All Forum Posts by: Dan H.

Mark’s reply is very good (I upvoted it) but a couple items I have a different perspective.

My lease and hopefully your lease places all repairs that is not usual wear and tear on the tenant.  The tenant should file with the jurisdiction for reimbursement for the fence damage and in the event that they fail to collect, the tenant is responsible for the costs.  It was their guest that resulted in this damage.   Let them take on the effort involved.

I see no need to pay the tenant unless you want to place a timeline on move out (which could be a good idea). 8 years without a rent increase implies you have already compensated them plenty.  Note if you are not going to manage your property, pay someone to manage it.   You would have made more money using a PM.  I recognize you seem to know this as you indicate you will use a pm for the next tenant.

I would use a lawyer for the response to the lawyer.   I like tough, no BS lawyers.  Get referrals to find one.  Some claim to be such and are not.  I had one (he retired) that put a local lawyer so in his place the local lawyer resorts to calling me names (in fairness I cal, him 2 bit, short for 2 bit lawyer which seems correct - he is much less creative and just uses profanities to describe me) and taking off in the opposite direction when I am around.  

Good luck

Try to get quotes for the same job as it makes comparisons easier.   The licensed contractors are quoting redwood.   Redwood is more costly than other wood (usually cedar).   This is accounting for some of the cost difference.  

In addition the licensed contractors have additional expenses especially in the area of labor.  I believe the majority of the cost difference does not go to the business, but to the employees and livable wage and need for insurance is real.

Having said this, I have never used a licensed contractor for a fence install.   I have my handyman crew that I keep busy and in general they repair fences and do not do new fence installs.  By the way placing posts removing old posts and replacing with a new post) is costly and typically most posts have many years left.   I slightly recently replaced every plank and beam on a fence and not a single post (the crew checked each post for being solid and secure).  It looks like a new fence but was significantly less expensive.  Something to consider.

Good luck

Sorry for your loss.

I have gone through handling inhering a property and assuming the existing loan   It was my brother who was assuming the loan, but he is borderline capable so I did all the inquiring, etc.  he still has the loan over 4 years after inheriting the property.

In most cases, a relative inheriting a residential property can assume the existing mortgage under the original terms due to federal law, which provides exceptions to the standard "due-on-sale" clause. It is my belief this law applies to all loans including VA loans. I would call the mortgage holder and discuss with them, but I suspect they will tell you that you can assume the loan

Question for OP is do you desire such a low leverage option. Below 37% LTV will negatively impact the return. You may desire to look into ways to increase your leverage and use the money for other investment opportunities.

You do not state what state this is, but if it is CA the property 13 reduced property tax is only maintained if the home was the primary of the deceased and will be the primary of a child (this was the case for my brother and he is still living in the home at a tax rate that is based on a 1977 purchase plus 2% max annual increase).   This implies that in CA you do not desire to have been renting the property if you plan to continue to live in the property; you will be better served if it was the primary residence of the deceased parents.  Something to consider.

good luck

 I am all about total return.   I do not care the source of the total return but historically cash flow has accounted for a very small percentage of my return.   I have multiple properties that have appreciated over $10k/month over my hold period.  There is no way I can achieve the same return by cash flow.

1) sure. Made an offer a week ago on an STR where it meets 2% rule. Surprisingly its return was not up to my usual expectations, but I kind of wanted a luxury cabin that I can escape to if I want. It is the 2nd offer I have made in that market.

2) yes. Always looking for a local off market MF that projects good return. Bonus if it has alternative financing it can be OO so fha and va assumed can work)

3) yes but not too creative.   Leery of sub to.  Prefer other forms of alternative financing (assumable, owner financed, etc).

4) yes.  it is a tough market.   I make offers, but in reality I have been sitting the sidelines.

Good luck

Spring 2024 I did a rehab of a little unit that the records indicated was built in 1901 but we believe was built circa 1920.

I have done a lot of unit rehabs.   I am typically fairly accurate on cost and very accurate on timeline.   I went significantly over my budget estimate; more than I thought I would ever go over budget.   We did manage to nearly meet our timeline (one week over which was exactly the overage margin I had reserved as guest moved in same day that we finished).   Some of it was scope creep, but a lot of it was encountering unexpected things.   For example, the mortar holding up the fireplace was closer to sand than cement.  The crawl space over the years had filled with sand which had to be extracted from the crawl space.  It is not unusual to encounter something unexpected in a large rehab, but on real old units you can expect more unexpected items.

Good luck

Ignore him as he knows nothing of Sacramento RE.

Here is a challenge for @Luka Milicevic.  Find a RE market outside Ca that 

1) has appreciated at least 254% since the Year 2000.  This is the Sacramento appreciation for this century (pretty good, but not special for CA) https://www.neighborhoodscout.com/ca/sacramento/real-estate
2) property tax has gone up at most 2% a year.

3) rents have increased $951.00 this century which is the average rent increase for this century for Sacramento.

My market meets all  3 of these conditions, but it would not be a good choice for the OP.

Sacramento is a fine RE market.  In addition it is the. OP’s home market.  Real estate agents benefit by advocating for their market. Recognize the bias.   This does not imply that all the markets that they advocate for $uck. it does imply remote RE investing has additional challenges and risks so virtually all new RE investors should start local.  


Good luck

According to NAR data from Nov 2021 an ADU in Denver added $170k. If an ADU addition in fact costs $300k+ to build, you are likely starting with over $100k of negative equity. There is no cash flow until the negative equity position is recovered. At that cost and rent point, it will take many years to recover the negative equity position.

https://www.nar.realtor/magazine/real-estate-news/study-adus...

Here is a list of why adding a single ADU in single family zoned areas in my CA market is typically a poor RE investment (some of these may not apply in Denver, especially I do not know the rent control rules in Denver):
1) The value added by the ADU addition is often significantly less than the cost of adding the ADU. Search the BP for ADU appraisals to encounter numerous examples. This creates a negative initial position. This negative position can consume years of cash flow to recover. Make sure you know the value the ADU will add to the property before building the ADU.
2) the financing on an ADU is typically far worse than for initial investment property acquisition or is often not leveraged by the ADU (HELOC, cash out refi, etc). Leverage magnifies return.
3) The effort involved in adding an ADU is comparable or larger than a rehab associated with a BRRRR. However if I do a BRRRR I can achieve infinite return by extracting all of my investment. Due to item 1, adding an ADU can require years to start achieving any return (once the accumulated cash flow recovers the initial negative position).
4) Adding an ADU is a slow process. It can take a year or more to complete an ADU. During this time you are not generating any return from the money invested in the ADU. This amounts to lost opportunity because if you had purchased RE, at the closing it can start producing return.
5) ADUs detract from the existing structure whether this is privacy, a garage, or just yard space.
6) this is related to number 1, but there are many more buyers looking to purchase homes for their family than there are RE investors looking to purchase small unit count properties. This may affect value or time required to sell.
7) Adding an ADU does not make the property a duplex. For example in many jurisdictions I can STR units in a duplex but cannot STR an ADU (some jurisdictions will let you STR if you owner occupy). Duplex have different zoning that may permit additional units. Duplex can always add additional units via the ADU laws.
8) Related to number 1, purchasing a property with an existing ADU is cheaper than buying a property and adding an ADU. Why add an ADU if it can be purchased cheaper?
9) adding multiple ADUs or adding an ADU to a quad looses F/F conventional financing. This reduces exit options and affects the value.
10) Small number of small units is the most expensive residential development there is. This implies residential units can be built at lower costs and provide better return than building a single ADU.
11) adding an ADU to SFH can make the SFH fall under rent control. In CA currently only MF properties are rent controlled. If the house is older than 15 years old and an ADU is added, it can become rent controlled. Rent control laws are market specific. Make sure you know the impact that adding an ADU will have on any rent control.
12) investors seldom include the land value in the overall ADU costs. The reality is the land has value.

good luck

My experience (not restricted to ADUs) is if the units are detached, it is a policy per detached unit and if they are attached it is one policy covering all attached units.  This has been the case with 3 separate insurers (3 out of 3), so I believe this is the standard process.  Note I do not claim it makes sense.  Detached units have significantly higher insurance costs than attached units.   

Furthermore, virtually every time the loan is purchased on a property with Multiple insurance policies, the insurance info does not accurately transfer to the buyer of the loan.   It virtually always requires us to manually participate in getting the correct insurance info to the new lender even though the old lender had it correct.   This seems to indicate that the lenders’ process is not typically set up for this situation.

I have long held the view that the property owner should receive some small compensation when their loan is sold.   At a very minimum the owners have to update their loan payment information (we set up new auto payment and update our records on the loan owner).  In many cases it requires interacting with the new owner of the loan because something failed to transfer correctly).   Most Banks share for a wire transfer which I 5minutes of effort.  

Good luck

 Something for you to ponder.

Initial cash flow has a poor correlation to long term cash flow.  This is because markets with the best initial cash flow typically have poor appreciation and rent growth outlooks.

However, long term cash flow typically has a tight coupling to appreciation because rent growth typically has a tight coupling to appreciation.  

The higher rent growth market will always eventually have the better cash flow.  It is basic math.

In my market the average rent per rent cafe is $2945 for 877’. The average in the year 2000 was $620.   Rent has increased $2325/month since the year 2000.  This is an average increase of $93/month for each of the 25 years.  It does not take much math skills to realize that without an extraction of value that the cash flow would be outstanding.  

Good luck

Rentometer is my favorite rent estimation tool but I dislike the 1.5 bathroom maximum.  I have 4 units with 3 bathrooms, roommates appreciate bathrooms.

With Rentometer pro you get a map of the comps and a brief listing of each comp.   I can quickly eliminate bad comps to improve the rent estimate.

I have Rentometer pro.   When I got it, there was a deal for being a BP Pro member.   To the best of my knowledge that deal still exists.

good luck