All Forum Posts by: Dan H.

@Oliver Fang research cap expenses. I suspect you need a rent of greater than $3k to have real projected cash flow going with the 5 ARM which also carries the highest risk. If you rent for $3000 to $3200 your projected actual cash flow would be no greater than $200/month assuming my cap expense numbers are somewhat accurate. I project cap expense on that size unit at >$400/month. Then add vacancies and maintenance. I think if you self manage maybe $250/month (5% vacancy at $3k rent=$150 then $100/month maintenance).

I am also surprised at the rent numbers being as high as those indicated in this post but Mira Mesa is not my area of expertise.  In Escondido that size rental would not be getting as high rent as $3k/month.  Maybe Mira Mesa has higher rents but make sure you do your rent research to know what market rent is.  

If you purchase this property your profit will likely have to be in appreciation.  By your description there is very little opportunity for forced appreciation (replacing carpets with wood floors is not going to result in much, if any, forced appreciation).  So your appreciation will be based on market property and rent appreciation. 

I am a bit surprised that experienced investors have not posted on the numbers. I would not choose the 5 ARM (like all the other posters I would go fixed 30) which means this property would result in negative projected cash flow at my financing choice.

I do not want to discourage you but are you sure this is the RE investment you are looking for?   The numbers seem not good when using the safe financing options.

One final item is to look at composite flooring when considering the wood flooring.  Some look very nice and are very low maintenance and hold up great. A lot of rentals are going to this flooring because of its low maintenance, the low cost of installation, and it looks good to great.  

Good luck

@John Dunn

I recently took cash out at 70% LTV on 2 duplexes. The loans closed in Jan which means they started last year. My rates were what your loan are currently at.

I did have issues with one appraisal but that is a separate post and a separate issue. 

My point is your loans are basically in-line with what I was able to get closing a month ago which was noticeably higher than rates from 4 months ago.  So your rates are not so low that you are giving up much in terms of rates (if giving up anything).

Good luck

@Tanner Verhoeks

It is my belief that most homes purchased to live in rather than as a RE investment do not make good rentals.  I have one of my ex-homes in my rentals (located in Claremont) and it is my worst performing rental by far.  It is worth ~$525K and rents for $2100.  It is slightly below market on the rent; market may be $2250 (it is a 3/2 with nice size yard and 2 car garage in good condition).  For comparison my second worse performing property is worth ~$430K and rents for $2700 and market rent is likely $2900.

I also think the acreage will be a hassle as a rental as it is tough to find tenants that will properly maintain large yards.

I think the rural location will not help finding renters or getting a good rent and the size of the unit and property will mean high cap expenses (my estimate would be >$400/month cap expense).

The reason your home does not work well as a rental is because you purchased the property to be a good home and not a good rental property.  Versus purchasing a property because it makes a good rental.

So I suspect your belief to sell your home rather than use it as a rental is likely the correct approach but I did not follow myself when I was starting out.

Good luck

Last Thursday I looked at a potential flip in Escondido at lunch and that had been on the market just one day. It was on the market at ~$300k with an ARV of close to $500k. There were already 5 all cash offers and the property looked like it was having an open house as there were 4 or 5 investors looking at the property including one from Temecula. I suspect the unit will sell for significantly above asking price.

That is the current market place in San Diego.  Finding a deal takes work.  Your completion is experienced and often have teams looking for those deals.  They often have cash for all cash offers.  They have experience.  They can spend many hours working title issues knowing those hours are at risk if the title cannot be cleared.  

I receive offers to buy properties almost daily.  Mailers in this environment are likely not going to be very successful. 

There are already many I buy houses signs.  

I do not want to be discouraging but I also want to be clear that finding deals in this climate is a lot of work.  This is not to indicate it is impossible.  If you work hard you can find a deal.  I would suggest driving for houses with a target mailing to only properties that you identify via your drive for houses.  

Good luck

I think you can find flip opportunities in Chula Vista but the competition is tough everywhere in San Diego.  I was at a flip opportunity on Thursday in Escondido at lunch time.  The property already had 5 cash offers after one day on the market and when I was there it looked like an open house; there were 5 or 6 other investors looking at the property at lunch including some from Temecula.  

So you will need to work it hard as many of these flippers have a lot of experience and big pockets. 

I do not hope to discourage you but to make sure you know the competition level in San Diego.  I believe with hard work you can find a good flip prior to it hitting the market.  

Good luck. 

Typically when granny flats are added the permit is issued with an signed agreement that it will not be rented as a separate unit.  

There are San Diego RE investors that purchase properties that need a rehab.  They perform the rehab and add a granny flat.  They then flip the property knowing the buyer is going to rent the granny flat as a separate unit.   There are many areas in San Diego that there is no enforcement of the no rentals of the granny flats.  

Your case is a bit different because you would be permitted to rent a room to a roommate.  I view this as a short term roommate.  

I recommend consulting an expert such as a real estate lawyer if you are relying on being able to short term rent the area. 

Good luck

I have purchases from a few years ago that if sold today would produce a good/great return. A REI property I purchased in 2013 did not have positive cash flow when using my conservative expense numbers. I purchased it expecting property and rent appreciation as well as recognizing that equity could be obtained via a rehab. The property has been rehabbed and the rents produce a solid cash flow. The property has appreciated almost $200k.

A purchase today in San Diego likely will not cash flow enough to be worth the effort.  Recent interest rate hikes have made financed properties less affordable.  The implication is that greater rent and property appreciation (greater than the good appreciation of the last few years) will be necessary to produce the same returns as recent purchases.  

The reduced number of potential income producing properties has also increased the competition. Yesterday I looked at a SFR in Escondido that needed a full rehab and entered the market 2 days ago. It already had, as of lunch yesterday, 5 all cash offers and it looked like an open house when I was there at lunch as there where 4 or 5 different investors looking at the property. The rehab was a bigger job than I was looking for and I expect the price will be much higher than the asking price (listed at ~$300k for ~2200 sf (bigger if including the unpermitted work) with a view and 0.8 acre lot).

In summary there are not many properties that look likely to produce the return of properties from just a few years ago and the competition for good income properties is significant.  

Good luck

I understand the rule as it is easy for every corner to get cluttered with signs if they can be just created and placed.

Versus having a sign spinner requires effort and of course is not just left there even if they are there every day.

What is more difficult to understand are the charity signs for charity garage sales, electronic recycling, car washes, etc.  Is there something that allows those signs?  I suspect it is more that it is a good cause so the rules are not enforced.

I get a mailer for purchases almost every day.  I suspect they are not targeted mailers or if they are targeted I have no idea what the criteria is except the property I get the most mailers on has been owned many years, purchased in 1992.  The more recent purchases get less mailers.  The mailers I receive go into the recycle bin so I suggest you somehow target who you send mail to.

Good luck

I do not have any sources for the info you requested but I went to Germany a while back and stayed in a prefab house that was comparable to my house in quality and there is no way anyone would guess that it was prefabbed.  It was fairly large (over 2000'), very stylish, with luxury features like hard wood floors, solar, granite counters, nice looking cabinets, etc.

I was told the fact it was prefabbed saved ~30% on construction costs which if it was the quality of the prefabs from a couple of decades ago I would not have thought it was worth the savings but this was a very fine house.  Put that house in my neighborhood and it would be >$800K.

So I like your thinking and hope you find a good source of Tiny prefabbed homes.

@Dawn Anastasi suggestion is correct but using zillow rental manager (formerly Postlets) will post on zillow, Trulia, and Hot pads from a single portal. It also creates HTML for posting on Craigslist.  It is nice to use a single portal to post to multiple sites but the formatting on each site is less than perfect but that is the price of using the single portal.  

Good luck