All Forum Posts by: Ramin M.

Ramin,

I'm a dentist turned real estate investor.  There are a couple of points you might want to consider.

I started buying houses and soon after quit dentistry, or at least quit being a full time dentist.  This ended up being an impediment to investing as my personal income dropped and banks were much tighter with loans than they would have been if I still had a more dentist-like income.  Since you have 6 years before your planned retirement (or semi-retirement) I would make sure to use those years of high income to acquire a lot of properties.  Once you cut back, banks won't look on you very favorably.

Second, I would make sure it makes financial sense to purchase a practice rather than associating, especially since you want to quit full time dentistry in 6 years.  The cost of purchasing, financing, and, most importantly, running a dental business can be draining.  I would check the numbers.  It wouldn't surprise me if you would be better off associating for those 6 years rather than buying.

@Ramin M. One thing to look into for yourself since your wife and you are both in the medical field, is a physician loan. They can provide you with 100% financing depending on your specific financial situation and standing. They can be used for SFH, 2-4 units and second homes last I checked. Definitely want to confirm with your lender but might be great for you to get some more doors and allow you to keep saving for your business. Hope this helps!

Cheers

Quote from @Ramin M.:

Quote from @Dan H.:

If we estimate your expenses as 50% of rent (Property tax, insurance, HOA, vacancy, maintenance/cap ex, PM) your return is ~3.2%. This is terrible especially if you can get ~5% with no effort and virtually no risk from either money market or CD. Note there are other options that also seem far better than the return you will achieve on your home without leverage.

If you sell you will meet the 2 of 5 years occupancy requirement in November 2023 to have no tax based on gain.  I would live in the house until at least November and sell it. I would not try to operate such a house as a rental from a far (exception for if you plan to move back to SAn Diego in the future).  If you are moving to Boston, you would be better served buying a home in Boston than renting out one in San Diego while renting a RE in Boston.  Especially seeing that after renting 3 years, you will lose your owner-occupied gains exemption.  Also your rent to value ratio on your home is poor.  This is common with ex-homes.  This is because the RE was purchased to be a good home for you and your family and not necessarily to be a good RE investment.

If RE is your goal, keep educating.  Start by considering and researching what I indicated above.  Look into expenses and the 50%.  Look into 2 of 5 year rule.  Look into what is considered a good rent to value ratio.  Research the power of leverage.

Good luck

Thanks for the feedback. I'll look into all that. How are you getting those numbers though? House is 840k cash. HOA 178 and yearly tax is right at 10k. Rent should go for around $4500 a month. No matter what it's still about $3500 cash flow positive monthly. It's brand new development and don't got too much expenses for maintenance or anything. I'm not worried about renting from afar personally. I agree, I don't plan on holding this property forever because I think the equity alone can help build a better portfolio with better rent to value ratio. It's in upcoming area but I don't foresee appreciation to skyrocket ever.

Prop tax is ~19%. Vacancy to include unit refresh time, finding tenant (including credit/back ground checks, and waiting for tenant notice period with current LL) will be at least 5% (possibly less if you were large enough to have employees already available to do the work but that is not the case with 1 unit), HOA 4%, maintenance/cap ex 10% ($450/month on a house of your size. Even though items are new their lifespan has started. Example if you have asphalt shingles and replacement is $10k (you may have tile with longer life and higher cost so works out to be close to same) at 20 years is $500/year or just over $40/month. Do this for all items and you will get ~$450/month for your RE. I used to do spreadsheet on each of my offers as part of underwriting but after a half dozen or so I could estimate fairly accurately what the spreadsheet would show. My lowest pro forma for a unit that HOA covers no maintenance is $250/month for a small, attached studio), Pm 8% (include it even if self managing because it is work and requires effort. It may also have some challenges from a far that lead you to desire to hire a PM (PMs are not getting rich on their fees), insurance ~4%, miscellaneous ~3% (things like LLC, umbrella policy, rental unit tax, accountant tax person, etc)

Roughly: 18+5+4+10+8+4+3=53%.  

If you want to self manage and not allocate any value for your time, subtract 8% and you are at 45%. 

The 50% rule seems to be fairly accurate with a quick estimate of your expenses not including mortgage service (which you currently have no mortgage). 

Good luck

If we estimate your expenses as 50% of rent (Property tax, insurance, HOA, vacancy, maintenance/cap ex, PM) your return is ~3.2%. This is terrible especially if you can get ~5% with no effort and virtually no risk from either money market or CD. Note there are other options that also seem far better than the return you will achieve on your home without leverage.

If you sell you will meet the 2 of 5 years occupancy requirement in November 2023 to have no tax based on gain.  I would live in the house until at least November and sell it. I would not try to operate such a house as a rental from a far (exception for if you plan to move back to SAn Diego in the future).  If you are moving to Boston, you would be better served buying a home in Boston than renting out one in San Diego while renting a RE in Boston.  Especially seeing that after renting 3 years, you will lose your owner-occupied gains exemption.  Also your rent to value ratio on your home is poor.  This is common with ex-homes.  This is because the RE was purchased to be a good home for you and your family and not necessarily to be a good RE investment.

If RE is your goal, keep educating.  Start by considering and researching what I indicated above.  Look into expenses and the 50%.  Look into 2 of 5 year rule.  Look into what is considered a good rent to value ratio.  Research the power of leverage.

Good luck

Hi Ramin-

I actually recently relocated to San Diego from Boston! Too funny. 

Congrats on your marriage, that's very exciting. 

I'd love to offer guidance with real estate and offer advice where I can. Would love to connect.

Here are a few articles that you can go through on your free time with what is happening in the Columbus market today!

1. Nationwide Children's hospital is investing $3.3+ billion dollars which will drive the prices up in Southern Orchards, Driving Park, Old North, Franklin Park and Old Towne East. https://www.dispatch.com/story...

2. Intel is coming to Columbus and building a 20+ Billion dollars to build a computer child facility with high wages paid to employees. https://www.intel.com/content/...

3. Honda is building a $4.4 billion dollar plant in Ohio to keep up with production which will lead to thousands of jobs. https://www.cnbc.com/2022/10/1...

Is there a reason that you are not investing in Ohio?

Here are a few articles that you can go through on your free time with what is happening in the Columbus market today!

1. Nationwide Children's hospital is investing $3.3+ billion dollars which will drive the prices up in Southern Orchards, Driving Park, Old North, Franklin Park and Old Towne East. https://www.dispatch.com/story...

2. Intel is coming to Columbus and building a 20+ Billion dollars to build a computer child facility with high wages paid to employees. https://www.intel.com/content/...

3. Honda is building a $4.4 billion dollar plant in Ohio to keep up with production which will lead to thousands of jobs. https://www.cnbc.com/2022/10/1...

Is there a reason that you are not investing in Ohio?