All Forum Posts by: Matt Mason

I'm with , that doesn't make any sense to me. Also, why don't you contact State Farm to see if they would write you a policy? If they are insuring it now, it seems they would for you as well - no?

@Aaron Mazzrillo

You can get pretty cash flow down there. I think it takes a certain type of personality. I've had a few buildings down there presented to me, but it isn't for me. Ironically, when Los Angeles had over 1,000 murders in the early 90s, I spent some time down there, but now that I am older I have less tolerance even though LA has less than 300 murders now and it is much safer. I guess it just depends on where you are in your life and the challenges you are ready for.

@Dawn Anastasi

Yep. My bad

@Account Closed

Rich Dad Poor Dad is a good book, especially for opening people's eyes on investing and overall financial decisions. For real estate, I would definately delve into some of the other books mentioned in the forums that have more specifics before you get into any purchases.

@Dawn Anastasi

I know what you are saying, but I don't know if there are really areas where you can rent out a $100,000 house for $3,000 anywhere in the US. I think there are 3% deals, but I think that may be more like a $30k house renting for $900.

Correct me if I am wrong. I am sure there is the freak fantastic deal where that might work, but not anywhere that could be applied consistently.

Thanks. I probably should have not said worthless requirement. I do think the possibility is remote based on the geography. It would almost have to be a flash food like you see in the desert and even then it is not ever expected to rise to the level of the actual habitable part of the building, but at the least I am covered.

I have a story with flood insurance that I wanted to share as I thought it may help someone out there.

A couple years ago I was in escrow on a 4-plex and the bank doing my loan said I needed flood insurance since my property was in a flood zone. This surprised me since the property was not near any creeks or mountains and is even in a little bit of a hilly area and it is not at the lowest elevation. I looked at the flood zone maps and indeed my side of the street was in the zone. For basic flood insurance that would satisfy the lender, I was quoted over $2,000. This is something I would have to pay year after year and would have probably torpedeod the deal in my eyes (this was a short sale and I going back to the bank for a big reduction for this would have been difficult at best)

Looking at the property, the map made no sense to me, since my neighbors property behind me was about 5 feet lower than this property. The only way this could flood is if a wall of water came rushing in, because it would pool in lower elevations. Also, the prop. had a raised foundation so if anything could get flooded it would be the crawl space. I asked if the seller was paying this flood insurance and yes they were paying over $2k per year. I was pretty upset as it is not easy to find properties here and I was potentially going to lose this over what I thought was a useless flood insurance requirement.

I called the insurance company and told them the facts and finally did get them to acknowledge if there were flood vents in the crawl space I could get a reduced rate since the crawl space was higher than the 2 foot flood zone listed on the map. The property didn't have flood vents, but it did have a lot of vents. I called back and asked about this and yes, they did grant the reduction if the total size of the vents met a certain requirement. I measured and was just short, but found out the rate would be reduced from over $2k to $250.

I ended up closing on the property and had the $2k sent in for the premium as part of escrow as the bank required, but had another vent installed a few days after close. Took pictures and sent all the measurements back to the insurance company and they granted me the refund and the overall reduction in rates a few days later.

Point is I never would have known if I didn't investigate and since the prior owner had no knowledge of this I am sure there are other owners out there with the same issue that could get quite a benefit. $2k a year is a big deal.

On taxes, I would keep in mind that you will pay CA income taxes no matter where you invest so long as you are a CA resident. While a place like Texas does not have an income tax it does you no good. Any income taxes you pay in other states would be a credit on your CA return.

Property taxes do vary a great deal, so a place like Texas you will pay around 2.5% or so - it depends exactly where. There is also no cap so it will increase with the value if your property. This is where CA taxes are much better with Prop 13. For example on my primary residence, I pay only about .6% of its value, because it has appreciated quite a lot over the 15 years I have owned it. In Texas, I'd be paying well over 4 times the property tax.

Over the long term these property tax caps make a big difference if your property appreciates. Gotta look into each states' rules.

Zach,

Given the amount of time on the market, I would seriously consider going in with a lower offer than the one you came up with. My guess is that they will counter at the worst. It sounds like the property is mismanaged and they are probably tired of dealing with it. They may just want to get their money out and would settle for a lot less than asking. It might not be a bad deal if you could beat it down more (not enough info here to really tell though). I think if you don't you'll regret it later

Also, if the rents are $700 each, that is what I would underwrite them at. I assume the $750 is after you fix up the look of the property a bit, which will cost you a few bucks I imagine. That is fine to keep in mind. I just wouldn't pay for it. Make sure you cash flow at the $700 level.

No reason to get into this if you aren't cash flowing. The experience itself isn't going to be worth it. Just my 2 cents.

@Nicholas N. , not sure where your property is, but values have risen sharply in almost all of SoCal. In my primary residence neighborhood, values are now about at the peak in 2006 - 2007.

Real estate in Seattle is quite expensive but to me seems like a better idea if you are just going to move in a few years. You don't want to be a long distance landlord if you can avoid it.