All Forum Posts by: J. Martin

@Bill Gulley and @Amit M. , I think you two hit it on the head that this purchase is probably an owner-occupant or some other specific situation beyond income production. Maybe he owns the place next door.. Or wants to move there in 10 years and wants to lock in the price now.. Unfortunately, I don't know all the details, because I am curious what it was..

The person who purchased this building has very deep pockets, so wouldn't be surprised if there is something going on with the motivations beyond what can be seen in the cap rate.. Even as low as cap rates get in SF, you are right Amit - this is especially low..

@Erin A. , glad we'll be able to meet up at this event.. I was going to propose a meetup with Stockton folks since I'll be working out there in January.. but this will be good ;)

@Ralph E. , sorry you can't make it this time.. Keep monitoring this forum, and I'll post the next meetup on here..

@Michaela G. , can you come out and say hi again..?

@Account Closed ,

The cookies are the replacement for the 30-pack in this instance, since they are families instead of college students.. (probably still wouldn't do the beer for tenants due to liability issues nowadays.. sucks!)

@Steve Babiak , I give gifts back to BP almost each and every day by staying active on the forums ;) But I'd be happy to give out a little slice of some bitcoin as a gift to anyone on this post who'd like some, to continue on the holiday spirit...

Go on blockchain.info and click on wallet to sign up for a bitcoin wallet easily..

@Patrick Connell ,

I don't use a realtor (negotiate my own deals with listing agent), and haven't engaged with neighbors to look after properties yet.. But thinking that's a good idea.. Wonder how much I'll have to bribe them with..

Now that you mention it, I will at least send something to my loan broker, because he does bust @ss to get deals closed when we get to crunch time..

@Nicole A. , I think you have a good point regarding how variable profit might be from year to year.. While I decided to give $500 after thinking about what he did for me this year, and even worked more than that for free because he is almost TOO nice, I'm going to make sure I tell him that this is based on how easy he made my life AND how well I did in 2013. So that might not be around every year.. It's true. It's just like a business. Sometimes there's bonuses when times are good. But those may not be around in times of belt-tightening. I'm going to make sure I tell him this when I give him his bonus..

@Levi F. and @Troy Sheets , I'm with both of you. It's hard to find someone good to make your life easy, and this guy has it in spades.. Trustworthy, good.. Can't say enough good things.

After taking that into consideration, I decided I'm going to give him $500.. It was a good year, and he's worth it.. On top of that, he has done more than a week of work for free, which he really deserves anyway..

@Rob K. , sounds like knowing your market, and knowing when to walk away from a deal (if you can!). Sorry to hear about your frustrations.. Lesson learned!

Hi @Latriece Williams , and welcome to BP! Like @Account Closed said, we will be meeting up in Oakland on January 16th, and you can find the details at the link below. However, despite Minh's generous offer for me, I will NOT be buying dinner and drinks for everyone (25+ people last time!), but I will be giving out free advice! 2013 was a good year for me, but not that good! lol There is no cost to come to the meetup. Just whatever you would like to eat or drink, if you choose to do so.

http://www.biggerpockets.com/forums/88/topics/109953-east-bay-meetup---thurs-jan-16-2014-in-Oakland

Hi @Erin A.

Yes, I put up some lights. And the tenants and their kids really liked it. Other neighbors put up some lights too after (maybe had a little impact in motivating them - "Daddy, I want lights too!"). One of the units had a big xmas party with family over, so hopefully that added a little to the xmas cheer and enjoyment they get out of their unit.

I'm really of the opinion that if you create a safe, welcoming, and friendly environment for your tenants, (as I've said before, the kind of place they are proud to bring their friends and family to) I think you can really lengthen tenancies, minimize headaches, and avoid blow-ups and badwill. So I think there are some bottom-line returns, but hard to quantify any individual little thing you do.. I think owner-occupants tend to agree with this more. We'll see how you feel about it as you get some more experience..

So did you close on your triplex?

@Melvin Yuen , I almost bought some property in Vallejo because it was, and still is to some extent, beatdown more than other areas. But since I'm a buy and hold investor, and rents/rental demand were so much higher in Richmond for a just a little more money (and better commute to Oak/SF), I bought there.

I absolutely understand why it corrected and could have more to go. Good that you were able to identify the difference between that correction/reversion and the longer-term prospects of Vallejo. I think @Jon Klaus has the right idea. Where is your "extractable" equity best used (after selling costs, expenses, etc)? Extractable = net cash to you after sale. Another way to look at it is to ask yourself, "Would I buy this property again today at the current market price, with the downpayment of my "extractable" equity?" You are deciding to tie up your equity and stay invested at the current market price, which is just like someone buying into the market at that moment. (after taking into account transaction costs..)

So now that we've set the framework, what about your deal? Would you jump into the Vallejo market on a SFH rental at $350K in 2 years..? (this would almost certainly have to be for appreciation potential, because rents out there will not give you much CF at that price from my perspective, unless rents skyrocket.) If you would stay in at that price, why not buy another Vallejo SFH at that price, if you believe in it so much? Or would you hang onto it just because it's a "legacy" asset that you had already? I'm a buy-and-hold investor, and plan to hang on to most of my properties for a long time, so this pains me a little to say.. I think I would 1031X out of this if it hits $350K, or subdivide/sell and keep the lot. And this is definitely impacted by my view of Vallejo.

To be honest, the high and potentially uncertain property taxes, coupled with the less-than-great public schools, and longer commute to most employment centers (unless you drop $300/mo on the ferry) gives Vallejo some headwinds on long-term appreciation IMHO. In addition, the rents and rental demand out there are not great relative to rising prices, especially if they go that high... You may get more correction/reversion returns, but I think the longer-term appreciation will be MUCH slower and MUCH MUCH more speculative IMHO.

As far as selling/1031X, subdivide/partial sale, or cash-out equity.. These are, in order, how much exposure you want to swap out of Vallejo into something else. The 1031X gets rid of all your Vallejo exposure at that price, selling the house and keeping the lot as a kicker gives you some speculative upside if Vallejo keeps going, and the cash-out option gives leveraged exposure to Vallejo, the most concentrated bet on the area.

I would choose the option that is most consistent with your view of Vallejo's further potential at that time, and CF, relative to other investments that are available to you at that time.. My view would be the 1031 or subdivide/partial sale if it goes that high. But I would probably take some cash-out equity now, either way, while rates are still low and there are still deals to be had on more properties.. unless you're so flush with cash for new investments, it doesn't matter..