All Forum Posts by: Dan H.

Along the lines of Stealth Wealth...

We indicate to both tenants and contractors that the LLC is the owners of the units (our LLC). We are the Property Managers. We do not explicitly lie as we do not outright state that we are not the owners. We let them assume, because we refer to ourselves as the Property Managers, that we are not the owners.

Any requests must be run past the owners.  The owners are the cheap S**s.  We (the Property Managers) are on the tenants' and contractors' side.  We are working stiffs.

Rents are increased by the owners.  Sorry but the owners have decided to raise the rent.

The owners are the bad guys.  We are the working stiffs who manage the contractors, gardeners, take the complaints, have to deal with tenants and the contractors, etc.  

We drive decent vehicles (2009 Prius and 2010 4Runner) but not showy vehicles.  We are considering purchasing a Tesla Model S and a Land Cruiser but would not drive them to the units.

When I go to the properties it is usually in clothing for manual labor (old pants and an old T shirt).  My usual attire is newer jeans and a dress shirt and that is the most dressed up any of them have seen me (usually they see me in pants and T-shirt that is almost ready for the trash).

We are not the rich owners in the view of our tenants and contractors.   We are the hard working and fair Property Managers,

Stealth Wealth.  I like the term (rhymes).  I believe in it when it come to dealing with tenants and contractors.

"Hotel: noun an establishment providing accommodations and other services for travelers and tourists." How is an STR different? Seems to match the definition of a hotel exactly.

The landfill was an analogy which apparently was lost on at least one. No where did I say or imply that an STR was a landfill.

 No 💰 to be made in NV. 

Regarding: "No 💰 to be made in NV."

 Interesting to know. I'm making plenty in Phoenix. Perhaps it's because I only do Subject To, Wraps and Lease Options.

 We have made plenty in San Diego with just traditional buy n hold and fairly minor value adds.  Nothing special in what we do.  

I think it depends on how bad your existing duplex is in need of a rehab.  My own goal is to achieve 100% return on investment on rehab expenses (for every $1 invested in the rehab the value add is $2).  To obtain this, the units typically have to be in very high need of a rehab.  A little out dated will not return 100% unless it also has a lot of damage.  The reason I set the bar at 100% return on investment is because it is work to do a rehab.

Determine what sort of value add you can expect from the rehab and determine the type of rent increase you could expect.  Then determine if that return is worth the effort. 

You also did not indicate if you live in one of the duplex units.  If I chose the rehab route and lived in one of the units, I would live in the unit more in need of a rehab.  I would rehab that unit (the one I live in) and, after rehab, rent it at top of market price because it had just been rehabbed.  I would then move into the other unit and repeat.  Ideally the value add exceeds the cost by a significant amount (our goal is value add is 2 times the cost of the rehab) and results in a significant rent increase.

If the analysis shows that a rehab is not going to add much value add beyond the cost of the rehab I would use the money to purchase a different investment property.  Ideally one with good value add potential.

Rehabs should increase equity beyond the cost of rehab as well as raise the rents collected.  If the rehab accomplishes both of these, your equity increases and it places you in a more favorable situation for that retirement.

Good luck

My view is you are living in one of the best areas for BRRRR. I say this even though I have not successfully gotten all of my purchase expenses and rehab expenses out of a refinance. I typically get all of my purchase expense out and part of my rehab expenses out with the refinance. This is in part due to low appraisals often associated with refinance and in part due to the relatively low LTV on investor refinances.

Here is why San Diego is a great BRRRR location:

• The rehabs have a high rate of return.  We do not consider a rehab unless we are expecting grater than 100% return on the rehab cost.  We have achieved our projected return on each of our rehabs.  In low cost areas the return on a rehab is less because the overall value of the property is less.
• After the refinance you now have a rental. The ROI for San Diego buy n hold is verifiably one of the best in the nation. This is due to appreciation. Historically there has been outstanding property and rent appreciation. Going forward I am very confident of continued rent appreciation for at least the next few years.
• Low price markets are low price because historically their appreciation has been poor.  This is both the property and rent appreciation.  So after you rehab a unit, the unit is aging or the rehab lifespan is in motion.  This is true in all markets but in the low appreciation market at the rehab ages it is losing value.  In a high appreciation area, typically the market appreciation is greater than the depreciation of the rehab aging.

In San Diego, the rehab returns are great and historically the ROI on financed buy n hold is near the best in the nation.

In your plan, you will move from San Diego (at a financial cost as well as likely a lifestyle cost) to do BRRRR in an area that historically has not produced the ROI for buy n hold that San Diego has produced (verifiable fact) and is unlikely to have as great a return on the value add rehab as you could achieve in San Diego.

I suggest before you move, you attend some San Diego RE meetups.  Network with long time San Diego RE investors.  Discuss their level of success and compare it to the best you can expect from the low cost areas (i.e. mostly Midwest areas).

Good luck

 >An owner has a right to use his or her property in any way they choose as long is it does not harm the neighbors.

The statement is not accurate.  When a purchase is made it has many items conveyed in the purchase.  This can include things such as easements, mineral rights or the lack of mineral rights, and of course the zoning.  Zoning plays a large role in the value of the property.  Zoned residential has a traditional meaning that is being blurred with the advent of STRs.  It was never the intent of zoned residential to include STRs that function similar to hotels (I am referring to non-owner occupied STRs).  It is also unlikely that the zoning regulations/definitions would foresee the huge popularity of STRs to make it crystal clear that STRs are in functionality hotels.

The neighbors who have purchased in a residential zone, purchased with the expectation that they were in a residential zone and not a zone that would allow hotels or STRs.  They have the right to expect the zoning to be as they purchased.

It would be similar to purchasing residential but a landfill is placed next door ignoring the zoning (extreme case to make the point).

We have 2 units of STR but they are both in an area that is probably greater than 90% STR. I realize it was not always this way but it is the way it is now. Even though we own 2 STR units, I would not want a hotel built by my house and using a house as a non-owner occupied STR is basically using a house as a hotel.

We have 2 units of STR in San Diego (Mission Beach) but I still would not want an STR in my neighborhood. Am I a hypocrite? Possibly. I will say our 2 STRs have mostly been operated as STR since the last century and are in an area where most of the units are STR. Long term residents probably make up less than 10% of the unit count. Maybe 2 to 3% of the long-term pre-date our units being STR units.

There has been an attempt to regulate STR in San Diego. So far the STRs have been mostly unregulated here.

Because I would not desire non-owner occupied STR in my neighborhood (I think renting rooms out in your house STR is different than renting the entire house STR), I understand the desire to regulate the STRs. My hope is that any such regulation is done smartly and fair. I would think that an STR that has been an STR for ~20 years should be exempt from any regulation that would require converting it to LTR. Similarly in area where the virtually the entire area is STR should probably be excluded from any STR regulations.

This is definitely a topic I see both sides.  For those that think it is a property rights issue my view is that they are discounting the rights of people who purchased in a residential area to expect it to be a traditional residential area.  To me it is a zoning item.  When a property is purchased with a zoning the purchaser has an expectation.  if the zoning is not what you desire, purchase in an area with zoning that you do desire.  Do not try to indicate I own the property so I can do with it what I want.  The property was purchased with limits imposed by the zoning; you have what you purchased.

Have you run the numbers on this SFR in San Diego? The reason I ask is that San Diego SFR purchased at retail have negative cash flow. The investors who invest in San Diego SFR either are finding them below retail or anticipating rent or property appreciation (or most likely a combination of both). Historically San Diego does have a very long track record of both property and rent appreciation. In addition, the market dynamics make it seem like continued rent appreciation over the next few years is very likely. Long-term a San Diego SFR has a good chance to be a good investment but the smart RE investors are not purchasing them at retail and many of them are taking a loss in the short-term.

Your brother-in-law likely is not so dire to sell to be willing to take significantly below retail price.  He may be willing to reduce the price by RE agent costs that he would incur with a traditional sale but a bigger discount than that would basically be a gift.

Someone that does not have the capital to purchase a SFR in San Diego I would think is unlikely to have the capital to supplement negative cash flow from owning the SFR. In addition, you would be an OOS investor so you would need a PM which would incur costs that would be avoided if investing local.

I am a big fan of San Diego RE but I am a bigger fan of investing local.  Your profile indicates you are not a newbie (your unit count is very close to my unit number) so you may have the experience to invest OOS successfully but I question if you have the capital for this investment and if you have run the numbers to realize how much you will be initially supplementing this investment.

Good luck

 @Matt Pich-Maxon

I do not have the expertise to provide a good answer to the OP but I second what Jo-Ann indicates.  I am a big fan of the peace of mind that comes from insurance and in particular an umbrella coverage (I am not an insurance sales person).  We carry a substantial umbrella coverage.  I know that if anything happens, I will have the insurance company taking on the fight at they have a significant vested interest. 

The peace of mind is worth the cost but the confidence that it provides also has value.  For example, I have successfully resisted bogus Emotional Support Animals multiple times.  Having the umbrella coverage provides additional confidence in these types of scenarios. 

I suspect that it is close to annually that someone has threatened to sue us.   I have yet to be sued.  it is in part because the tenants typically do not have any case and are hoping that the threat of law suit will result in them getting their way.  But it may also be in part because I give the appearance of go-for-it.  Enough threats toughens the skin.  Having confidence that the insurance company will pay out first means I do not have to be concerned about frivolous law suit threats.  Threatening to sue me for something frivolous will get the tenant on my undesired list and has yet to result in an actual suit.  My undesired tenants get rent rates above market rate.  They usually get the hint and move elsewhere and do not get a glowing landlord recommendation (off the record - Indicate they threatened to sue for something frivolous and see how many landlords desire them as tenants).

I love the very low vacancy rate of my market.  Poor tenants have difficulty finding places to rent.   Poor tenants are easy to replace; it is rare if my units are not rented in a 1 hour open house.

I know just a bit about the micro inverters on the panels but do not know how it changes the primary inverter.

I was aware the prices had come down significantly.  When I purchased my system: 1) the prices were much higher 2) CA had a big tax rebate 3) the fed tax rebate was limited to I believe $2k (this limit was removed in the great recession).   So I got a big state tax rebate but smaller fed rebate and higher price.  

I suspect my system would barely have paid itself off, if not for subsidies (mostly the CA tax rebate), in the life of the system but with the lower cost now I think most systems with good orientation in sunny CA should be able to pay for themselves at less than 50% of lifespan (just a rough guess).

I was unaware that the inverters now had standard 20 year warrantees but they are proven technology that should be reliable.