All Forum Posts by: J. Martin

Like any city, there are good, bad, and OK areas. I agree though, it does take more proactive/diligent management to keep out the problems/headaches.

Good luck on the new business!

Hi @Barbara Brennan . Welcome! Lots of great people and advice on BP. I invest here in the East Bay. Like @Justin Williams said, there's still stuff in California! I like to know the area well and be able to drive to it if I want to see what's going on. Many here have been very successful out of state also though. As many have said before, having a good/trustworthy team in place is critical, whether you are in or out of state!

Much success in your investing/wholesaling!

When you say you have $40k equity in your rental property, are you talking about $40K in "tappable" equity below 75% LTV for a bank-loaned non-owner-occupied 2nd lien? Or does the $40K take you to the value property value? That would make it MUCH harder to tap. There are other private sources out there, but they usually want a better LTV than the bank..

From what I understand, VA loans are for owner-occupants only.

I was also unclear when you said "buy and hold at least until summer for a bigger profit". Do you intend to flip the house (and count on the new buyers to be better in upkeep)? Or take permanent ownership of it so you can have 2 nice-looking properties with good tenants next to each other?

I approached the owner of the 4plex adjacent to mine about buying it, and she said she wasn't interested. She doesn't sell her properties. I let her know that I would expect to pay above market since she's not trying to sell it, or swap her for a higher-yielding property, but said she still wasn't interested. There is a lot of value to me in controlling that property, for various reasons, such as your issue with the upkeep. Adds value all the way around.

If you would really like to have the property over the long run, I highly recommend you do within reason whatever it takes to purchase it, if it's a reasonable deal. Who knows when it will come around again? If it's a flip, then just look at it like a flip. In that case, it doesn't seem to matter as much that it's next to your rental, except that you may have better knowledge of the neighborhood than your average purchaser. And maybe you can fix it up nicer..

Either way, good luck!!

Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage.

Handbook 4155.1: 4.B.2.c-d
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh

@Ariam K. There is no explicit restriction regarding the size of the new purchase. However, the HUD language explicitly states that FHA will not insure a mortgage (aka, you will not get one) "if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties." Maybe this statement has something to do with rumors regarding not being able to purchase another 4-unit property, because it may have a higher chance of being view by FHA as an attempt to obtain investment properties, rather than just an affordable place to live. Talk to a mortgage broker who has done a second FHA loan before and find out what the practice is versus the HUD language in your area. You can also refi the existing FHA into conventional, if possible, and it does not appear that you would be subject to the restrictions listed above by @Aaron Ram . Here is the language:

http://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879

Good luck, and let me know if you're able to close on another one!

You can purchase up to a 4-unit (rather than UNDER 4 units) with an FHA loan, but it has to be one property/parcel. (Technically, you can even buy a 5+ unit and convert it to a 1-4 unit with an FHA 203k loan!)

The FHA language explicitly states that the program is NOT intended for investors to accumulate properties. And generally, having more than 1 FHA is not allowed.

However, they make exceptions

1) if necessary due to a growing family,

2) moving more than is reasonably commutable (generally considered 50 miles) 3) and certain exceptions regarding joint ownership/co borrowers.

From what I hear though, you may need to be renting at the time of entering the second transaction to convince them you are actually going to move. But that last part is just a rumor.. Also, the language in FHA refers to having more than one insured mortgage at a time, not originations. So, you may be able to buy FHA, refi that to conventional within 2 years if possible, then get a new FHA. But that involves a lot more expenses..

Here's what HUD says:

http://portalapps.hud.gov/FHAFAQ/controllerServlet?method=showPopup&faqId=1-6KT-879

There are some options for low-downpayment and PMI on conventional loans, but not always readily available.. I'm with you though! I can see why that is a very attractive option! Good luck!

Also, regarding your questions on your numbers and the rules.. It is absolutely impossible or nearly impossible to hit the 1% rule (monthly rents to purchase price) in 80-90% of Bay Area properties. Cash flow itself is hard to find without a BIG downpayment, but that squeezes down ROE also.. That's why you see so many CA investors out in Phoenix/Houston/Atlanta/etc buying up SFRs.

Are your units 2br? Do your research and don't be afraid to ask for market rents. They've been going up a lot lately, so it's worth your time to do your diligent homework. Go on Craigslist. Go personally look at open houses for rentals in the area, and see how it sizes up to yours.. An extra $50/unit is $2,400 in your pocket for the year, which will be a good chunk of your likely net income. Of course, this may require finding new tenants looking in that price range..

Enjoy the journey!

@Sam Magi

In Richmond, yes. Lower prices for the same rents. In Walnut Creek, would be very difficult to find. Prices are higher per dollar of rent (Higher GRMs, lower cap rates) The area is much more prime, and has really taken off in the last few years (and decade for that matter). These types of areas almost always provide less CF than areas which are less prime. Concord is more 'prime' than Richmond. Better schools.

So is it the Monument Blvd property? If so, I like the split duplexes.. Or maybe you're doing something off-market..

Depending on area of Richmond, about $115-150/ft+ for a fourplex compared to $220-300/ft+ over there. Concord prices are about double, but rents are only a fraction of that higher.. But you can probably manage less actively out there.. And I think Concord is a good long-term bet, and likely more consistent appreciation than a tertiary Bay Area city like Richmond. Might be hard to make much cash flow depending on your leverage though. I think your payment will make it close, but you'll have some cash rolling in on a gross basis. Property manager (if you have one), periodic vacancies, any common area utilities, trash, misc fixes, reserves, etc. will suck up a lot of the rest. But lots of good upside in rents and appreciation. Congrats on your deal, and hope to hear you closed soon!

@Kumar R. and @Pakav Kim .

I'd like to suggest some alternatives rather than directly addressing the turnkey company issue. Have you considered investing directly alongside the cash of an experienced buy and hold investor in a cash flow property with equity and cash flow split pro-rata? - so your interests are aligned and they are working to boost the value of their own equity also? - rather than buying someone's flip at a premium when they have no real interest in the property except for collecting fees? Just a thought on an alternative to the "turn-key-but-on-your-own-if-things-go-south" route.. (No offense to any turnkey sellers out there! I'm just talking about investing with someone that has the same skin in the same game as you do - rather than a pure 'sevice provider'.)

Regarding the location, I ran up against many of the out-of-state issues mentioned here when I first started looking, until I realized I could find cash flow in the East Bay. There is cash flow if you come up to the North part of the East Bay, such as Richmond, Pittsburgh/Bay Point, and a few others. I can share some specific numbers with you if you message me, on deals I've purchased in the last 4 and 10 months, respectively, for informational purposes. Both providing good cash flow, principal paydown, and good appreciation prospects, with a reasonable commute to Oakland (20min) and SF (35min) in a tight market with lots of spillover into the secondary/tertiary markets. And no rent control!

Look at a 10+yr historical chart of prices in the area, and you'll see how far they have gone down and how much more potential they could move up over the long term.. (although, who knows!? - that's why I like the cash flow and principal paydown to support the purchase of the investments.) I like to be near BART and freeways, when possible. Commutes can get crazy real quick. **Just information. Not a solicitation.**

Rough down in the South Bay! It is ON FIRE down there along with tech!!! I see a lot of multifamily deals (although I invest in 1-4), and WOW! Cap rates (yields) getting pushed to 3-4%..!

Always happy to help with any questions, and especially networking with fellow local investors! Send me a message. Welcome to BP and good luck!

Wow! That is a new one!

I can't imagine how that would feel if you woke up the first night in your house and saw all the crazy neon graffiti (who knows what it could say..) on the wall.. Glad you avoided that!