All Forum Posts by: Orion Walker

I'll try to time this with another business trip over to Sac. In the meantime I just threw out a little post to see if anyone happens to be around and want to meet up after work on Thursday (12/4). Cheers.

Hi Folks,

A family friend contacted me today to let me know that they are looking to sell or have someone manage their coast house in the area I've been buying. I love the house, have stayed there a number of times, and have daydreamed about buying it in the past. So, I'm pretty happy that they came to me for advise/help. Shows that my recent outreach is working. 

Now I need to think about a strategy that could work for us and them. They are interested in either selling it, or renting it and having someone else manage it. They are looking to me for advice and to see if I would be interested in buying or managing. 

They recently posted on Zillow FSBO at a fairly high price ($500k). I estimate that it might be currently worth about $450k. They purchased it in 2000 for $300k and I believe they've been overpaying their mortgage, though probably not all the way paid off. They've added a mud room and master bath, and various other improvements, probably have $50-100k into it.

They don't use it much. It is in a good area for vacation rental (short walk to sand dunes, some ocean view). It also has a fairly good sized garage/shop that I've always thought should be turned into a second unit. I think if I owned the place I would finish out the garage/shop as a compact 2/1, rent that out long term, and then rent the larger house (a 2/3) as a vacation rental, or maybe the other way around. 

The owners are fairly well off, and not really interested in dealing with RE. I'm thinking this is ripe for an owner financed deal or a lease option, or maybe subject to? Given that they are family friends and not desperate I'm not thinking I'll get a particularly low purchase price, but I'm thinking that if I structure something correctly they could be happy turning what is now an under used money loss into a hands free income source while I use some creativity to maximize income to cash flow and acquire. 

I'd love to get pointers/advise on how you would approach this deal. Thanks!

Hi Folks,

I know it is kind of short notice, but I'm headed over to Sacramento on Thursday (12/4) for work and I'd be interested to meet up and yack about real estate after work. Anyone want to meet for dinner or a beer or what not?

@Taylor McClung, trying to think of who else I've crossed paths with over there, Al Williamson, Sergey Tkachev... Anyhow, if anyone would be interested in meeting up just let me know.

Cheers.

Hi @Steven W. my wife and I used to live down there after she finished up at Stanford. She's a teacher and I work at our local community college, so sounds like we have a few things in common. Interesting that your method for getting started was to buy up some SFR's out of state. I've been taking the opposite approach in creatively making some deals work up here, but eventually I would like to try both approaches. Look forward to crossing paths here and meeting up at some point.

@Gordon Cuffe, thanks for the heads up on CESA's. I'd be interested to learn more about this strategy. Anyone else have experience with this type of self directed IRA? We have kids ages 3 and 6 and I'd like to make moves now to prepare for the college expenses.

@Yu L. That is suuuper inspiring! I keep meaning to get really active on this strategy and haven't quite made the time. Now I will, and I'll do it knowing that I will likely do it for a long time without getting anything, but I'll keep in mind that you never know when you just might make 40k from sending a letter. Thanks for the inspiration.

@Steve Olafson , there seems to be a an interesting array of opinion here on how to approach expenses. I agree that those expenses could vary a ton depending on location and various other factors. Thanks for the specifics on elements to track down and analyze. Seems like verify as much as possible and then extrapolate conservatively where needed to build projections. 

Thanks for the follow up info @Tom Lafferty . The place currently has a maintenance guy who lives on site and a management company based a couple blocks away. I would likely keep the maintenance guy and look at taking over the management with my wife. We could be on site pretty much every day for a while as needed. If the current rental market continues it shouldn't be hard to keep this place at near 100% occupancy.

@Account Closed , Thanks. I'll keep asking for more specifics regarding the loan.

I'll continue to gather information and add updates here. I super appreciate all of your helpful comments on this thread.

Hi @Stanley Miller and @Leyla Simsek, always good to meet new norcal folks on BP. I'm a bit further north, two hours up 101 from SF. Best of luck in your wholesaling. Doesn't look like anyone has mentioned it yet, so I'll add: be sure to set up keywords, really helps to stay tuned into conversations going on in your area/subjects of interest.

Cheers

Wow, every time I think this thread is probably drying up more folks jump on with another round of great advice. Thanks everyone! It rocks to have this great site and all of you helpful folks out there!

I've been mostly focusing on family time over the last few days, but here are a couple of little updates/info. Just passing on info that I'm getting at this stage.

-- I've asked a couple times now and they assure me that the loan has 24 years remaining and is fixed at 4.1% with no increase.

-- Their explanation for the low expenses is that they keep tight control of the property, most of the units have been recently redone, and tenants pay electric, garbage, and water.

-- Explanation for previous escrow not closing was that buyer did not meet experience guidelines to assume loan (this would be my big problem as well).

So, QUESTION: If I were to assume expenses at 50% of income as some have suggested, Income would be 39k, expenses would be 19.5k and then you add in mortgage payment of 18.5k and you are at 38k. That sure doesn't leave much income/wiggle room. And that's before figuring out how to bring 1.1M down to the deal. So, by those standards this deal would seem to look terrible. Am I missing something in that analysis?

@Tom Lafferty , Thanks for the great comments. I'm of a similar mind. A big repositioning play sounds great, but given my experience level taking over a recently renovated cash flowing complex might make a lot more sense. Do you mind if I ask how you bought your 32 unit place? Did you have a the $1 Million to bring to it? Lack of funds and lack of track record for the loan would seem to be the big inhibitors for me on this. Seems like I would need 1 or more experienced partners, or an opportunity to manage the place for a couple years to then qualify for the loan.

@Nik S. , thanks for the words of wisdom. From what I know of the tenant base/area I would say it is primarily Hispanic families. Not to generalize too much, but my general notion is that in this area these families have fairly stable incomes. They tend to work in local industries/jobs that are pretty much always in demand. Not as easy as a more upscale/white collar complex, but not as challenging as other areas/demographics. That would be my take on that.

Thanks @Ryan Goldfarb , yeah, I easily could have just written it off and said "I don't have a chance on that", but I'm super glad I contacted the guy. I've been learning a ton, and who knows, it could happen. I agree with @Lawrence T.  that by rights this deal would be over my head, but I figure that with a lot of help on the analysis side and some hustle on the management/ownership side it could rock this if I found a way into it. I'm always a big believer that motivation, desire, and hustle are often more important than experience alone. Plus, between BP and my local knowledge/network (have lived here 30+ years) I feel pretty confident on understanding the local market and having folks to turn to for help/advice/services...

Okay, this post is turning into a book. Better wrap up. I'll keep rolling on information gathering. Any further/continued ideas/input/advise is VERY much appreciated!

Thanks @Eric Z. I totally agree. Having this real deal in front of me has accelerated my learning a ton. 

@Johnson H., Yes, I am going to keep going on this one for a bit and then if this one doesn't end up going anywhere I'm going to track down contact info for all of the apartment/multi owners in this town and reach out to them :)

I still have a lot of questions on the financing side. If this WAS a good deal, would it just be a matter of pulling in enough partners to raise the 1.1M to buy out their equity or how would this likely go down? Obviously there would be some negotiating involved. Anyone willing to walk me through likely scenarios on how a deal like this would or wouldn't come together, especially for someone without a lot of track record or personal funds?

I'll keep digging and post more info on this deal as I get it. 

Thanks again for all the comments and advice!

@Brian Burke, thanks for jumping in. I've been eagerly awaiting your opinion. Man, I'm learning a ton just from this process so far. Yeah, it is pretty clear that the current owners made the nice play. I DO want to be that guy. But it is also true that I'm in a bit of a different situation than you, or them, in that I'm working to get a foothold, a track record, a leverage point. But I'd rather not be a sucker. Yeah, I'd be curious to know what happened on the escrow last year. Certainly a red flag. Great feedback from you and others on the expenses. Glad I won't have to make that mistake. Big thanks for the feedback/advice. Very much appreciated.