All Forum Posts by: Dan H.

In San Francisco area $700k can purchase few of the properties and likely will need some work.  Median home price is almost $1.5m.  

@Jessica Yuan you are entering RE at a challenging time were a lot of long time investors are sitting on the sidelines when it comes to but and hold.

You will qualify for a little more if you but a multi family as part of the rent goes to the income qualification. It it enough to qualify for a MF in San Fran area?

House hacking is your best option.   Why pay rent to someone else?   House hack can include roommate situation.   Note it will still be a long game.

If you plan on owner occupying, have your RE agent send you properties with assumable financing.  This can result in a rate less than half of the current market finance rates.

Next up is network. Go to RE meet ups. Talk to other RE investors. My last 4 purchases have been off market without any RE agent involved. If it is on the MLS, you will pay retail. The way to get a discount in RE is to buy off market. Recognize that virtually all off market properties involve work and/or have risk.

Good luck

 I agree that many residential syndications are struggling if they formed in the last few years.

However, virtually no residential syndication is offered without a value add opportunity.  They are not typically expecting market rent to appreciate.   They are also not typically expecting market property valuation to increase.  One thing I always check is the expected cap rate at exit.   I expect it to be no higher than the acquisition cap rate.   If it is not, it depicts an aggressive underwriting.

Evaluate the operator (I believe the operator is as important as anything), the plan (especially the value add and the underwriting), the asset category as well as the asset(s), the location, the market, the financing including rates and other terms, the risks.

The increased rates make RE more challenging but does not mean there is not RE opportunities.  There are a lot of offerings that are not residential based.   Not office space has also taken a recent beating.   Industrial, storage units, hospitality, recreational, the list is very long.

By the way 2 of the syndications I have joined in the last couple/few years appear to be struggling.  One is residential and one recreational.  I personally believe I will be fortunate to recover my initial investment.  

What I would like to see is these people posting about the high risks post when they first joined a syndication.   It is my belief that virtually all would have entered since 2020.   They entered at a difficult time for many syndications.   I think those that have invested for a while recognize with returns that for years was typically at least double the S&P are less likely to be complaining about a rough period.

Good luck

 Accredited investor is suppose to convey a certain level of knowledge.  I do not fault you for investing with ODC, but I do fault you for not understanding how leverage plays into the investment and can potentially result in a total loss.

Every syndication declaration states the expected hold and options to extend, the illiquidity of the fund, that investors can lose all of their investment, the expected level of leverage, etc  

ODC has never been in an RE slowdown market.   This pretty much applies to every sponsor that has started since 2010.  

Until recently RE syndications performed outstanding. From 2010 to an exit in 2012 it seemed like every RE syndication was achieving 20%+ IRR. I know one investor that averaged over 60% return.

I will say 2 of the 3 syndications I have joined recently appear to be struggling.  One had around a dozen exits all over 16% return (some far over) prior to this offering but is struggling.  

There are sponsors that have gone through the GFC and everything since then without ever losing a dollar of their LP investment. Some of these sponsors virtually always (maybe always) have produced 20%+ IRR while having the tax advantages associated with RE.

Brandon turner gets LP investors based more on his name than his track record.   I believe multiple of his funds are struggling.   It is a tough time to be a sponsor; he has zero experience with a tough residential market like today

I am sorry your investment did not work out, but I see a lack of ownership in your role.


good luck

A SFH with multiple ADUs is not a triplex. After splitting the SFH, you WILL have a single family home with likely a JADU and when you add the ADU, you have 2 ADUs. This is all allowed by various state laws. As indicated, I have seen inconsistent application of the rule against conventional financing for multiple ADUs and it does seem arbitrary that you can conventionally finance a triplex but by rule cannot get conventional financing on a SFH with multiple ADUs.

Note if your zoning allows for a triplex, you could upgrade to a triplex, but it is likely the fees will be greater than the ADU route.

You may qualify for a lot split. 

You need to know the ramifications of any decision.   You may want to consult with a trusted expert.

Good luck

 I see by mutual agreement the lease has been terminated.  I suspect this was best option for all parties.

None of those items other than potentially the mold is cause for breaking a lease.   A place does not have to be clean to rent it,   The walls do not need to be freshly pained assuming it is not flaking lead paint.   The shower head does not need to work perfectly.

However, addressing those items will help obtain higher quality tenants at maximum rent.

At a minimum, I would get a good cleaning crew in there.   Request they especially address any areas with mildew.   I would also replace the shower head if it is not functioning correctly.  Analyze whether painting is necessary. 

Once you have it cleaned, list it for rent unless you receive something official such as red tag that indicates you cannot rent the unit.  

Good luck

 Is the current unit you are creating by the split going to be classified as a JADU?   Is the area already zoned for MF?

Make sure you know/understand the conventional financing rules (Fannie/freddie).   2 ADUs are not allowed for conventional financing by rule, but I have seen inconsistent enforcement.   If you are adding 2 ADUs, recognize that conventional financing may not be available.   Even if you get the conventional financing on your refinance, recognize that it may not be available for a future refi or when you go to sell the property.

>will have his contracting license very soon

I believe statewide, owner builders are exempt from needing a contractors license.  I  In addition, W2 workers of the owner do not need to be licensed.  However, there are some recent disclosure rules for non contractor upgrades/enhancements at time of sale.  

good luck

I agree with the sentiment expressed by @Nicholas L., it is a tough market.

However I believe cash flow is possible with one or more of the following:

- off market, below retail purchase

- value add without an extraction of the value added

- creative financing

- alternate rent strategy (STR, MTR, rent by room)

- patience

- low leverage

All of those require work, have risk, historically produce low return, or take more time than I desire.

However, looking at the list you are better situated for the value add than most investors.   Having a husband that is a carpenter not only can save on carpentry, but he likely has contacts for many of the trades.

The alternate rent models are more effort than traditional LTR, but it can produce more income.   

Buy 2 units (duplex or SFH with ADU) that is in need of rehab. Move into the better unit and quickly rehab the worse unit. Then use one of the alternate rent models to optimize income. Rehab the other unit while living in the unit.

I am not implying this is easy or without sacrifices.   I am implying this approach can maximize returns.  There will likely be times that are not easy.   Living in a construction zone is not going to be easy.

Go in aware.   Many people think all tenants are good, there is good cash flow on turn key LTR leveraged purchases, there are no vacancies and associated tenant flips, that all components in a property last forever, that property tax and insurance cannot increase significantly.  In short, many people under estimate the effort involved in being a landlord.

Good luck

Lying on an application voids their application.  I get threatened with lawsuit slightly regularly.   I have never been sued for anything related to RE.

Issue in your case is an ESA is not considered a pet.  If you ask if they have a pet, the answer can be no but they have an ESA.

fortunately you have applicants that applied prior to perspective tenant with the ESA. 

 By the way I use PetScreening.com.   They claim to flag bogus ESAs.  I personally believe they do not do great at this, but if the tenant believes they do a good job at detecting bogus ESAs, the tenant will not apply and risk their application fee if they have bogus ESA. It is easier for them to apply somewhere that does not check for a bogus ESA.

Good luck

We Placed an offer today on a cabin that if the offer is accepted will be an STR.

The underwriting on this purchase is leaner than any property that I have ever purchased.   So why did I make an offer?

- RE is challenging everywhere

- the itch to purchase got over whelming.   

- it is a nice luxury cabin in the sierras.   The area has a lot of giant sequoias including one of the biggest in the world, a nice river, a cute little town, and I know a very competent (understatement) co-host that serves that area.

- it is near turn key.  This is a rarity for my purchases.   With greater effort/risk I should get greater return.  This being near turn key, it should have lower return.

- my family can use it and if the $hit ever hits the fan, we have a place to escape to.

This definitely is not a home run purchase. My underwriting shows IRR after a couple years that exceeds the S&P lifetime by an ok margin. More of a base hit on a luxury cabin that I will be proud to own.

In addition most people consider my underwriting conservative (I consider it slightly conservative). For example, I used $500/month maintenance/cap ex which I consider my best estimate but most would consider conservative.

Expected stabilized monthly rent ratio is 2.1% (yearly 25.3%).  As indicated it is a tough market so in this market, I consider this pretty good in a location I want to own.  I would definitely pass if this was not a location that I want to own or if I did not have a good co-host in that area.

Good luck

 #1) Higher psf areas have the potential to add more value.   A year ago I did a rehab in an area with ~$2k psf value.   I added a half bathroom using existing footage.  Comps show this half bathroom added $50k value.  How much value do you think a half bathroom added can add in a market where the psf is $100?

#2) Older properties cost more to rehab.   Lathe and plaster is difficult and heavy.   Plumbing and electrical work is expensive.   Replacement windows are expensive.   Older units need more work. 

good luck