All Forum Posts by: Jonathan Pflueger

@Dawn Albert

What are your other options? I 100% agree with @Andrew Powers, you need to really evaluate your goals, expectations, and risk tolerance levels. With the information you have given it sounds like you cannot afford a house in the Bay Area unless it is similar to a deal like this, and believe me there are not a lot of deals like this. 

When you don't have much you have to sacrifice in order to get ahead. The more ahead you get the less you will need to sacrifice (or sacrifices won't necessarily feel like sacrifices) and more options will open up. All of the reasons you list on your "worry list" can be mitigated and just come with the territory of owning rental properties. Our fear in investing usually comes from a lack of education - with the right education you know your risk tolerance and how to get where you need to be. You gotta start somewhere, don't pass up a potentially good opportunity because it may be inconvenient or hard, not a great way to start or end up. 

Best of luck. 

@Steven Birch

No relationship is so good that a clearly spelled out partnership agreement isn’t needed. I repeat, no relationship is so good a clearly spelled out partnership agreement is not needed. I repeat, no relationship is so good a clearly spelled out partnership agreement is not needed.

The best way to honor and respect the relationship you have with your brother is to put together a partnership agreement. When you combine a good relationship with a good partnership agreement you dramatically lower your familial risk. Notice I only said lower, the risk is always there but good investors always look to lower risk and maximize returns.

Best of luck!

I am buying value add single and multiple-family units in San Lorenzo Valley (Mt. Hermon, Felton, Ben Lomond, Brookdale, and Boulder Creek), Scotts Valley, and Santa Cruz areas of California. We use conventional, hard money, private money, and very creative financing options to get deals closed and renovated quick.

We love unique properties with lots of issues and/or problems. Wholesalers welcome.

@Cameron Calvert

I don't know if it is a good idea or not to give the neighbor some or any money per booking, but I do know that if $25.00 a booking affects your bottom line this deal is way too thin. Throw in the difficult neighbors and you are in for some expensive lessons. 

@Manco Snead

Look for house with a detached garage and convert that into the ADU - a whole lot cheaper than building from the ground up.

@Jai Reddy

You could not have said it better. The bonus is that sincerity feels good and you get a deal where both parties walk away happy. Thanks!

@Ika Sargeant

It's a people game. People mean relationship building. If you can do this you will be successful. I have found locally that small multi-family commercial operations with between 5-10 units tend to be mom and pop owners. These owners all tend to be older and consider their units to be home or at the least a second home, tenants are friends of theirs, and rents/finances are far from optimized. This can be a serious sweet spot or niche for the well meaning local investor. 

Best of luck!

@Dawn C Holley

Thanks Dawn! Definitely do not give up, there is a deal out there for everyone. I am sure you have a lot of local connections that just might be the ticket to success. 

This was our first big commercial property deal with lots of moving parts. We learned a lot and thankfully made it out the other end better off than we when we started. Being a small time investor with limited funds we had to prioritize our strengths and hedge out our limitations when competing with other more savvy investors.

We love investing in the San Lorenzo Valley (Ben Lomond, Felton, Boulder Creek, Brookdale). Our mountain community has many unique properties - this property used to be a small summer resort consisting of 5 small cabins that had been in one family for about 70 years. In the last 15 years or so the property had fallen into disrepair with many of the cabins unlivable, dilapidated, and 100% vacancy.

Our goal was to bring this property back to its former glory while maintaining the rustic community and neighborhood vibe that is Boulder Creek. At the same time we wanted to help provide affordable community housing to locals - we ended up succeeding in both.

Since we live in a such a high cost area (medium home price in the Santa Cruz County, Ca. is $923,065) we required a deal with significant value add potential in order to enable us to refinance our money out at the end. Because of this we needed to find a difficult problem (property) that needed solving - something that would scare most other buyers and part time investors away, low enough on the economic scale as to not attract “big money,” and unique enough to require a more flexible type of thinking. We had to focus on identifying unique strengths that might give us a small but critical advantage over our competition - in other words we needed a niche.

Our niche turned out to be the most common thing about us - our family and the simple fact that we are local to the area. The property was in such bad shape that it would not qualify for conventional financing and as an assortment of summer cabins it was not a typical straight forward multi-family deal. Our familiarization with the area, local contacts, market rents/values, and the community allowed us to build a strong rapport with the seller and present a very competitive and competent offer other investors could not duplicate.

We found this deal on the MLS of all places. The acquisition of this property was less of a negotiation and more of a relationship building opportunity. Since the property had been in the sellers family for over 70 years and had been their summer vacation spot for all that time, they were not simply selling an investment but a piece of their lives. This is a very important distinction that a lot of investors miss - treating sellers of this nature, like dollars and cents investors, is a mistake and likely a big turn off to the seller. Similar to the seller when they first acquired the property, we were interested in purchasing the property for the longevity of our family and a chance to build generational wealth - selling to us was a continuation of the sellers own ethos (beliefs and aspirations) and not just a calculation or monetary gain - this was our key advantage.

The point here is that identifying the type of seller is just as important as making the right offer. With that said, all of this is for nothing if you are not sincere in your approach and honest in your dealing with people. When our 45 day seller-financed offer was accepted it was 15% lower than the other two cash offers.

The seller owner-financed 70%, private money for 10%, and we put down 20%. We were able to lock in a very favorable interest only rate for 3 years with the intention of refinancing as soon as possible. Last month we closed on our refinance, paid the seller off, and pulled out 100% of our money. With lots of sweat equity and help from professionals we more than doubled the properties valuation and now sit at 100% occupancy (the vacancy rate for our area is about 1%).

Relationships are what create great deals. Plain and simple.

*I originally accidentally posted this in Deal Diaries when I meant to post it here. 

@Greg Hoffmann

You may only raise a tenants rent once every 12 month period. This does not change even if you sign new lease or ownership changes hands. I am more familiar with county rent laws so you may want to reach out to someone who is more versed in Santa Cruz City specific rent laws. @Jenifer Levini may be able to help you out, she is a real estate lawyer in Santa Cruz who is up to date on things.