All Forum Posts by: Jonathan Pflueger

@Thomas Poloncarz Jr

Run the numbers as if you are not going to live there, that way if you ever decide to move the investment still makes sense. The same goes for including property management costs. While you may be able to manage the property yourself in the beginning, you never know what might happen - i.e. what if you have to move out of state or you decide property management is not for you. 

For a smaller multi-family like a duplex I would focus more on cash flow. Just make absolutely sure you are accounting for all of the expenses when you do your analysis. 

Bottom line: every situation is different and depends on what you want to get out of it. 

Best of luck. 

@Michael Lee

Dont be discouraged that your offers are being turned down, that's the price of doing business the right way in real estate. As the saying goes, "you are going to make a 100 offers to just get one." In fact, if too many of your offers are being accepted you are most likely doing something wrong - i.e. making offers that are too high, miscalculating your numbers, or not taking into account the real costs of doing business.  

When I was buying my first investment property I also found myself a little discouraged when my offers were turned down. However, I quickly came to realize this feeling of discouragement was not really because I was discouraged about the business aspect of REI but more because of the emotional aspect I had developed during my "lengthy" due diligence of the property.

It sounds like you are doing the right things and more importantly you are sticking to your criteria. You have to find a property that fits the numbers, you need, to make yourself a good investment. These numbers vary for everyone, but it is paramount that you do not deviate from what works for you. If you continue working your system, and by that I mean your numbers, you are going to get more rejected offers but at some point you will get an accepted one. 

REI is all about the waiting game. And yet, you have to be willing to take swift action when the time comes. Sounds like you have the swift action part down, don't be afraid to wait for the right deal.

Best of luck. 

@Ernest Tavares

I like your way of thinking, especially right out of college. Mobile homes can be a tricky business, but they are also a great way to get your foot in the door. Mobile homes in the Santa Cruz area are not cheap and usually tend to sit around 300-500k depending on the park and condition. The "low" price also reflects the fact that the majority of parks will require lot rent which tends to be high (anywhere from 100-650). 

Lending on mobile homes are also a little more difficult than your normal SFH. For instance, if the home is on a foundation or not, whether you own or rent the land, or maybe the park land is communally owned and you are own just a percentage of it. The mobile homes date of manufacture will matter as well. All these factors have a big impact on whether you can get financing and the terms.

I have not heard of a "discount factor" when it comes to mobile homes. To be honest, the housing stock is so limited in the entire Bay Area, including Santa Cruz County, that any home is commanding a premium and mobile homes are not an exception. 

I would recommend attending a few Real Estate Meet-up in your area or the area you want to invest in. You will get a wealth of knowledge and may even meet someone who will want to partner with you.

@Llewelyn A.

"Cash Flow is not a characteristic of the Investment, it's a Characteristic of the INVESTOR." This is great, I 100% agree. I feel like so many people, members of BP included, have a single definition of what "cash flow" is, and in that way, limit themselves to so many other ways of evaluating investments - specifically in high cost areas. 

Due to your recommendation in a previous forum I bought What Every Real Estate Investor Needs to Know About Cash Flow and have been working my way through it. I will admit, it's been some pretty heavy reading but very enlightening. Thanks for the recommendation. 

@Llewelyn A.

I really appreciate all your posts here. I can see how your line of thinking is somewhat counterintuitive or counter-culture to a lot of folks here on BP. I live in the SF Bay Area and I am beginning to really understand what you are getting at by IIR and different approaches to what constitutes a cash flowing investment. 

I struggle with synthesizing my market with all of the advice/opinions I read/listen to on BP. Real Estate investments here in the Bay Area, like NYC, I feel, are incredibly more multi-dimensional than your typical RE investment in most other parts of the country. The exception to the rule in the Bay Area is buying a SFH house that cash flows and for that matter a Multi as well. However, we also see home prices nearly double every 10 years and while you cannot absolutely count on that as gospel the overall trend is upward - and for a buy and hold strategy this is key. There are ways for the average guy to get both an appreciation play and cash flow, with limited money down - it just takes some creativity and patience. However, you must have a significantly deeper understanding of the market in an area like NYC or the SF Bay Area than most other parts of the country to make this work.

Ultimately, ones buying strategy comes down to their end game. I think all Real Estate investing is speculative, some of it is just less speculative than others. 

With good screening you can always find a good tenant so I would not worry about the current tenants moving. End the lease with the currents tenants as soon as you can and raise the rents. 

This needs to be a business decision pure and simple. Although you could talk to the tenant, let me them know you are going to terminate their lease, and offer to re-lease to them at 10% below market value. This way you keep good tenants and they still get a deal . Win, win. 

Best of luck .

@Kally M. 

@Lonnie Freeman

Ha, the SF area is a hard nut to crack. The game out here is so different than most places, fundamentals are the same but numbers sure work differently. 

I do love it out here though and the deals I have been able to do have been great. It's definitely a long term buy and hold strategy for the most part. Same goes for you, if you are ever in the greater Bay Area feel free to hit me up. I'm small time, but I am slowly building my network. 

Jonathan

@Lonnie Freeman

Lonnie, thanks for sharing your deal. I always get so much inspiration from hearing other peoples stories. I live in the San Francisco Bay Area sand hearing what other people are doing is very helpful. 

Best of luck Lonnie!

@AJ Nettles 

While $22,000 is a nice chunk of equity it may not be enough to get a HELOC or cash out refinance. Most banks will only allow a 75% LTV HELOC on investment properties (this can vary from bank to bank) - so if your property appraises at $100,000 you would not qualify for a HELOC due to your high LTV. Really depends on how much the property is worth.

With that said, every bank has different overlays/standards so if one bank tells you no I would recommend shopping around at your local credit union, etc..

I do like your line of thinking. At the moment I am in the middle of refinancing and applying for HELOC all at the same time.

Best of luck AJ.

I would tend to agree with @Ronald Rohde. If you plan on moving to Texas in the future buy there and rent in the Bay Area for now. You will be out of state investing for a while but it sounds like you already have a support network in Texas, being that your family is there and can possibly oversee/help out with any potential rentals you purchase. 

Buying in the Bay Area is, for the most part, playing the long game as a hold. If you plan on moving in the next 5 years you had better hope the market holds and houses keep appreciating or you will be stuck with either taking a one time loss when you sell or a loss every month when you have to rent it out. 

Personally I love investing in the Bay Area, but all my deals are long-term holds. I plan on turning all my real estate over to my sons when I pass, hopefully building generational wealth in the future. It ultimately comes down to your endgame and how you want to get there. 

Best of luck.