All Forum Posts by: Dan H.

 Fire victims maintain their property tax basis by law after rebuild.

not sure what any of the things you mentioned trumps return. 
 
I have offer accepted on a luxury cabin in a high fire risk area.  The insurance is high.   If it burns down it will be a pain in the *** to deal with the consequence.   However it still comes down to return and desired area.  The mountains (sierras) this cabin is in exceeds what can be found in virtually every state.

 My little beach STRs have appreciated enough that most people,e could retire on the appreciation alone from either unit.   My best revenue year was about 50% of the purchase price.   

My most recent purchase is up $1m above my costs in 3 years.

It’s the return.   That is why people invest in CA RE and more homes are investor owned in CA than any other state.   Do you think that happens without years of awesome returns?

We have owned out of state but currently all our RE is in CA because of the outstanding return.  

 Let’s look at my claims:

- there is not a strong correlation between safety and cost of living of the city.   Not sure how that is biased, but I also provided the link and an example of one of the safer cities on the list not having a high cost of living. 
- California has highest investor ownership rate and I provided the link to the source.

- California has higher rate of return for the large coastal cities matches the stats case Shiller used to provide for total residential return for this century.   The 3 top cities where all coastal CA cities but CA cities made up a majority of top 10 cities on the list with my market at number 3 for total return for this century.  I will challenge you to find a single reputable source that does not show San Diego to have achieved outstanding long term return.

- I posted a recent rehab that I added half a bathroom out of existing space and the comps showed that half bathroom added $50k of value.   Good luck getting such significant value add in a low cost market.  This was in a property where the psf is over $1k.  
- I pointed out that my market (San Diego) has one of the lowest eviction and delinquent rates in the country.   I challenge you to find a single reputable source that shows otherwise.

I then advocated for all newbies start close to their home market.

I stand by my remarks and challenge you to show one statement to not be factual.   Facts, no need for confirmation bias.  In addition, I do not need to make more money so I am not needing to push CA RE.   Not a realtor, not a mortgage broker, not selling any mentorships (my protégés do not pay but are a very limited group).   I do not need to push CA RE and have little to gain which places me in a different category than many of the people who have posted on this thread including the OP who is a realtor, property manager, and sells mentoring (at what appears a reasonable price) in his Ohio markets.

I have used the STR spreadsheet That is provided by BP.. it is a fairly good start. Every property i use it i make additional tweaks.

I dislike they refer to it as Airbnb calculator. STRs, including 2 of mine existed before AirBnB. AirBnB is one of many STR OTAs. Correctly it should be called the STE calculator. Most operators post on multiple STR OTAs

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

Good luck

You could rent month to month.   There is risk with this approach that the tenant can have short residence or leave in Nov to January.   The positive is you can get them out with 60 day notice so 60 day escrow would allow the unit to be delivered vacant (assuming zero issues terminating the rental)

good luck

I agree so much with @Jonathan Greene.   At the low value of cleveland, a small count LL cannot cashflow even with a well above 1% monthly to value cash ratio.  The maintenance/cap ex will consume a large percentage of the rent.  

I do want to correct one thing jonathon stated.  It is not the interest rates alone that make the property negative after the high ltv refi.   It is the combination of the worst rent to value ratio ever (e separate studies show this) combined with the high interest rates.  

I have made a lot of money doing BRRRRs.  Most of my RE has achieved the elusive infinite return because i extracted all of my investment.   At this time, i am not actively pursuing BRRRRs and realize i have successfully done quite a few.  

This is not the correct market to attempt your first brrrr. There is a reason BRRRRs are getting so little attention now. Even @david greene the author of the brrrr book indicated publicly that he is no longer pursuing BRRRRs. That speaks volume about the challenges of doing a BRRRR in this market.

Good luck

My opinion only 2 cases make sense for the seller 1) they have few options and this presents the best means to get out if a bad situation.   They recognize the buyer can destroy the seller credit, but they are in such dire straights that the risk is justified 2) the seller knows the buyer and has so much trust in the buyer that they have every confidence that the buyer will perform on the loan.

From a buyer, it provides a means to get an interest rate from NLT q1 2022 that is a fraction of today’s rate.  They realize the due on sale clause could get exercised and believe the risk is justified by the reduced rate. Ideally they did not pay over retail because if they did they could easily lose the money they put into the property if the loan gets called.  Best case under such circumstance is they find alternative financing and simply over paid for the property.

good luck

Some of the advice above is not well thought out or not aware of the rules in CA.  My thoughts:

- best advice above is to get a good attorney that specializes in evictions. 
- Who ever told you that only 30 days notice is required does not know CA law.  You need to provide 60 days notice if they have been a tenant more than a year.  Hopefully the attorney informed you of this

- selling a long owned CA property that likely has significant appreciation owned by someone going into long term care is crazy stupid.   At death, the property gets a stepped up basis.  For appreciating CA properties this could easily be a 7 digit step up in value but i would think in all CA markets would be significant.   In addition due to prop 13, the tax base is a fraction of if it sold today.   This can save thousands annually.  This tax base benefit goes away at your father’s death. Much better off paying the eviction lawyer to do what they do than give up those 2 benefits.   The savings from either will be many times the cost of the lawyer.  Selling before death would be a costly mistake   

- you did not explicitly state this was not a multi family but it seems likely from your description.   Single family homes are exempt from rent control everywhere in the state.  The implication is your ex-wife cannot simply choose to stay beyond a 60 day notice.  An eviction will make it challenging for her ever to find a quality rental in low vacancy areas.  I hope your attorney has explained this to you. 

Have the lawyer deal with this.  Realize there will be a cost but also realize the value in a highly appreciated property in CA and the consequences of selling.  You will likely save 6 digits on the gains as well as 4 digits (maybe 5) on property taxes annually by waiting until death to sell the property.  

Good luck

We are in january 2025.  If you can live in the unit until june 2025, you will have the 2 of 5 years gain exemption so that $500k (married couple) is tax exempt.   I do not know your gain, but i would at a minimum look into this option to determine if it warrants staying in your existing home for ~5 additional months.

good luck

 There is a tight coupling between appreciation and the cash flow over a long hold.  The long hold cash flow coupling with appreciation is much stronger correlation than there is between initial cash flow and the cash flow over a hold.  All of my rentals at the great recession maintained their positive cash flow that was the result of market rent increases that was tightly coupled to the appreciation.

So purchase with poor or no cash flow in an appreciation market and the cash flow will come with the appreciation.   Appreciation virtually always results in rent appreciation which results in increased cash flow.

Case shiller used to publish a ranking of large cities based on total residential return since the year 2000.   The large coastal California cities were ranked very high in appreciation (not surprising) but also were ranked very high for their cash flow (this could surprise some who do not recognize the coupling of appreciation and cash flow).

Initial cash flow has a poor correlation to actual cash flow over a long hold. This is not by chance as there are many factors that determine a market’s RE price.  Two key ones are expected appreciation and expected rent growth.  In general the best initial cash flow markets have poor appreciation and poor rent growth outlook.   Note the market with higher rent growth will virtually always produce the better cash flow over a long hold.   Appreciation with its tight coupling to rent growth, results in cash flow.

An example from my market, a few years ago core logic indicated the average rent increase in my market was ~$600/month.  Imagine what that type of average rent increase does to cash flow.

i recommend all new investor start in a market near them, regardless of initial cash flow or appreciation outlook.   I believe success can be achieved in both markets.   However, in general the appreciation market will produce the higher return and historically on long holds much of that return can be from cash flow.

good luck

@James Wise

 Outside bases, especially on military payday, is one of those places you can find sex providers easily in San Diego area.  They can be assertive/aggressive in obtaining a client.