisco Bay Area, Sacramento, Central Valley, NorCal (Sonoma, Napa, Eureka, etc), LA area, San Diego, and many parts of SoCal that I don't know about. 

I don't dispute that it leans towards tenant friendly and has a lot of regulations. Rent control is much more localized. For example, San Francisco considers a multi-unit to be 2 unit or more, which includes having an ADU on a SFH property - that would be under rent control. If buying now, I personally wouldn't buy in S.F., Oakland, or Berkeley which are very pro-tenant. I think the other parts of the Bay Area are much better for investing. I just walked a 4 unit in a suburb of S.F. - that's not under rent control. Sacramento leans towards a little more landlord friendly from talking to agents there.

We have Proposition 13 which limits property tax increases to 2% a year (unless doing a significant renovation causing it to be re-assessed). Many long time investors are paying $2000 a year property tax on property valued at $1 million. It's unfair to new homeowners and investors, where the value is re-assessed upon purchase. How many other states have this type of property tax increase cap?

CA recently passed a proposition in Nov. 2024 banning rent control between tenants. Ex: Tenant A who's lived in a unit for 30 years paying $1400 a month rent moves out. New Tenant B who moves in can charged market rate rent at $4000 a month. There were efforts to prevent the huge increase between Tenant A and B. Luckily this didn't work - rise in insurance costs and other costs and expecting landlords to keep rents at year 2000 level isn't common sense. 

On the flip side I've heard "Texas has high property taxes and you shouldn't buy there". I have CA investor friends recently buying multi-units and commercial property (for businesses) in Texas. 

Thanks for coming to my TED talk :) 

 >I just walked a 4 unit in a suburb of S.F. - that's not under rent control.

4 units in CA are rent controlled under the state rent control law (AB1482).  This law allows significant rent increases (CPI + 5%, capped at 10%).  I recognize it is not the extreme rent control that applies in some jurisdictions in CA.  However, It has all the other issues associated with rent control such as difficulty getting marginal tenants out of the unit.

Prior to rent control, if I had a tenant that was rough on the unit I would increase their rent to above market rent to solicit the tenant giving notice.   Keeping the rent near market rate can still allow this to work in years where the market rents have increased modesty, but is useless to get rid of a tenant in years where the market rent has increased above or near the maximum rent increase.

Screen well if you have CA MF as it is difficult to get rid of poor tenants that pay their rent.

Good luck

Bigger Pockets (BP) has an STR calculator Excel document.  It does not try to predict ADR, revenue, occupancy, etc.  I like this spreadsheet because you can modify it to provide the details you desire.

https://www.biggerpockets.com/airbnb-calculator

I suggest you use multiple sources to derive the revenue.  If it is already operating as an STR, obtain the T12.  This tells you the current revenue, but can you improve the revenue?  Next I suggest reaching out to a successful PM or co-host in that market for their estimate of revenue. AirDna, STR Insights, etc can also be used to help obtain revenue.  Finally use the "enemy method" to verify the data from the other sources.

Make sure your underwriting is as accurate as possible and error on the side of being conservative.

Good luck

Quote from @Jill F.:

Tile is great in a basement. I would leave the tile and spend (way less) money on a *good* paint job with colors that would look good with that beige-y tile. Painting the walls in SW aesthetic white or Behr spun wool and trim in SW extra white or Behr ultra white would make that tile look great. (I'd also paint out the orange wood book case in wall and/or trim color . If the dark contrasting grout bugs you you could use polyblend grout renew; the 'urban putty' color would probably make the grout lines 'disappear' 

 I agree with Jill’s @Jill F. comment on that it could be the grout lines and not the tile that makes the floor seem as dated.   I think I would try to save the tile.   

@Ben Fernandez suggestion, I have never tried epoxy on flooring but it holds up fairly well in shower enclosures.   Flooring gets a lot more wear than shower enclosures.  I would do research before going this route.  It may warrant investigation if you do not like the floor coloring.

Good luck