All Forum Posts by: Robert C.

@Scott Roelofs, @Heidi Henderson, @Bill S., @Daniel Hyman, Thanks. I probably should have specified - I'm a little old school and prefer to work with someone locally. I like being able to knock on someone's door if need be! 

Hey BP,

I'm searching around for a cost seg firm for multi-family around the Bay Area. Do any of you have recommendations that you've used? Any cost estimates?

Sadly, this is one area where I seem to be short with my local contacts (including my CPA - oops!). 

Thanks in advance!

@Jennifer Hamon, Full disclaimer: I do know of Tod Spieker (I've seen him speak) and he is kind of a local legend around here having built such a large portfolio. It's unfortunate that you're being haunted like this, and I'm not totally surprised. I do think many of the property management companies around here lose sight of the customer service aspect of the business. 

Here are some of my thoughts:

1.) The simple answer is to run your business differently - there's nothing wrong with that. No need to chase down your tenants for a couple hundred dollars if you can afford to let it pass. 

2.) On the tough love side of things - if this $200 thing affects you so deeply, I'm not sure how you will react when a tenant does something that costs you that amount or more. Tenants can be pretty irresponsible and vindictive as well, and can cause mental anguish, too - you will always remember the bad ones!

3.) The fact that you're asking the morality question means that tough decisions will be unavoidable unless you have enough money to not to care about the money. And if that's the case, you're not really being that good an investor. You will at some point have to raise rents, or evict someone, or deal with somebody who is not happy with you or asks for something that you are not willing to give. 

I can't answer the self-worth thing for you, but I can tell you that if you self-manage, then landlord-ing is a very "up close and personal" business. That means that you might feel like a turd some days because you had to get your hands dirty, but then there are other days when you know you did a little something to help a good person out. Hopefully, there is much more of the latter than the former. 

@Alex Shin, It sounds like the money can be split up since there are two parcels, so they don't have to put all their eggs in one basket. 

I personally haven't found an opportunity zone deal I'm interested in yet, but I wouldn't throw the idea out. I know some smart people who are allocating funds there, and it offers great wealth preservation over the long term if you choose right. The biggest "loophole" I've seen is people putting their money in luxury projects located in areas that have already gentrified. CA is probably not the best state for it, though. I've seen interesting things going on in Texas and Arizona. They probably have original equity that they can put back into their pockets to reinvest elsewhere.

There's no perfect answer to what you're asking, otherwise everyone would be doing it. With $7mm, most people don't want to pay the taxes, and it's hard to entrust all that money to a syndicator. 

@Stephen Quesinberry, Wow, what a blog post. Thanks for the link.

1.) Comparing what Clayton is going through to having chemo... uh... no, and gross...

2.) I'm pretty sure at least the critics on this forum of REI folks are not all "anti-Fox". Ha.

@Mike Lin, Just a disclaimer first - I'm not totally up to date on all the SF regulations cause things have changed a bit the last few years. 

But just food for thought, I have a recent anecdote where a friend of mine bought a single family home with an additional non-legalized space with a back entry door. He wanted to legalize the square footage to the house and flip the property. The city DID do research to see whether that extra space had ever been rented out. He got lucky and they didn't find anything, but they said they wouldn't have allowed it if there was proof of a rental history. 

@Account Closed, One method isn’t necessarily better than another. It’s part personal choice and part market you’re in. Sounds like you’re already starting with what you feel more comfortable with, which is probably a good thing. 

@Account Closed's point about depreciation, that's a tactic that can be better exploited by people who view real estate as a long term and generational wealth strategy. It's less feasible if you're looking to become wealthy through real estate investing alone, if that makes sense. If you're starting from "zero" and looking to "get rich" in real estate, then you're mostly going to rely on shorter term strategies (like flipping, or development, or syndication) to put money in your pocket immediately. 

The best example I can give, is that I used to wonder (when I started) why people in San Francisco or Palo Alto were willing to buy up property at a 3% cap rate. Don't people want cashflow?? Well, many of those are people/entities with a lot of cash at their disposal. What they see is an opportunity to buy property in highly appreciating markets, with a tax free (as you were saying) 3% annual yield. So from a wealth preservation standpoint, that's a really good deal compared to where else you might put the money, especially when you consider the cashflow and appreciation will also grow over time. The depreciation also gets crazy when you're in an upswinging market, because the assessor (based on local guidelines and I'm sure a company like Kushner's petitions) can easily assess the land as a smaller fraction of the total property value. So, like a $10mm property could end up depreciating $8mm for the building's value upon purchase. 

You'll find that on BP, there's a lot of push back about the risk/reward of buying high cash flowing properties versus low cap, highly appreciating properties. My view is that the risk assessment of wealthy investors is different from the folks who are really relying on returns to make a living. 

@Jim K., I wonder if what you're noticing is more of a self-selecting distinction. People starting out today who are much more organized/self-motivate/knowledge seeking (whatever you want to call it) will probably encounter BP sooner rather than later. 

At the same time, anybody who is totally new to this will have no idea what they're doing, and it's up to them to figure out how to conquer the learning curve. Landlording is one of those things where you really don't know what to ask until a problem comes up, because you've probably never thought about the day-to-day work in much detail. Also, I think the instincts of a seasoned landlord in dealing with tenants are often completely different from how most people normally deal with interpersonal relations. I notice a lot of new landlords think "I'm just going to treat the tenants the way that I would want to be treated", and as many of us know, that is a recipe for disaster both in terms of management headaches and running afoul of landlord-tenant laws. 

Anyway, I think BP is helpful, but not the only way to go, and maybe it's easy forget how much we all didn't know when we started. Heck, I roll my eyes a lot about some of the questions that pop up in the forums here, too - I just can't help myself!

I didn't use BP for starting out, but I find it useful to direct people here when they start asking me about getting into it. 

@Jay Hinrichs, I haven’t seen that here in the Bay Area yet. I was also surprised to discover that luxury apartment buildings in the Peninsula down to Los Altos are still raising rents this year by $200-$500 per month. That’s actually helping my more recent buildings out because I’m finding a lot of renters are realizing their not getting any use out of the pool and the fancy services and would rather save some money by living in my remodeled units. 

One of the commercial brokers I work with thinks they can keep raising because they are actually supported by a lot of corporate rentals. So they are getting a premium prices on 3-6 month leases and the renters don’t care because it’s the tech companies paying. Don’t know if it’s true or not, but whatever the case these big property management companies seem to be happy continuing charging what they charge.