All Forum Posts by: Jake Kucheck

Brandon,

Need to tweak your thinking a bit on the "no cash flow unless I put a lot down".

Properties produce a certain amount of yield, regardless of how you choose to finance them. In its simplest form, this is NOI/Aggregated Cost, and is referred to as cap rate. Now, cap rates are relative, as a 6 cap is good for office buildings in A markets, but terrible for multi-family in C markets. So, there's a lot more to the equation, and you have to analyze each deal in its own context (asset type, market type, project type, etc).

What doesn't matter, though, is how much you put down. That doesn't change the property or its context at all. It does change the cash that goes into (or gets deducted from) your bank account, but it doesn't change the fundamentals of the property.

Circling back to the main point of your post- you can find markets in CA that generate decent yields, and if you do your homework, you can buy properties that outperform those markets. But, you're also giving up part of the HPA component by going after these properties that provide higher yields. It's not quite a zero sum game, but its close. I will say that you will have a better combination of cash flow and appreciation in the IE and Bakersfield markets than you will in OC, because OC is so out of whack with price/rent ratios that you would need massive appreciation to make up for the yield you are losing out on.

To give you a concrete example- our Columbus, OH purchases have averaged $31,500 in aggregated cost for $675/mo in gross rent. In Orange County terms, that would be like being able to buy a $315,000 home (which I guess would be an old, 1500 Square foot SFR in Santa Ana/Anaheim) that rented for $6,750/mo. If you find one of those... you should definitely buy it :)

Curt,

Kinda have to disagree there. In what world is establishing your own broker/contractor teams, doing your own research, hand-picking your own PM, and having final cut on tenants (if you so choose) a worse scenario than putting blind faith into a company that profits from you continuing to buy (and thus will shape your opinion of good/bad deals to fit their inventory).

I'm not saying turnkeys are bad, but I am saying they sit on the opposite side of the table from their customers. No two ways about that. I do think it is a disservice to tell a new investor that they should go the turnkey route from the start- how are they supposed to learn how to do things right when they will be learning from a company that is doing it wrong?

I'm a little late to this party, but two things here:

1) O'Brian- I'm pretty sure we played little league together in Irvine. You have a pretty unique name.

2) What's up with wanting to go with a turnkey? Why not find the properties on your own, either rehabbed or pre-leased, and turn over to a trusted PM? It seems like you want far more control over all of the different "groceries" that go into a purchase than a typical turnkey will be able to give you.

The distinction I usually make is that a structure that has zero shared walls is detached, a structure that has one shared wall is SFR Attached, and a structure with two or more shared walls is considered a condo. I have no idea if that is correct, or even the right thought process, but it seems to be consistent. For what its worth though, I've thought the concept of "SFR Attached" was kinda silly.

16th and Washington... which appears reasonably close to downtown.

... and for a friend's Bachelor Party... pretty good/lucky planning on the part of those who planned said Bachelor Party.

Since I know there is a strong Denver community here... anyone have suggestions as to where we might find good craft beer, a decent meal, etc? I remember a lot of the things I learned at the BP conference a couple years ago, but the memory gets a little hazy when it comes to what bars/clubs we actually ended up at.

Also... since I'm a huge Niners fan, I'll definitely be rooting for the Broncos this weekend, and hoping Peyton carves up the "best corner in the game".

If they are owned free and clear, a seller financed blanket loan would accomplish that. Of course, you'd still need to negotiate terms, but that would be a starting point to the conversation.

American Homes 4 Rent has a footprint in Houston too, and actually a bigger one, but they are barely over 50% leased right now and I doubt they'd want to take on new acquisitions in that market before fixing the vacancy.

Invitation Homes (Blackstone's subsidiary) doesn't have anything in Houston to my knowledge, and I doubt a 12 door portfolio would get their attention enough to start operating in a new market, but by all means it is worth a try. I only led with ARPI because they have a decently smooth and well-leased operation in Houston already.

American Residential Properties, Inc (NYSE: ARPI) had 830 properties in Houston as of the end of their 2013 Q3... they're probably interested.

Corey, feel free to use our fund as a benchmark. I think we've talked formulas in that area before. Without knowing rent numbers, it would be hard to give you an ARV, though.