All Forum Posts by: J. Martin

Hi Deryk, Welcome to BP! There are a lot of great people and great advice on here! I’m a ‘fix and hold’ investor from the Bay Area in CA, and loving it! A few tips about the site..

You'll find lots of good info in the "Learn" link across the top navigation bar, and in the link at the top of this introduction forum. You can tag people by typing @ before you type their name, then clicking their name when it pops up at the bottom of the message box. You can click on the "vote" button if you like someone's post or is helpful. And you can earn "awards" for various "achievements" - just look at your profile. Hope that helps with the site! Good luck on your investments!

Hi @Tamika Charles , I didn't see your post until now. Welcome to BP from a fellow East Bay investor! You're close by.. I'm a 'fix and hold' investor here, so I can't give you a ton of advice about wholesaling. But you'll find good info by clicking on the "Learn" link in the top navigation bar, or search podcasts or forums for wholesaling and you'll get lots of info. I'm looking for 2-4 unit properties below 8 GRM if you come across any around here - maybe I'll be your first customer! A few more tips about the site..

You can tag people by typing @ before you type their name, then clicking their name when it pops up at the bottom of the message box. You can click on the "vote" button if you like someone's post or is helpful. And you can earn "awards" for various "achievements" - just look at your profile. Hope that helps with the site! Good luck on your investments!

Thanks @Michael Seeker , you are both right I would have to do my homework and know how long I could hold onto it with some variability.

@Vince Rosario , getting in low on a pre-foreclosure or some other off-market sale could save multiple 10's or hundreds of thousands in such a high-price-point market. You're right on.

The other point that was an issue for me while I was starting out, is that I needed cash-flowing properties that could sustain purchases of additional properties (through investment of cash flow) and retaining the ability to qualify for new loans without solely relying on private/hard financing. So that's another big difference between these types of properties and higher cap rate properties..

@Mary B. , thanks for posting that article. I definitely understand the difference between the types of properties at various cap rates. But 2.5%!! Even the article talks about 6-7% as low cap rates.. I guess this is just an extreme example..

@Michael Seeker , I'm still buying cash-flowing properties in the East Bay, but it's just sort of an intellectual curiosity . That being said, I almost was going to try to buy a luxury condo not subject to rent control in downtown SF in the financial district. It could have rented to cover mortgage and HOA.. And I think would not be crazy for it to go from the $600K listing price to $1MM over the next 5-10 years.. It's probably already up $100-200K since I was looking at it about 2 years ago.. But price points are high, and it would be a lot of my eggs in one basket.. Maybe at some point.. but probably an owner-occ, that I would eventually rent out..

Hi Ashlee,

I'm also a 'fix and hold' investor, but got started just a bit before you.. Too bad you can't do an FHA purchase on a 4-unit! Great way to build long-term wealth though. So far so good for me! A few tips about the site..

You'll find lots of good info in the "Learn" link across the top navigation bar, and in the link at the top of this introduction forum. You can tag people by typing @ before you type their name, then clicking their name when it pops up at the bottom of the message box. You can click on the "vote" button if you like someone's post or is helpful. And you can earn "awards" for various "achievements" - just look at your profile. Hope that helps with the site! Good luck on your investments!

Andrew and Sam, two great additions to the meetup! Two of the few that I've actually had more time to sit down and talk to.. Looking forward to talking to both of you there!

I recently saw a deal on a duplex in San Francisco in a prime neighborhood with a cap rate on existing rents of 2.5%. Rents a bit below market, but not crazy. Building in good condition. Great location. This number will look insane to 90% of people on BP. Obviously, part of the expected returns on a property like this are the appreciation returns. Historically, these have been phenomenal in SF. Prices barely dropped during the crisis and are already well above that for most locations. Limited space in a dense, unique metropolitan area. But you'll likely be coming out of pocket every month unless you buy cash or put down a crazy big downpayment.

So is buying a property at a 2.5% cap rate in a prime neighborhood in a prime city like SF really more risky than buying a property with large amounts of cash flow today in a B or C area? If you look at the price volatility over time, especially through the crisis, the SF property makes it look like much less price risk and income fluctuations. On the other hand, you don't get any returns unless it keeps going up.. I own in the East Bay, but not in San Francisco now.. Thoughts?

@Account Closed , I like your quote regarding "working with only partial and imperfect information." It kinds of brings this conversation full circle, as my first post was trying to acknowledge that we can't precisely calculate any of this, whether it be expenses, profit, interest rates, economic cycle etc... so you have to make some reasonable estimates of the range of outcomes you can expect and be reasonably ready for them.. From my first post on this forum:

"I think this is a more realistic way to assess the likely range of outcomes, rather than some "overly precise", but less informative calculations, where I see people estimating they will be earning $129.72/door this year, with a ROE of "approximately" 17.25834%.. "

The data and the returns are estimates, made with only partial and imperfect information.. Let's not kid ourselves that our pencil is so sharp, or spreadsheet macros so powerful, that we overly focus on one outcome, or today's returns, that we lose sight of the range of outcomes we may experience.. That doesn't mean that we can't learn a lot from history and make a lot of money off of it! But be ready for some of these variables to steer off course from time to time. I guess that's what reserves and not getting over-leveraged are for!

Glad you got something out of the yield curve graph. Interesting history lesson, and interesting way to present the information. I'm with Bill though, I wouldn't be surprised to see Fed Funds at 4-5% sometime over the next decade, putting prime at 7-8%. When and for how long? Your crystal ball is as good as mine. Look at the 40yr chart of fed funds and add 300bp. Even if you just take the last 20 years, it's hard to see how it could stay below 600bp prime forever.. But I also agree with you that there will be another recession and rock-bottom rates at SOME point. 2.75% 30yr? I don't know if I would say the MOST likely scenario in the next decade, but I would not be surprised to see it someday either. I'll be waiting at the Bank's door at opening hours when we get there! lol

PS @Johnson H. and @Bill Gulley, I'd like to grant Minh honary examiner status for all his contributions to this forum, his deep, ever-questioning intellect, and love for all things economic and real estate. There's no pay, and rarely is anyone greatful, but it's fun and interesting, and someone has to do it! lol

@Bill Gulley

"Most local banks have balloons in five years actually. Some regional banks have 7 to 10 year balloons if you search for it.

The 5 year loans have the lowest interest rates typically but the most risk. There is more time with a 7 to 10 year loan term to pay down the payoff balance."

Here's Mine:

"In CA, if you call around, common loans for multifamily are 25% down, 30yr am (on MF, 20-25yr am on other CRE), 1.25 DSCR (some wiggle room), a 5/1 ARM is often due in 10 years, with resets from 5-10 years and 3/2/1% prepayment penalties for first 3 years. This can vary a bit though too.. Know when your rates reset and potentially how far.. The 30yr bull market for bonds and ever-decreasing rates is over :( Doesn't mean we'll be at 6% LIBOR next year. But there is a full economic and interest rate cycle ahead of us in the next decade. Hopefully rents will keep pace or beat ;) "
http://www.biggerpockets.com/forums/12/topics/110054-commercial-loan-balloon-payments

Hi Jonathan, and welcome to BP. Lots of opportunities to learn here.. I’m a ‘fix and hold’ investor from the Bay Area in CA, and loving it! A few tips about the site..

You'll find lots of good info in the "Learn" link across the top navigation bar, and in the link at the top of this introduction forum. You can tag people by typing @ before you type their name, then clicking their name when it pops up at the bottom of the message box. You can click on the "vote" button if you like someone's post or is helpful. And you can earn "awards" for various "achievements" - just look at your profile. Hope that helps with the site! Good luck on your investments!