All Forum Posts by: Jonathan Pflueger

@Jessie Saribay Jr

Find a niche and get really, really good at it. Don't try and compete with institutional money or large cash offers - find something that is marginalized or overlooked and exploit it. 

@Robert Schumacher

Ha, I did get my numbers reversed. Not much sense investing only to get a higher cap rate. Cap rates are one of the very few metrics you want to buy high and sell low. 

Thanks for the catch! 

@Greg R.

I ran into all the same questions you have about 2 years ago. My best advice is to echo what @Mark Pedroza said - go to as many meetups as possible and begin networking. Watching webinars and reading only takes you so far, the next step is making connections and talking to the people that have the experiences you desire. This was huge for me when I started doing it and continues to pay off to this day. 

Everyone recommends investing outside of CA, I recommend the opposite - invest in Santa Cruz and the surrounding areas - specifically the San Lorenzo Valley! It's expensive, extremely competitive, and only getting harder, but well worth it. It is not impossible here, just difficult.

PM me if you would like to meet up sometime and talk real estate. I just purchased a multi-plex in the local area and have plans to take it from a 6 cap to a 8.5 cap in under a year- nearly doubling its value. The deals are out there, they just have to be flushed out. 

Best of luck. 

@Nicholas Kitchen

Your offer should always reflect the current NOI or cash flow. You analysis of the property should also reflect the potential upside, should you be able to capitalize on it. Cash flow unrealized is not cash flow.

A lot of brokers like to include future "potential" income as part of their valuation (CAP rate) thereby boosting the appeal of a property. Be wary of this and stick to the actual numbers. The only caveat I would add to this is that some markets command higher lower CAP rates, even on mismanaged and partially vacant properties, due to the crazy appreciation and "potential" future rents. Examples of this would be the San Francisco Bay Area, New York, and Seattle - these types of markets are unique and require a different type of investor/mindset sometimes.

With all the in mind, stick to your buying criteria and only accept actual numbers. Make the offer you think it is worth and see what happens. 

Best of luck. 

@Rachel Deering

Fair is having your daughter pay market rent - she has zero invested/risk, experience, and not much to offer other than she can pay rent. So the question is not "what is fair," but what are you comfortable doing? Fair is trading like value for like value - this is a handout of sorts (don't get me wrong, I am all for helping family out - it is just important we call it what it is and not confuse this with investing). 

You say, "I have told her that this MUST be an investment for me because we are simply not in a position to be making a down payment on a house for my young daughter just to help her out..." and yet that is exactly what you are doing. You would be better off buying the duplex and renting it out at full market value to non-family tenants and having your daughter rent a small studio or room out of someones house. This way, when you sell, you can still pay her as much money as you want and you avoid any potential (and likely) sticky family situations, not to mention you make more money and lower your risk. 

If you want it to be an investment treat it as an investment. If you want to do it to help out your daughter and you are stuck on having her live there, then figure out whatever split you are comfortable with. Ultimately, it just depends on what you are after - but do not confuse the two. 

@Ben M.

A good deal is a good deal. We buy real estate to invest, not for it's learning value. With that said, you always end up learning a lot from any deal you buy so it's sort of a catch 22. And to boot, the biggest lessons usually cost the most...

I would highly recommend running this deal by an experienced investor before you purchase. Being that it's your first deal it can't hurt to be safe. 

Best of luck!

@Anthony Barbato

You can do whatever you want with a property you own - that is, until it gets red-tagged and/or you get into a "ghost ship" disaster like mentioned above. 

Whatever you buy, the numbers need to pencil with only the permitted units - that way if you ever do lose the un-permitted units due to city red tags, fire, or anything else you are not underwater (insurance will not cover un-permitted units and in some cases your insurance provider could deny a claim on a permitted unit if the damage was caused by a un-permitted unit you allowed) . In this market and specifically in the Bay Area it can be tempting to fudge the numbers (and yes, including rent from un-permitted units is fudging the numbers) and force a deal to work, but this is just a recipe for disaster and not the way to conduct business. 

Just my opinion. 

@Jonathan Styer

Are you trying to get a blanket loan for both properties or individual financing? Depending on which strategy you choose, your options will vary greatly. 

A residential loan is a no-go for most commercial properties depending on the zoning, although there are exceptions depending on the intended use and whether the property will be owner-occupied or not. You could finance the property with just the SFH on it with a residential loan (this may depend on the amount of renovations it needs though) and get commercial for the other.

If you do decide to get a down payment loan (a better term for this would simply be a personal unsecured loan) from your family - acquire the loan and deposit it in your account two months before you purchase the property, that will meet the seasoning requirements by the bank. This way you can use the money as a down payment for residential financing no questions asked.

A combination of all these strategies, as well as the ever possible owner-financing strategy may be in-line. 

Just as an aside, before you go through all the work of figuring out what type of financing might or might not work - just call up the owner and see what he/she has in mind. Tell them you are interested and you would like to know how you might be able to structure a deal that works for them. They might solve your problem for you or at the very least point you in the direction you need to go to make a deal work. 

Best of luck. 

@Nick Talvy

For the right price most anything can be a good deal. With that said, not all good deals are worth acquiring. I think this really depends on the area in general. For instance, I rented a home exactly like this a few years back and I paid top dollar rents - however, it was in an exceptional area and amazing neighborhood. I got used to the sound and eventually I had to really concentrate to actually hear the traffic. 

Don't buy the house, buy the area. And make sure there are other houses it will comp against before you buy. Assuming there are others house similar to this one (next to the traffic wall), see what those are renting for - can't hurt to be too careful. But the right area should go a long way to insulting any investment at the right price. 

Best of luck!

@Stephen Stokes

I am not a fan of "bait and switch" tactics and this sounds like one. For instance, are you actually willing to make an offer at the price you put in the letter, or is it simply a gimmick to get someone to call you. Nearly all sales pitches are gimmicks to a certain degree, but the best pitches are sincere and focus more on the customer than the bottom line of the salesman. 

I am old school I think, but I believe if you say something you need to be able to deliver on it. Blanket statements are hard to deliver on and may build cash in the present, but they generally do not build business relationships that last a lifetime. 

I really like the handwritten letter strategy and since you are a buy and hold investor this might work for you. Wholesales and flippers need volume - buy and hold investors need refined quality. I would work on narrowing down your target audience (area, type of units, price point, etc..) to a manageable number and reaching out to them with a more personal connection - handwritten letters really help with this. 

Just my 2 cents, best of luck.