All Forum Posts by: Dan H.

I recommend all RE investors start local self-managed before ever considering OOS.  This is because the learning that occurs by self managing a property educates you to what it takes to manage a property.  In addition your local knowledge beats your OOS knowledge.  Also OOS requires building a trusted, competent team which is more likely to be a success when you have acquired knowledge.

Also you indicate you have quite a bit of equity.  I suspect it is equity from appreciation.  if it is, you have a built in savings from Prop 13.

As for the HOA president, see if others share your view and if so elect someone else. I suspect it is a thankless position but someone should be willing to fill the role for a while.

My final item is trying to time the market is difficult.  @Michael Swann posted that he thought San Diego was at the top of the market in terms of appreciation a couple of years ago when he started exchanging his properties to OOS.  Well last year San Diego was #3 large city in appreciation in the US (just behind Las Vegas which was way behind Seattle).  Without the San Diego appreciation he would not have the properties to 1031 exchange into OOS MF RE.  In the last 2 years he missed ~20% of San Diego appreciation.  That ~20% appreciation would not have required selling, buying, increasing cash flow (most of his OOS purchases are MF that value increases as cash flow increases).  Profit due to market and rent appreciation is a fairly passive gain compared to his approach.  I realize this is looking at it with hindsight but I am not indicating this because it appeared to not be an OK move at the time as much as to indicate how difficult it is to time the market.  It could be years before San Diego has a noticeable RE depreciation cycle.   If you plan on waiting you could look like a genius, a fool, or somewhere in between.  Also Michael Swan has some experience managing/owning local properties but has made a few mistakes going OOS (i.e. is selling off or has sold off some of his OOS purchases).  It is not illogical to think someone with less experience would encounter more mistakes.

Good luck

Your rate is 1/8% better than I got in Oct on a 0 point 75% LTV loan so I consider your loan to be a good loan if you actually get these terms.

Good luck

I like that you posted such thorough references.  I will be saving the reference.  However, I am still willing to battle it in cases where 1) my insurance is risk 2) It is a hardship on my other tenants and may be willing to battle it for violation of lease (depends on the tenant and the situation). 

About half my units allow dogs and I have about a third of my units with dogs.  These are properties that have means to have a dog such as a yard.  The units I list as no dogs are listed that way for a reason.  I have a dog and 2 cats and pretty much have always had dogs and cats so I like animals (we also have a plethora of additional animals: snakes, lizards, fish, frog, tortoise, millipedes, etc. : we are almost a zoo).

The tenant that I made give up their "Emotional Support Animal" violated the lease as soon as they had a dog stay at the unit without notifying us.  Like the OP it was a pit bull that could present problems with our insurance.  The way I see it the tenant had 3 choices 1) get rid of the dog 2) give up the unit 3) fight it in the legal system.  They made the right choice to give up their "Emotional Support Animal". 

As indicated I have had two tenants/potential tenants threaten legal action.  Neither of them have followed through but I slightly look forward to the day (I would look more forward to the day if I had time for it). 

I would have liked to have the recent one with the pit bull try legal action as 1) they violated their lease 2) it was a pit bull 3) the other tenant has children that play daily in the common area things like soccer, kick ball etc.  4) The dog was not well behaved.   The other tenants came up to me afterwards thanking me for making the tenant get rid of the dog.  They were afraid of it.  The dog lunged and barked at everyone.  The boy who typically took the dog onto the common area to go to the bathroom could barely keep it under controlled when leashed.  I suspect anyone seeing that dog and its behavior would have agreed that I had just cause to make the tenant either give up the dog or the unit.  As indicated I would have welcomed the legal action if it were not for the time drain but the tenant wisely decided that they really did not need the "emotional support animal".

If by some chance that I did lose the legal case, I would have made sure that their rent was always at the top of market rent while my usual MO is to allow existing tenants rents to get below market rent.  I rent at market but do not raise the rent as soon as they are below market. So all my desired long term tenants are below market rent; I have one tenant that has rent set at market because they are not desired but not bad enough to warrant me not extending their lease (they are on month to month but soon will have length of stay that will require me to provide a 2 month notice).

So the tenant made the right choice.  A choice that allows them to stay on my desired tenant list.  They have a good home with a nice common area that they may only need to move out of if/when they outgrow it.  As long as they stay on my desired tenant list, their rent will become and stay below market rent.

Of my rentals, my ex-Home is my worse performing property.   This is even with a prop 13 benefit that results in a ~$3k/year savings.  

My house was purchased to be a good home for my family. It was not purchased to be a good RE investment property. It is a SFR that was purchased at approximately retail price without any calculations on its cash flow metrics.

It does cash flow but primarily because the equity position is high and the prop 13 savings. I think a SFR purchased at retail in the last 2 years would have negative cash flow at least for a while.

Good luck

I wanted to add that we have accepted an ESA at a property that was a no animal property.  

The person is on disability with a disability that is visible but not physically limiting.  He asked about getting an ESA and had a dog in mind that was small (not a putt bull).  

We wanted to allow him to have his pet but the property was listed as no animals because it has a common yard with the other unit of the duplex.  So we discussed it with the other tenants who indicated they had no issues. 

On our properties that we allow animals we charge pet rent and collect a pet deposit.  We chose not to charge pet rent and I do not remember if we collected a rent deposit.  

This represents the proper way for a tenant to request a disability animal.  

I am not a lawyer but I question how many of the above posters who indicate that you must accept an emotional support animal have read the ADA rules.  

I have twice been threatened with legal action.  Neither occurred.  

Again I am not a lawyer but my view of the ADA rules is that they do not include ESA animals, cats (or any animal other than dogs and miniature horses) and that most posters have not looked into what ADA states.  

Normally I do not threaten eviction and would rather find alternate methods of getting rid of tenants that I do not desire.   My usual is to raise rent above market price and let the tenant provide notice.  However if they lie on their application and bring in a dog against lease terms I would consider eviction for cause as they did not abide by the terms of the lease.  

A couple of months ago I experienced the same thing.   After a discussion, the tenant offered to get rid of her ESA and I took her up on the offer and indicated that a future breaking of the lease would result in eviction. 

I suggest you read up on what is protected regardless of how you choose to proceed.  I also view nothing in the ADA allows not following lease terms and that breaking lease terms is grounds for eviction.  

But you need to decide how confrontational you want to be with these tenants.  

Good luck

I agree with @Oren K. that maintenance/cap expense is not primarily a function of the rent amount or purchase price but more a function of things like number of bathrooms, quality of interior, square footage, attached vs detached, type of exterior (siding), unit requires HVAC vs just furnace, etc.  

@Justin R. and I recently discussed cap expense versus maintenance.  I think his view is cap expense are items to be depreciated.  It does provide a clean definition.  Justin is very good at having well defined terminology.  

I group cap expense and maintenance estimates because I realize that it is hard enough to forecast one estimate or the other estimate.  Combining them means I only need to try to forecast a single number.   The actual expense will dictate if the item needs to be depreciated.  

Justin and I each recently posted our expense estimates on recent purchases on a different thread (something like is anyone cash flowing on San Diego rental properties).  We both by happenstance posted on a duplex with 3/1 and 2/1 configuration.  My combined maintenance/cap expense number was very close to Justin’s separated estimates (cap expense, maintenance, yard maintenance) .   My maintenance/cap expense estimate on this duplex was $275 (3/1/1) and $250 (2/1/1) for a total of $525.   For comparison the rent is $3200/month and purchase was $442k.  Note in areas with cheaper rents the cap expense/maintenance cost versus the rent would be worse.

On a related subject...  Last week we experienced our third slab leak in the last 4 years.   It appears the plumber failed to fix the issue on his first try (~3 man days of labor).  Concrete Slabs from the 1960s and 1970s are approaching end of life on the copper plumbing.   Bypass the leak does nothing to make the remaining slab plumbing any newer.   Consider whether the entire unit should be replumbed.   I forecast what I believe are realistic cap expense/maintenance estimates.   When expenses like slab leaks occur I take solace in knowing that I have allocated for these expenditures.

Good luck

He is not the cheapest and does not provide cost estimates but we use Jason at nation wide inspections.  He is very thorough.  His reports are very thorough.  If he sees issues that require further expertise such as foundation issues he notes it and recommends you have additional inspections.  

We will likely use Jason for life.  We once negotiated 1/7 off of a property based on his inspection report.  That savings alone warrants using him forever.  

We used him last month and he got the report back to us real fast.  This is not always the case but likely indicates he is not super busy right now.  Either that or he provides us higher priority service.  

If you desire you can indicate I referred him to you. 

One thing is that he is so thorough that the reports often looks like the property is falling down.  This is because he is very thorough.  Often a decent Handyman can address virtually all or the issues in a day or two.  Realize this.  Concentrate on large findings that should result in price reduction or a credit at closing.  

Good luck

Similar to @Rob Brown we own a duplex in Mission Beach (San Diego) one block from the ocean and 2 blocks north of Belmont Park. We have owned it since 1999 and it has done well as a STR. Its annual STR rent is likely more than it would cost to rebuild the duplex (Peak rent is ~$350/unit per day = $700/day for the duplex, Minimum rent is $80/day per unit - it is rented virtually every day).

The fear is San Diego STR regulations. I would like to think that an STR from the last century would be grandfathered in but that is not guaranteed. So any purchase in San Diego with intent to STR should take into account potential STR regulations into any purchasing decision.

@Amanda Fabian seeing that you already own your place, I think STR could provide some additional income. We use a PM to minimize our associated work so STR is work with the tenant turn overs but I think the additional income will justify the work.

Good luck

If I could be all smartly invested in San Diego RE I would go all in but I invest in San Diego RE then pull money out of the RE place it in mutual funds heavily slanted in stocks waiting for another smart San Diego purchase.  Finding smart San Diego RE purchases in the past few years has not been able to keep up with what is going into my mutual funds.

So at this point I am maybe 40% RE, 40% stock (domestic and international), 3% bonds and cash, and 7% mineral rights.  The RE and mineral rights provide a monthly cash flow which is nice.

I do realize it is a very aggressive allocation and not for everyone.  Especially because I am in my early 50s virtually everyone would say it is too aggressive.  However, it has worked very well for our family.  I do not have to work, my wife has not worked this century other than raising a child (which is work of a different category) and managing our RE (which is work but usually very flexible).

We have owned RE thorough both the mid 1990s downturn and the 2008 downturn.  I look at the downturns as buying opportunities that I did not fully take advantage of last time.  They do not scare me.