All Forum Posts by: Dan H.

@Dulce Beltran I think the flipper had to be very experienced with good teams in place and many efficiencies including his own realtor. I could not do that flip and expect to make any money. The purchase was at 85% ARV. I do not have the teams in place or the efficiencies. My little rehabs take almost 2 months.

So either the flipper was very good or he did not make much money.  I suspect I would lose money if I tried that flip.

However, finding 70% of ARV purchases is difficult and getting more difficult. I am in escrow on a buy and hold in San Diego county that is ~$30K below current value. I suspect the purchase is at ~80% of ARV but I am not flipping it so I do not have to be that precise on expected ARV. Could I flip this purchase and make a profit? I think I would not be making as much of a profit as I would desire but would make a small profit. Part of the issue with this REI is that it is not so thrashed that all upgrades/rehab would return full investment. If it was more thrashed I could possibly purchase for less than 80% ARV but those are difficult to find and purchase.

So if I were flipping I need to purchase for significantly less than 80% ARV to make the type of profit I would desire. If I could find something at 70% ARV that would definitely permit a decent profit. However, for buy n hold instant equity is tough to pass up and 80% of ARV is pretty good. I am happy with the pending purchase.

@Ann-Marie Vargas Sorry about your grandfather's passing. Congrats on entering into REI.

As for Meetups. Meetup.com has numberous REI meetup groups. Search for real estate. Pick the one that is most convenient. If it is not what you are looking for then go to the next one on the list. I suspect you will find one that works for you.

Some San Diego BP members (@Kevin Fox, @Justin R., etc) have an on-site meetup close to monthly.  I have been to a few (maybe 5 or 6) and have found each to be worth my time.  I learn something and enjoy the network opportunity.  I have found most of the best networking happens at the end.

Good luck

@Jeff Greenberg implies meetup.com has Meetups related to RE investing.  Just perform a search and many will come up.  Start with the most convenient and if they are not what you are looking for go down the list. 

In addition some San Diego BP members hold a meetup on a job site around monthly (a little less often in the holiday season). @Kevin Fox @Justin R.  I have attended a few of these and have found them to be worth my time.  

Good luck

I have made offers using all 3 of the methods you listed but most of my purchases have come from MLS.

The numbers can make sense in certain areas with certain purchases. You need to find those areas and purchases. I am in escrow on a REI currently and made another offer in the last month (that offer was accepted but the owner had issues with the inspections I desired so we used our escape - the unit has a lot of deferred maintenance/cap expense and I needed to have the inspections or a much lower purchase price).

I find CA RE investors investing in Texas an interesting choice as they pay income taxes here and property taxes there.  Foundations also can be an issue in Texas.  How long have you been investing in Texas? 

I have purchased near market highs and have experienced RE depreciation in the short-term but those purchases now look like I was a genius purchasing even though the purchases were near market high. In 1993 I purchased a SFR at $167k. It fell to low $140s. Today it is worth ~$575k. In 2004 I purchased a SFR FOR $741k. It fell to ~$620k. Today it is worth ~$950k. The only people to have lost money on San Diego buy n hold RE in the last 50 years are those that sold at the wrong time typically because they were over leveraged.

Good luck

It was not clear to me that you still owned the Cardiff condo. On the positive your appreciation is through the roof and you have a significant prop 13 benefit. The questions are how does the prop 13 benefit compare to the lost depreciation write off and is it a good rental. In general I would think that it is a rare condo in San Diego county that provides decent returns relative to its value using LTR. Have you considered turning over to PM that would run it as an STR? My family has a duplex STR that uses a PM; it has been a homerun. The annual rent likely exceeds what it would cost to build the units. The PM gets paid well but there is no way we could handle the units as STR without a PM.

Basically I am missing too much info to provide a definitive answer but hopefully I have provided some things for you to consider.  I know that when my units loose their depreciation write-off they will need to be evaluated if they are still the best investment option (actually this evaluation is on-going but a significant parameter has changed after the depreciation can not be written off). 

If you decide to keep it and need cash out there may be reverse mortgage, refinance, and ELOC (non-owner occupied ELOC are not super easy to find) options. 

Good luck

The first RE Purchase is the hardest. This is for multiple reasons but confidence is near the top of the list. In addition you have less contacts and less credibility than more seasoned investors. If someone has a RE for sale that is a good value in current market do you think they will offer it to the newby who has zero REI purchases or someone that has completed many REI purchases?

I will say it gets easier after completing some REI purchases. So it is important to start the journey into REI to open further opportunities, to increase your knowledge, and most importantly to get off the sidelines.

Good luck

The San Diego property is producing good for San Diego but is at risk of STR regulations. in addition STR has additional effort or cost (tenant turnover). Do you use a PM? Do you turn it over yourself? You show no PM costs but you called it money income so that can be post PM expense. We self manage except for our 2 STR units. I can find LTR with virtually the same rent rent to value numbers. However cost to sell will be close to 10%. I lean towards selling it.

Orlando is out of state.  You can do better than this RE local.  You can get better cash flow in many locales (virtually entire Midwest).   I am not a fan of local investors buying OOS especially before they are seasoned RE investors.  I cannot see any reason to keep this RE unless you have an emotional attachment.  I would sell it. 

It does seem that way but a couple/few years ago I populated spreadsheets on 3 representative units that I owned.  I put in cost of replacement and a min and max expected lifespan.  I used the midpoint of the lifespans.  My units came in from just a bit below $250 to $300/month estimated cap expense.  The kitchens has an over $40 month cap expense (going from memory I think it was just short of $50/month).  I posted my results on BP San Diego forum for comment.  Mostly I got that my numbers were higher than people expected and that most of the people replying had never gone through the exercise.   The few that had performed similar exercise typically were on condo boards and had to do this exercise for some reason and those people were not surprised by my numbers.

So I believe my numbers to be as accurate as I can forecast but I have had some surprises such as I still have a working 1956 furnace (In San Diego where this unit is located the furnace gets used less than 30 days a year).  I also just replaced a water heater from the late 1980s (it lasted >25 years).  Both are/were above my maximum expected life but then to counter I have also had items for one reason or another that did not make my minimum expected life.  Maybe it balances.

CA has recent water heater regulations that resulted in cost to code using licensed plumber of $1200 for a decent water heater and installation.  I could get a handyman to do it for much less matching current install (i.e. not to current regulations).  I use 10 to 15 years for water heater lifespan so $8/month for its cap expense when installed to code using a licensed plumber.

Flooring, paint (interior and exterior), appliances, roof, fences/walls, windows, furnace/HVAC, hardscape, siding, foundations, kitchens (cabinets, counters, sinks, etc.) , bathrooms all have lifespans and all add up.

 I have seen the $0 cap expense new building approach used before but I do not really understand it as the lifespan on everything starts depleting as soon as installed.  By not taking into account the cap expense from the moment the lifespan starts you will be back loading the cap expense and have not allocated the incoming income to address it.  So what you will have is a very good on paper profit after rehab but a terrible profit basis as the items get older and need replacing (because the costs were not evenly distributed).  It presents an optimistic cash flow projection that can cause issues later.  If I were projecting profit on this RE in my market I would subtract $900/month for my cap expense estimate which would still leave you a cash flow of $2798 not including principle pay down (substantial on this size loan plus the down (second) also has interest (and principle pay down) on it).

This one issue aside, it looks like a fun and profitable project.

Good luck

 I personally do not think the margin is there for a flip.  I suspect the margin is not there for a buy and hold but I would need to know what the park rental fee is to determine that.  In general, MH do not appreciate.  Most of the rent appreciation goes to the MH park fee (i.e. the land).  So in some ways it is similar to long term buy n hold in an area with no appreciation (i.e. even if it has cash flow today in real terms it will only go down (taking into account inflation)).

@Justin R. last year did a successful flip of a mobile home in San Diego.  It was larger and in a nice location (nice for mobile homes) with a nice (real nice for MH) lot.  You can search for his summary post.  He made money and learned some things but I do not know if he would do it again (maybe he'll respond).  I suspect that he can tell you more about the process than most others seeing that he did it recently in a nearby market to your target property.

Good luck