All Forum Posts by: Ladd Brunner

@Kecia Troy Penfed is often listed on this forum and we are closing a heloc on a non owner occupied investment property next week. Our loan officer just informed me PenFed will no longer be offering this product as of 4/8/22 until further notice.

@James B.

@James B.

I’d be interested to see what this place looks like and where it is. Didn’t know there was still a property left in CA that was under 200k, let alone 110k in one of the most desirable areas in our state. I can maybe see a place more inland in the Monterey area or in Salinas, Watsonville, etc. And with your projected low rent that is most likely the case.

You will find it challenging to meet the 1% rule in Cali and some of the other criteria that many investors use for evaluation of a property. Do these numbers exist in CA? Of course they do, but they are few and far between so it’s up to you how much you want to count on the insane Cali appreciation potential.

Your question was related to financing though. I’ll just add that in addition to negotiating price, down payment (many owners want at least 10% down), etc, don’t forget that you can get creative with interest rate. On our fourplex we purchased seller fi, owner was solid on price, DP, term (30 yr amortization due in 10), so I negotiated a lower interest rate for the first two years to “get us going”. Saved us $250/month. Then it converted to the higher rate he initially wanted. However, were able to refi no prob in two years and get dialed in with conventional loan. Saved us quite a bit. Just something to think about. Good luck.

Ladd

@Jonathan Giglio

As many have indicated, it is always the right time to buy if you get the right deal. It also depends on if you’re long term or not. There’s always many threads on here about timing the market, the bubble, etc. One recent comment that made me think and reflect was that in 10 years, you’re going to look back at 2021 and wish you would have bought more RE when it was “cheap”. Might be some truth to that and of course real estate is local. Good luck 👍.

@Michael Valenzuela

Closing costs would be very low on our evaluation criteria of an investment property.

We own a fourplex and feel it fits well with our investment goals.

Pros: cash flow opportunities, streamlined and efficiency of management of four units, one driveway/roof/yard, etc, diverse financing options, lower insurance, less vacancy burden to name a few.

Cons: more transient tenants, more limited exit strategy, increased tenant complaints due to closer quarters.

We’ll be acquiring more multi-unit properties very soon.

Ladd

@Tammy Mason

We live next door, and I mean right next door, to a fourplex we own and manage. I’m up front with our tenants about our ownership but don’t disclose details. They just know I’m one of the owners. You aren’t obligated to share your ownership percentage position, etc. When there are at times difficult discussions and decisions, I will sometimes indicate that I will take the issue to “the family” to decide. That’s the wife and our two labs of course. Some insulation, especially in close quarters, is beneficial.

Ladd

@Anna Mecagni

Yes, they are. We just did a cash out refi, however it was on our primary. We went 75% ltv but still got 2.99% 30 year fixed. Not all apples to apples with your situation but hopefully helpful to get a ballpark of where you may be able to go with your loan. Good luck 👍

@Anna Mecagni

Seems a bit high but depends on DTI and credit. We went 80% ltv and closed on our 4-plex a few months ago at 3.625% for 30 year fixed. We did buy it down but will get that $ back in less than two years and we're in it for the long haul. We do have decent w2 income and 770-800 credit.

Almost 3 years ago we acquired a 4-plex that was owner financed, one which we would have had limited opportunity through conventional financing to purchase.  We have since refinanced (3.625%) and cashed him out and now have a very strong long term and desirable asset in our portfolio.  We have built a trusting relationship with him and his family (they have many properties and are looking to downsize) and they are giving us the same opportunity (owner financing) on one of their desirable commercial properties.  He is offering us the same financing structure, which is ideal for us as we both have good w2 income but we're not in a position to acquire a commercial loan.

I understand that there is risk in all real estate transactions but with Covid19, I'm particularly cautious with commercial real estate at this point. Or at least until the covid dust settles. I've read all the dread and predictions, particular with commercial, but I also know that real estate is very local.  These 9 units are not retail but more office/professional.  Attorneys, financial planning, educational (reading center), counseling, etc. in a prime location.   All rents have been current and the complex has 100% occupancy.  Most are on 3-5 year leases with 2 on MTM. Additionally, this is in a desirable Sierra foothill town that has seen a recent influx of Bay Area folks that want a more simple and safe place to live and do business.  Just hope the fires don't reach us!!!

The cap rate is pretty steady here at 6% and I have most of the numbers to determine a fair price. We have already discussed initial ballpark numbers.  There is more due diligence to be done on my part and he's not in a hurry, but I'm starting to think about the potential of this acquisition.  Additionally, l have a trusted property manager, who I also have a good relationship with, that has offered to manage this property for me (he's current manager).  

Any thoughts on this?  I just like to take the temperature of the BP folks and get your thoughts and perspectives and perhaps think about things I haven't pondered yet. I'm a school teacher in the middle of my first week of seeing students, so my analytical skills are shot!!  Send me your initial thoughts!  Thanks.

We're north of you between Yosemite and Tahoe and have been affected by the wildfires over the years. Six years ago we could get a SFH homeowner policy for $650/year. Now we have to go with a wrap around policy through the CA Fair Plan. We're at $2,600 for a 1,550sf SFH. Interestingly enough, we pay $3,200 for coverage on our 4-plex next door (don't need Fair Plan).