All Forum Posts by: Dan H.

I do not like first year COC as an investment criteria. In most markets the best COC will be in the worst areas. The rent to price ratio is highest due to 1) the risks involved with that class of tenant 2) poor appreciation outlook 3) poor rent growth outlook.

Note for a long hold, the best cash flow will typically be achieved in the property that has the best rent appreciation.  This is very unlikely to have been the property with the best year 1 COC.  

My own belief is that the best rent ready purchases for long hold have 0% year 1 COC or even negative. it is a tough RE market. Price to rent ratios are at all time low (2 separate recent studies show this) and the interest rate is near high for this century. Tough combination for initial cash flow.

Good luck

Some thoughts:

- @Brian Burke insight on syndications should be highly regarded.

- BP recently introduced passive pockets. 
- ideally every operator is sound at all aspects of being an operator, but there are operators who are outstanding at the operational side that are a bit lacking on the communication side.  Note I am not stating I find this ideal, but if an operator has outstanding performance record, I may be able to tolerate sub-par communication.  One of my sponsors definitely could communicate better.
- there is a reason investing in syndication have the restrictions that they do.   They are high risk.  Be careful of investing based on existing relationship.   Actually, be careful investing in any syndication.  
- my belief is investing 10% of net worth in syndications is investing too much in syndications even if this is across multiple syndications.  
- only invest in syndications what you are able to lose.

Good luck

Quote from @Paul Dashevsky:

Just finished my SB9 and ADU project in Los Angeles (San Fernando Valley). My original SFR was 1100sf and I added 2 units: an 800sf SB9 unit and a 750sf ADU (converted garage plus addition). Both units are 2 bedroom and 1 bath. (FYI - this was an SB9 "two unit development, not an SB9 lot split). All three units are long term rentals.

Reach out if you need a good architect or contractor for your projects (anywhere in SoCal or NorCal).

 What was your reason for not going for the lot split?   I am considering going for a lot split, but there seems to be no one in my jurisdiction (Poway) that has done one.  

Congrats on completing your effort.  

As you likely know CA has sb1482 so you cannot simply terminate the tenancy (no amount of notice suffices even if on month to month lease).   In addition there are areas in Los Angeles that have stricter rent control than the state wide rent control.  I do not have knowledge of Los Angeles local rent control ordinance but statewide the “no fault eviction” (terrible name) has only a few valid reasons.  The most common is to move in family or a rehab extensive enough that unit cannot be occupied.  Abatement would qualify.  Does the unit have textured ceilings and over 50 years old?  Remove the ceiling texture in that instance is an abatement issue.  State wide this requires one month rent to tenant and at least 60 days notice in your case.   Note local rules could be more extreme.  

You should have provided a new lease when you took over.  By sb1482 there cannot be a substantial change in lease terms but requiring notice to introduce animals, requiring keeping public/common areas free of junk, requiring her animal to be leashed in public/common areas, to require instant pet pick up in public/common areas are all reasonable terms, require the animal to not be a nuisance to other tenants (jumping on definitely is a nuisance, but I usually mean this to mean the dog cannot have excessive barking) and would be difficult for tenant to state are substantial change of terms as all those are reasonable requirements. 

Now to address the ESA…  have an ESA policy.  1) use petscreening.com to screen out bogus ESAs.  They probably flag a small percentage of bogus ESA authorizations but just using them discourages bogus ESAs 2) require all ESA authorizations be AB468 compliant.  I require the medical provider to explicitly state they are aware of AB468 requirements.  The implication is that the provider reads AB468 and understands the punishment associated with bogus ESA authorizations (even if no one has ever been charged) 3) meet the ESA.  If it is not behaved such that you would not accept it as a pet, reject it.  Let them do something about it as the ESA rules are not intended to accommodate misbehaved or vicious animals. 

I also suggest you be leery of following well intended guidance from those unfamiliar with the rules of your jurisdiction/state (and why I address statewide rent control ordinance but state I do not know if your jurisdiction has more extreme rules).  

Address this issue and learn from it.  

Good luck

 Petscreening.com supposedly verifies that the health provider does more than charge a fee for the ESA authorization.   I think this would be difficult for an individual to do.  The individual can verify that it is a licensed health care provider, but cannot easily determine if that health care provider is one of the many that advertise on the internet for ESA authorizations for a fee.

I personally think the biggest advantage of using petscreening.com as well as enforce AB468 is it discourages bogus ESA applicants from applying.  There are LL that are doing nothing to verify the authenticity of ESAs.   It is easier for the bogus ESA to apply there than to apply for my unit and potentially have their bogus ESA rejected and lose their application fees.   

I do not suspect that PetScreening.com catches a large percentage of the bogus ESAs, but just the potential of their ESA being flagged as bogus and losing their application fees to s far better than doing less.  Especially seeing the service is free for LL, there is no reason not to use them.  In addition, they track vaccination dates.   We do need not make use of this (I get the email but do nothing with them), but possibly would if we only had a few units. 

If it is a legit ESA, it still has to abide by the usual criteria (no barking, biting, and/or destruction, picked up after (we have daily requirement for private yards, immediately for shared/public areas)

Good luck.  

If you hired out all the work, you are more likely to get ~$0.50 for each dollar you spent on the ADU assuming 1) in single family zoned area 2) not converted from existing habitat space.

When you get your appraisal, post your appraised value and value of property without the ADU and ideally the address.

Good luck

How did you screen the ESA?  Did you use a service like PetScreening.com to help discourage bogus ESAs?  Did you make sure their health provider met the requirements of AB468?   Did you meet the animal?   

In the future, I recommend doing each of these.  There are a lot of tenants that purchase ESA authorizations.  Note AB468 has stiff penalties for the medical provider providing bogus ESA authorization, but to the best of my knowledge no one has yet to be fined for selling ESA authorizations.  The law would have more impact if they fined some of the places that clearly are selling ESA authorizations.  

Good luck

https://www.amazon.com/California-Landlords-Law-Book-Respons...

$26 for the kindle edition could be some of the best money spent on your RE business.  

Good luck

We had a duplex on the beach in gulf shores.   We sold it maybe a dozen years ago after it got hit in consecutive years by hurricanes.  Each hurricane red tagged about 50% of the houses on the beach and had to be rebuilt set back from the beach.  Both times our property got lucky and was not red tagged.  After the 2 hurricanes maybe only 25% were still on the beach, but the hurricanes were a pain and resulted in our insurance going up significantly. 

In addition, the property tax rate is reasonable but the valuation was going up faster than the ADR then the hurricanes hit and values fell.  So our cash flow was reducing during our hold due to poor ADR increase and large insurance and prop tax increases.   Meanwhile our local properties were having increased cash flow without the effort involved with 2 hurricanes. 

I do have seller’s remorse at times.  It was an awesome property that would be 8 digits in Southern CA if you could even find such a property.  

Good luck

 Assuming my calculation is somewhat close and it is negative >$400/month then at that price point I claim it is not worth holding on to.  

A $160k ARV is going to be real challenged to add $100 a month increase per year. $50/month increase per year is more likely. This implies likely over 8 years to have positive cash flow.

To me this property screams flip for someone getting started.  

Good luck