All Forum Posts by: Jon Schwartz

Jon Schwartz has started 37 posts and replied 926 times.

Originally posted by @Alex K.:

Native Angeleno looking to invest in Los Angeles and discuss some strategies that actually works for this market.

Any stories and experience are appreciated.

Thank you,

Alex

Alex, welcome to most interesting real estate market in the country!

The first thing to confront is that LA is generally an appreciation market, not a cashflow market. Properties can cashflow, and there are more aggressive strategies to force cashflow, but the wealth builder here is the appreciation.

I noticed on your profile that you're looking for properties that meet a 1% or 2% rule. You won't find those in LA!

Speaking broadly, I think the best investment strategy involves finding properties that aren't fully utilizing their income potential.

At a more sophisticated level, that might mean buying a fourplex of large two-bedrooms, making relocation agreements with the tenants, remodeling the units into three-bedrooms, and then renting them out at market rents. I'm invested in a property near the Grove that's executing that business plan now.

At a simpler level, that might mean buying a house with a garage, converting the garage into an ADU, and renting out the ADU.

I think a super solid first step to get into the LA market is to househack a home or a multifamily. The property won't cashflow per se, but your housing expense will decrease while your equity in the property grows thanks to principal paydown and appreciation. I wish I had started my journey with a househack. Instead, just last year, at the age of 38 and with a wife and kid, I househacked a duplex in Hancock Park. I'll tell ya, I love running the numbers...

Oh, I just realized something! This is all from the point of view of a buy-and-hold multifamily guy. Another strong avenue in LA is flipping. It's a lot of work and very competitive, but it's a living.

I see you've been a member of BP for years. Are you invested out of state? What are you attracting to in the LA investing landscape?

Best,

Jon

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Welcome, Jazmine!

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Originally posted by @DJHano Magana:

Hello, my name is Hano I am 25 years old and I am new to this app and to real estate. I am preparing to take my exam soon for my Real Estate License here in Southern California, but I am also in search for my first home to purchase for my wife and daughter. I want to make this home my first true investment home that we can live in for at least 2-5 years and potentially purchase another home and rent one of them out, but does anyone have any suggestions, tips, advice? I’m here to learn and receive any helpful information from other successful individuals.

DJHano,

Welcome!

I'm also preparing to take my real estate exam here in Southern California!

My advice to you on your first purchase would be: buy a multifamily property. Buy a duplex, triplex, or fourplex. It will build such a solid financial foundation for you moving forward.

Where in Southern California are you?

Best,

Jon

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Originally posted by @Eric Martinez:

Hi all! I am new here and have been listening to the podcast for a couple months now and love everything about it. I understand all the strategies and avenues various guests have applied to become successful but I feel like living in Southern CA is a disadvantage because of extremely expensive real estate. I am currently in my 3rd home starting from a condo and now in a single family in an amazing neighborhood (bought the worst house in the neighborhood for the location), meaning I understand buying and selling real estate. My question is...what are your tips for starting off investing in real estate and living in expensive SoCal? Look inland? Explore other states? Any tips are very much appreciated!

Eric, welcome!

If you're on your third primary residence, then you know how powerful appreciation is in SoCal.

I'm on my third primary residence, too, and this one is a duplex househack. I have a wife and a toddler, so it's not the traditional setup. We live in a 3/3 in Hancock Park in Los Angeles; the unit under us is a 3/2 luxury rental.

I decided to keep my money in SoCal because I don't need cashflow now. I have income from my day job. However, in a decade, I'd like to quit the day job (or at least be able to!). With that timeframe in mind, I'm keeping my money in SoCal to let it appreciation in high-value properties. I'm also forcing appreciation through renovation, and with our low-cap-rate environment, forced appreciation is incredibly powerful.

I've explored less expensive areas around LA, was far inland as Riverside and San Bernardino County. There are pro's and con's there, I'm finding. Less expensive real estate is often less expensive because it's less desirable. At the same time, I've found some promising pockets.

Where in SoCal are you? More importantly, what goal or goals are you working toward? What are you trying to get from investing in real estate (in terms of life outcomes)?

Best,

Jon

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Originally posted by @Ivan Melendez:

Hello I am super new to BP and currently I am acting like a sponge and soaking up as much information as I can (books, podcasts forms). My question is I plan to move in May of 2021to a duplex and house hack it. What are somethings I should know before buying my first real estate investment? Or things you wish you new before house hacking?

Thanks!!

Ivan,

Good work! Honestly, the thing I wish I knew before buying my first house was the concept of househacking at all!

Now I'm on my third primary residence, which is a househacked duplex.

My few tips:

Find a duplex that will be cashflow positive if/when you move out. That's challenging in my market of Los Angeles. It might be a breeze in your market. Having a duplex that will provide cashflow if you move out allows you the option of moving out whenever you want.

Think big. Buy as large as you can, but keep reserves of six months' rental income to cover any vacancy that happens. The reason to go big is that you'll be maximizing the principal paydown and appreciation growth. As these begin to snowball, your equity in the property will really climb.

Side-by-side is better than top/bottom. In my market, it's hard to find a side-by-side duplex of the size we needed.

Work with an investor-focused agent. Where are you? I may be able to recommend one.

Good luck!

Jon

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Originally posted by @Ashley Keeler:

Hi everyone! I have been using BiggerPockets for real estate info for about a year now, but this is my first post. I’m looking to start investing long distance investing in the Midwest (likely Minnesota, my hometown) from Los Angeles. The goal is to start next summer 2021 with $140,000 cash reserves. We will be using the brrrr method through single family homes and possibly multi-family, as well. We are looking to scale as quickly as possible. Does anyone have advice on how to scale quickly?

Hi Ashley,

I'm speaking out of my zone here because I'm a buy-and-hold investor here in LA, but from what I understand, you can really supercharge your growth by having greatest access to money. Your $140K will get one or maaaaybe two BRRRRs off the ground, but if you can borrow hard money, you'll be able to execute multiple BRRRRs at once. My advice is to start reaching out to and building relationships with hard money lenders here in LA and in Minnesota.

Best,

Jon

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Originally posted by @Drew Hoffos:

Hi Friends! Thank you all so much in advance for taking time to give your advice.

My wife and I are looking to deploy between $180-$220k into investment properties. We live in Southern California. Our initial plan was to work slowly; purchase SFH or Duplex in the Cleveland or Indianapolis area for $70-$110k cash and then hold it and pull some $$ out after 6 months (maybe $30-$40k). Then we'd bring the rest of the cash to do it again and purchase another $70-$110k property until our whole wad was spent. We run restaurants full time and we're not looking for a new career per se. We'll be using a management company to do the day-to-day operations.

I'm familiar with some of the pro and cons of this method vs. purchasing a larger multifamily unit (8-20 doors), but only anecdotally. I have two real questions: 1) If you had this amount of cash to spend, would you try to hit the home run and buy something at the top end of your budget? (leaving enough cash reserves for emergencies, of course). 2) Depending on your advice above, what market(s) would you look into?

Extra credit: If you're a realtor we'd be happy to take a look at inventory.

Thank you!!!

Drew, I'd look into Columbus, and I'd recommend looking at @Remington Lyman's inventory. He has on-market, off-market, residential and commercial. And Columbus is a really solid market -- the only place I'd consider outside of CA!

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Originally posted by @Oscar Montealegre:

I've been investing in Real Estate for 10 years now. 80% of my assets are in Los Angeles, the remaining 20% in Colombia-that's another story for another time.

In my last post I wrote that I am no longer investing in Los Angeles or any where else in California. Reason being is because the investment environment is too anti-business and anti-capital. And I when I write capital, I mean it in the literal sense. We are becoming a state of handouts and entitlements.

I'll stop ranting before I digress even more. As a result, I am looking at investing in other states. Please note that my list is in its preliminary stage and subject to change. Here is you go...

1. San Antonio-I expect a halo effect from Austin to hit this city soon; after my travels to San Antonio (July 2020) it seems it is already happening.
2. Phoenix-It's hot literally and metaphorically speaking. But I don't see a bubble forming; in fact I see the opposite, a lot of upside.
3. Reno: Close to Sactown, relatively close to the Bay Area. No income tax is a plus for locals but out of state investors beware of investment capital gains tax.
4. Dallas-Because its the opposite of Austin. Austin is cool, but its too hipster for my liking. I already live in LA, I don't need anymore "I'm too cool for school in my life."
5. Bend, Oregon-Although Oregon is the first state to impose a statewide rent control mandate, I foresee the city growing even more now than the norm. Especially with the increase of people being able to work remotely.

FYI, I am a long term investor. I don't flip and when I buy, I buy never to sell. I want cash flow and appreciation. If I need money, I refinance when it makes sense, take some cash out when I need to (especially now with such low interest rates), and deploy said cash into new investments. In short, I try not to complicate investing in Real Estate. Sounds cliche, but life is a marathon not a spring.

Hey Oscar!

I'm an LA investor who's still bullish on several neighborhoods in LA.

I like your list of markets; they're all well-regarded markets, and you're thinking is sound.

I'm curious: what's your portfolio look like in LA? I'm curious to know what you have here and why you've decided you don't want anymore of it.

Thanks so much!

Jon

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Originally posted by @Todd Rasmussen:

Originally posted by @Jon Schwartz:

Originally posted by @Todd Rasmussen:

Originally posted by @Jon Schwartz:

Originally posted by @Todd Rasmussen:

Originally posted by @Jon Schwartz:

Originally posted by @Dennis Cosgrave:

AB 2088 establishes a first-in-the-nation net worth tax, setting a 0.4% tax rate on all net worth above $30 million. If successful, Illinois, New York, New Jersey and Connecticut are likely to follow suit. How will this tax effect you and what, if anything, will you do in response?

Dennis, great question, and smart of you to ask it directly to us as individuals. Let's talk about this new tax in real terms instead of throwing around platitudes!

This tax will be levied on roughly 30,000 of the 39,510,000 residents of California. That's that top 0.076% of the state (source: https://sanfrancisco.cbslocal.com/2020/08/13/california-legislature-proposes-first-in-the-nation-wealth-tax/). Sadly, I'm not in the top 0.076% of earners. In fact, I'm only in the top 4% of CA earners (I used this website: https://dqydj.com/income-percentile-by-state-calculator/).

This tax will produce $7.5B (that's a "B" for billion) in revenue for CA (same source as above).

I don't know about you, but I've been noticing all this talk about revenue shortages for states and cities as a result of COVID, and I've begun to worry about two things: my property taxes and my community. I'm worried my property taxes will go up because the city, county, and state will need more revenue to fund public services. And I'm worried my community will suffer because my local schools, police departments, fire departments, social services, road repair crews, graffiti abatement crews (this is LA, after all), adult education programs, job placement programs, etc., will receive less funding.

So this tax abates my fears. I think my property taxes are less likely to get hiked, and I think my community will likely benefit from this tax. That's how this tax affects me, and in response, I'll email my state representatives and voice my support.

Great post!

I hear your points Jon, but I fail to see how charging 30,000 people $250,000 a better solution than charging 39,510,000 people $190?

I concede that we shouldn't be responsible for supporting the government in the same amount, and will illustrate supporting CA on a sliding scale. I wish I had time to put in more research, but I'll lean on the easiest tax revenue for me to reference for the state, being income tax. If 7.5 B is the problem, that represents a 9.3% increase over the 79.998970205 Billion https://data.ftb.ca.gov/PIT-Charts/Personal-Income-Tax-Liability-Column-Chart/5ss3-24b3 collected in income tax from Californians (at least in 2017)

My share of that would be under $2,000, I can't imagine that your "fair" share is not bearable for you, although I remember the impact of mortgage payments took a while to get used to :).

Why are we expectant that the top 30,000 earners in CA should pay for this state which has given me ample opportunity to put myself in a position to retire to where I want to live, and provided you with the ability to work/retire/live where you want to? You are on a trajectory where these decisions will affect you directly someday. "I support it, because it's not coming out of my pocket" seems shortsighted considering the 30 million threshold will lower, the .4% rate will increase, and inflation will push more and more CA taxpayers into this tax bracket.

Hey Todd!

Thanks for the well-reasoned, sourced, and thoughtful comment!

You're totally right that my argument came off as "I support it because it's not coming out of my pocket." I was being tongue-in-cheek in my initial response, and I definitely gave the impression you took. Guilty as charged!

My truer sentiment is simply that I support progressive taxation -- "progressive" not meaning "liberal," but "progressive" meaning that higher earners progressively pay a larger percentage of their income to taxes.

Before anybody hits me with a ridiculous slippery slope rebuttal, let me say that I do believe all policy should be within reason. A 0.4% surcharge tax on the extremely wealthy is not the same as raising all tax brackets by 40%. Let's that scream platitudes from the fringes of the debate; let's talk realities.

The problematic truth is that low earners don't have enough money to generate any savings. Everything they earn, they spend to survive in this country. The savings rate reaches 0% as earners reach $40K in annual income; people who earn under $40K/year have negative savings rates; by $80K, an individual's savings rate is 22%; over $250K in annual income and one's savings rate averages 42% (source: https://dqydj.com/how-much-do-people-save-by-income/). You know as well as I that, without the ability to save, a person doesn't have the ability to prepare for retirement, much less "get ahead."

So I think it's moral and community-minded to implement a progressive tax strategy that takes more from the very wealthy and gives a break to the working poor. I know I pay more in taxes than many others while utilizing relatively few of the public services I fund; I'm okay with that.

One more thought: you calculate that your "fair" share is $2000. What's fair, though? Is it a simple math problem? Is there a moral element to fairness? I'd say there is.

I'm grateful, "Not my problem" is not the source of your consideration! It's hard to read intent over text.

As a sometimes reasonable Libertarian, I would much prefer a flat rate taxation method on income without deductions as taxing everyone the same percent still accomplishes wealth balancing without nearly the amount of effort required to file your taxes currently.

I accept that progressive taxation is as close to my preferred method as I can expect us to get. The <$2,000 that is my fair share is a math equation that illustrates spreading the 7.5 Billion across our current progressive tax structure, instead of implementing a wealth tax. CA brought in 79.99.... billion in income taxes and needs an additional 7.5, which is a 9.3% increase. Multiply your total state income tax last year by .093 and that is your share of generating an additional 7.5 billion for the state. Id rather pay my portion of that than ask someone else to on my behalf.

I think the moral aspect of taxes is that people should contribute equally as able, which is the basis of my flat rate taxation dream. I think, however in your moral aspect comment you were alluding towards supporting taxes that support those without? I do, because most people are compassionate to the limits of their own convenience, but I've never seen a dollar with the government go even close to as far as a dollar I've given my church, any other charitable organization, or any person who needed some help.

Todd, I always appreciate a cordial disagreement. Thanks so much!

First off, if we have differing views on what's fair, I'm defining not knocking yours as inferior on any metric. I value your viewpoint.

Just want to throw out my two cents on your last point there: I have a brother-in-law, a conservative Republican, who frequently says, "I'd be happy to pay taxes if the government actually did something worthwhile with the money." Frankly, I think that's an excuse for not wanting to pay taxes at all. Isn't educating children worth taxes? Aren't police worth taxes? We can debate how far our social programs should go, but there's obviously worth to a portion of them.

To your point more specifically: your church or a needy individual can surely make a dollar go further than the government. There's a lot of overhead with the government. And if everybody of there own volition contributed 10-40% of their income to a charitable organization run by volunteers for the administration of social services, yeah, our financial contribution to the greater American good would go a lot further. But an argument against government overhead doesn't negate the need for government.

For sure, and our viewpoints aren't even that far off each others. Despite the polarizing effect the two party system has, we are pretty close to a solution, but have found ourselves on a significant tangent to the rest of this: Military, law enforcement, education, social security, and healthcare are all very important. Taxes are a necessary evil to ensure people contribute at least something to the coffers, because like I said before people's compassion stops at their own convenience. Not all people are poor due to circumstance, not all people are wealthy due to hard work. We need government and I am happy it exists.

My position is:

We shouldn't carve out new taxes that generate more bureaucracy and less efficient government operation targeting small groups of people when we could more efficiently increase the tax that already exists and split the responsibility among taxpayers proportionately to the already progressive tax system.

Does your position remain in favor of the new wealth tax?

It does. You've made excellent arguments, but you haven't persuaded me to abandon my original sentiment!

However, your position statement is... well, I like it. Holistically, I'd favor progressive tax brackets and no loopholes. You get taxed X% on your first $100K, then X% on the next $400K, then X% on the next $500K, then X% on everything over that. I know it's not as simple as a flat tax, but I'd trade simplicity for a little wealth redistribution.

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Originally posted by @Steve Morris:

So you're like, what, 45?

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All Forum Posts by: Jon Schwartz

Jon Schwartz has started 37 posts and replied 926 times.

Post: How are you guys investing in Los Angeles

Post: Starting a meet up with motivated investors

Post: First Time Home Buyer

Post: Southern CA New Guy Looking For Advice

Post: Newbie Investor Trying To Make The Right Moves

Post: How to scale quickly using brrrr?

Post: Baby Steps or Home Run?

Post: Moving Forward into New Cities

Post: How Will California's Proposed Wealth Tax Affect You?

Post: How Will California's Proposed Wealth Tax Affect You?