All Forum Posts by: Ken Teng

80% mortgage on an investment property is totally doable. But you need to outbid others, and your mortgage needs to look promising.

In general, investing in bay area is betting on appreciation. Cash flow? Forget about it.

@Account Closed Congrats! Would you mind sharing the contacts of the people you work with? Thanks!

Look up your property in Zillow to get an idea of what it may rent. It is just a ballpark estimate. However, in bay area, currently renting does not offer great ROI.

@Kevin Fox This is very informative, thanks for the info. These numbers look pretty impressive. Yet several observations:

1, They manage themselves, and thus avoiding ~10% management fee. I do not live in SD, and must hire a property manager. If I factor that into account, the COC will drop to around 5%. This is not that impressive, given the level of leverage.

2, No offense is intended, but, in general, agents tend to overplay the numbers a little. As you say, you just closed the deal, then these are all pro forma numbers. I will downplay the number (lower revenue and increase cost) by at least 5-10% to start with. This is my personal opinion as well as some famous property managers', such as Ken McElroy in his book The ABC's of Property Management.

3, You are maybe one of the best agents in SD, and this may be one of the best deals you can find, I guess. I, as well as many remote investors, am not as well connected and familiar as you are in the SD market. I won't be surprised that my projected COC will be lower than yours, even if I hire a SD agent.

4, Finally, you give an example of >1M for an investor with little or no money to start with? Of course, multi-family houses generally offer better COCs than single-family houses or single townhouse/condo. If a 4plex can offer just ~5% pro forma, what about a single family house priced at around 500k or less?

In conclusion, you showed that maybe some multi-house properties in SD may cash flow (the actual number is still to be seen), I still do not see very convincing evidence to go for SD instead of, say, Midwest. I believe the beauty of investing in coastal California lies in the prospect of appreciation. Cash flow is mostly negative or, at best, paltry. Given the current trend and volatility in the market, I would say betting on appreciation is risky. So I still say I will not invest coastal California in the near future.

@Kevin Fox I did not intend to reply, but my curiosity took the upper hand. Let's do this: show me a property in SD that can cash flow now to prove I am wrong. Let's assume we borrow 80% of the money at a rate of 4.5%.

Maybe it's not the best time to jump in. Of course there are deals in any markets. But think how big advantages those well connected investors, like REIT companies and veteran investors, over you. It really takes luck and a lot of patience and time to find a good deal. My suggestion is to keep your eyes open and wait for some time.

Do you properties still cash-flow at a 7-10% rate? Or are they appreciating well? I am a little concerned about your properties.

Try your best to do refinancing to 1) Pay off your high rate personal loans; 2) Bring down the rate; 3) Get your equity out to re-invest, if you find good deals.

There is an area forum here for Bakersfield. Check that out. Some useful information.