All Forum Posts by: Dan H.

We require our tenants to have rental insurance.  Their insurance would cover them temporarily living in a hotel while the work is performed.  

I realize this does not help for this case but it can help for next time.  

Also units from the 1960s and 1970s are nearing end of life of the plumbing placed in the concrete slab.  How do i know this?   Seven units impacted by slab leaks in the last few years.  

By the way if the cost is great you can claim it against your insurance.  Some leaks warrant claiming against insurance but most will not.  We had one that total cost (including damaged flooring) was above $10k so we claimed it against insurance. 

Your definition is as indicated by ADA but HUD has a much lower standard. As a landlord your criteria is the HUD criteria which basically does not include any training requirement.

So the restaurant can deny access to an emotional support animal (an animal that in no way has been trained to help a disabled person)but a landlord is not allowed to deny the access to the support animal.

What I am seeing is that people can pay some money to get an animal classified as a support animal even if the person has no need for a support animal.  This is making it tough on landlords and is not fair to those with real disabilities that have trained support animals.

I have been threatened to be sued twice by tenants that wanted their bogus support animals in my no dog units.  Both times I indicated I would see them in court and both times they decided it was not worth the fight or knew their animals were bogus support animals and that they did not have a need for the animal beyond it being a pet.

I have dog units.  My no dog units have rationale for not allowing dogs.  I am not anti-dog; I own a dog and have always had a dog.  I am anti tenants claiming their pets are support/service animals.

Maybe I do not do the BRRRR right also...

I have done the BRRRR process a few times and I have never got all of my initial investment and all of my rehab costs even when the BRRRR has been assisted by market appreciation.

The hurdles:

• Low appraisals for refinancing at least in San Diego
• Typically limited to 75% or lower LTV
• Costs of San Diego rehabs

I typically get my initial purchase costs back and some of the rehab costs.  However, my post rehab equity typically has gone up significantly, I can now rent the newly rehabbed unit at top of market rent, and I now have some of the investment to leverage it on a different investment.

Condos purchased at retail in San Diego at such high LTV (95% LTV) do not have initial positive cash flow and typically have negative cash flow. If you are unwilling to supplement the condo until rents appreciate enough to provide positive cash flow then the decision is obvious.

if however you are willing to supplement the condo until the rent appreciation creates positive cash flow there is the advantage of getting in sooner. San Diego RE appreciation has been outstanding for the last 6 or 7 years. Redfin says my market appreciated 17.5% last year. Note at 5% down and maybe 5% closing you have 10% of cost. A 17.5% appreciation means an ROI due to appreciation of far over 100% then subtract off the negative cash flow and even with huge negative cash flow you still likely have an ROI of over 50%. Note, however the appreciation/depreciation cycles goes in waves. Maybe we are at the end of the appreciation cycle. Anyone can have an opinion on this but no one really knows.

To put numbers behind the Condo lets assume you purchase a $250K condo in my market with a total cost (down payment and any closing costs) of 10% so $25K at the beginning of 2017. With the 17.5% appreciation that condo was worth $293.75K at the beginning of 2018. If you had to supplement the unit to the extent of $250/month (I would consider this fairly low suppplement for a 95% LTV) you have $3K out of pocket above incoming. $293.75K - $250K - $3K = $40.75K. ROI on the first year 163%.

What is the right choice?  it depends on your risk tolerance (will properties continue to appreciate in the near term) and are you willing to supplement a negative cash flow property?

Good luck

I do not know how you are getting an ROI of only 3 to 4% in San Diego. Where most of my units are located the lowest appreciation year in the last 6 has been 6% and appreciation in the last year was 17.5% according to Redfin. If I financed at 25% down and was cash neutral my ROI for the year was 70%. If I purchased at 20% down it was 87.5%. In the last 6 years my annual ROI has probably exceeded 50% annually.

Verified fact that San Diego has close to the top ROI for financed buy and hold RE in the nation. San Diego RE has been very good to my family.

I do share your frustration on this pet issue.  I have run into support animals that are likely bogus a few times and so far have been successful fending them off but I realize I take on some risk doing so.

If you do not have umbrella policy get one and get one with enough cover that you are comfortable for situations like this.  I realize there are other ways to get asset protection but an umbrella coverage has some advantages including the insurance has a big stake in any legal action, you are protected to the level of the insurance so no worries, and there is no need to try to maintain separation of funds.

LLC will cost $800/annually tax, can be pierced if there in not good separation of assets, likely will not spare you from being named individually in any law suit, and there in no other significant stake holder to assist in the legal battle.

Good luck

When was the last time you heard of a poodle killing someone?  Seriously hurting someone?  Pitt Bulls, it happens way too often.  I have no issue with big dogs in my units that allow dogs but they cannot pose a high risk.  Also your bite statistics on the poodles does not match the last stats I saw on dog attacks by breed but I have not looked it up in few years.

I am not asking the tenant to give up a family member.  I am making them rent somewhere else.  As soon as they chose a pitt bull as a pet they limited their housing choices.  That is a decision they made.

In this case the current insurance will not cover the dog.  That is not a landlord decision but the decision of the insurance carrier.  There is no way I am switching insurance to cover a pitt bull.  I have already indicated that we have been threatened with law suit before over the dog "support animal" item.   So far the tenant that threatens to sue has always went away without following through with their threat of suit.

By the way I have units that allow dogs and units that do not.  Each unit that does not allow a dog I have rationale for the decision and the rationale is not something like I do not want dogs.  The rationale is stuff like shared yard or yard that is all pavers.  I have at least 5 units that have dogs and at least 3 units without dogs are not dog free units by lease (i.e. the tenants could choose to get a dog and pay the additional deposit and pet rent).  One unit that has a dog was a dog free unit but the tenant has an obvious case for a support animal (versus a bogus case) and he was up front and contacted us prior to getting the dog.  We told him at that time it was a dog free unit due to a single shared yard but if the other tenants were OK with the dog then all was good.  The other tenants, similar to us, knew this was not a support animal scam and were OK with the dog if the owner cleaned up after the dog immediately.  Both sets of tenants still are living there.

I have a large dog (lab that is over 100 lbs) and have had in the past Goldens and a King Shepherd (150 lbs of virtually no fat).   So I do not have issues with dogs just because they are large.

These service animals are sometimes a scam and it irks me.  The last issue we had with a dog the tenant brought the animal into a no animal unit without permission.  When caught they claimed it was a support animal.  We told them we did not care and that they broke the lease (lease clearly states we are to be informed prior to any dog staying at the property).  We indicated we could evict them for the broken lease.  She denied we had that right but she got rid of the dog.  The same tenant tried to claim we did not have the right to not rent to smokers.  It ended similarly in that we indicated smoking is not a protected class and we would not went to a smoker.  She said she would look into it and we never heard about it again.

I think this case of a pitt bull that is not a service animal has no merit and the threat of suit will not result in a suit (no legit lawyer would want this case). If it was a service animal then there is the whole issue of HUD definition of service animal versus ADA definition of service animal as well as the whole issue of bogus service animals. My interpretation of the HUD guidance is that it does not require a support animal to need any specialized training. ADA clearly indicates that it must have specialized training and that cats do not qualify. I think the HUD guidance is a part of the problem; makes it too easy to have illegitimate support animals.

I am not an attorney but my family and I have been landlords in San Diego for many year (too many years).

There is no way you lose this case if the animal is not a service animal. A landlord can choose to accept or deny any animal that is not a service animal. Unfortunately HUD's definition of a service animal is much lower than ADA's definition but I have threaten to fight this inconsistency on a couple of occasions and both times the tenant backed down (We never went to court).

What sort of asset protection do you have in place?   Do you have an umbrella policy?  Is the umbrella policy with the same insurance that insures the property?

Unfortunately I would not take this tenant because 1) they are threatening to sue without merit 2) Your insurance does not take Pit Bulls.  However, this could result in a law suit which even though you will not lose and you could possibly collect your expense would be a pain in the butt.

In addition, I would fire the PM for cause and not worry about breaking the contract 1) PM has displayed provable incompetence 2) PM has not followed your direction which is grounds for immediate termination 3) PM has already displayed they are afraid to get their hands dirty in a legal battle and therefore are very unlikely to sue you because you have a good case for firing them and if they are afraid of a meritless lawsuit against them they certainly are not going to initiate their own losing law suit.

Note if the dog is a service animal then the merits of the case are tougher. It is very easy to get an animal certified to the level of HUD definition as a service animal. There are places that will certify emotional support animals for a very small fee. I believe it is illegal in CA to claim an animal is a support animal when it is not but I have never seen any enforcement.

Good luck

I find it interesting that 30-35 days on market on average is a 9.  In the last 5 years I think I have had one unit that took as long as 30 days to fill.  I normally have it filled in a 1 hour open house, on a rare occasion it takes two one hour open houses.  I have had 2 vacancies filled in the last couple of years by contacting people on a waitlist.  More than two open houses I think has happened only 1 or 2 times in the last 5 years.

It just shows how there are differing perspectives based on history.  Going from our current vacancy rate to a rate that takes 30 days to fill a vacancy would warrant a low score because of what I am used to.  It is not that 30 days is long, it is just much longer than I am used to.

It is one of the reasons that the scores provided may not accurately reflect reality.  Add in the bias toward their own RE market and the numbers become virtually useless unless provided with justification.

My scores for San Diego:

• Growth rate: 8 (13th fastest growing city according to Forbes https://www.forbes.com/pictures/mhj45mhlf/13-san-diego-ca/#1ab8ca6f6626).  I would give the top 10 cities a 9.
• Job growth: 8 (unemployment rate of 3.5% versus 4.4% national average http://www.trbas.com/media/media/acrobat/2018-03/69948872607840-23135441.pdf.  20% better than national average.  If there were more jobs they would have to go unfilled as there are not employees to fill the openings and not the housing to accommodate more potential employees (see vacancy rate).
• vacancy rate: 9 (vacancy rate of 3.2% http://apartmentrealtygroup.net/wp-content/uploads/2014/10/Q1-2018-San-Diego-Multifamily-Snapshot-Report-Apartment-Realty-Group.pdf I suspect that no city larger than San Diego has a significantly lower vacancy rate.

There is not a straight forward answer to this because I have been investing almost my entire working life (started with 401K), so I have been investing ~28 years.  However, during the Great Recession my net worth was maybe 1/12th of what it is today (I already owned a rental and the home I was living in and my equity in both went from a significant amount to hardly any equity but I suspect neither property was upside down but close and of course stocks were way down (everything was way down)).  Prior to the Great Recession my net worth probably was close to 1/5th of what it is today.

So while I have investing for many years (~28 years) most of my net worth has been accumulated in the last 7 years. RE has done well. Stocks have done well. Basically in the last ~10 years it would have been difficult to have invested in something with poor returns (a poor investment is one that did not produce above 15% ROI). Hopefully people realize this has not always been the case.

The greatest value of that early investing/saving is that it provided me the means to jump in somewhat aggressive during the recovery from the great recession.  If I had not done the early investing/saving I would not have been in as good a position to benefit from the recovery.  So while my net worth in 2010 was not much compared to my net worth today, it had a critical role in creating the current net worth.  From 2012 through 2017 we acquired at least one small San Diego multiplex per year (San Diego RE is not cheap) excluding 2016 (we made offers in 2016 but did not close on any).  Lending criteria was strict in the Great Recession.  It helped to have assets/net worth and a great credit score.  If I had started from $0 in 2012 it would have been difficult to achieve the same net worth.

As indicated the answer is not as simple as I started with $0 dollars in 2010 and expect to retire without concern for money in 2020.

Good luck

Similar to my goal: $10M net worth with most of it bringing in more money (i.e. investment - The equity in the home I live in is not bringing in any income so not all parts of the $10M net worth have equal value to retirement).  We are currently at greater than 5 digits cash flow/month not including investment returns from appreciation of RE or stocks.

Current plan is retire summer of 2020.  Maybe start with a PCT hike (~2700 miles) with my son if I can get in good enough shape and he wants me to go (he seems to be going regardless - he will be 17 years old).