All Forum Posts by: Andrey Y.

Your opinion might be right! but the U.S is the best option I think especially because of 1031 exchange cause it's no where else!

thanks a lot for you advice!

appreciate it!

This is false. The greatest predictor of poverty is the economic conditions of your parents. Somehow this thread has devolved into story swapping about tenants that would rather order takeout than pull themselves up by their boot straps. To be clear, these anecdotes are meaningless when we are talking about population level questions like economic inequality. If this thread was physicians discussing the cure for a disease as widespread as poverty, talking in terms of case studies or anecdotes would get your input immediately dismissed. Yet in this thread Joe Schmo landlord spinning tales of his tenant who just bought a big screen TV but can't make his rent is the meat of the discussion. I am happy that there are people on BP that have thrived despite the inequality of their situation at birth. But no larger inferences can be made on a case by case basis. 

To suggest that intelligence and/or willpower is the main difference between the rich and the poor is not only unsupported but a bit obtuse.

Alright! thanks for your advice!

I just wanted to know what do I need to know and do before investing in another country!

Is there anyone who is doing long distance investing? investing out of there country or state? Cause I want to know what measures do I have to take before investing in another country or state.

HI Brian,

Andrey's response made me think some more about what you were saying about cap rates. I agree with your points in theory, but aren't you making the assumption of a competitive market? This flattening out of the cap rates would occur if the market place for the higher double-digit cap rate properties and the market place for the lower 3-6 cap rate properties in Los Angeles consisted of the same set of buyers. I'm sure there is some overlap, but most likely very minimal. So Cal will never have high cap rates....and other markets where there are still properties in the 9-12 cap range will never experience the type of increase needed to move to the 3-6 range... at least not in my lifetime.

Also, I humbly submit that since your preference is to look at things from a cap rate perspective, I think that actually make the case for So Cal-type of markets. If CoC isn't considered, I think it is a no brainer that lower cap properties with high appreciation potential are much more attractive.

@Carl A.

Carl

As a practicing dentist and RE investor my spin is they are taking advantage of your situation and putting you in an undesirable position. You are left with either sending a notice to vacate or agreeing to giving them 3months of free rent. I doubt they would forego all the leasehold improvements they did to your space for 90 days of rent. And if you agree to their terms what is preventing them from asking for an additional 90 days? Most likely your tenant is a DSO and has Wall Street money behind them. That being said they could very well be feeling the down market and trying to salvage some liquidity. Their underlying business model is based on growth not earnings and that has come home to create problems. Would have to know more to fully understand your tenant but I would call their bluff and manage the situation from there. BTW I have dentist tenants as well and they are all paying their rent as promised. On a side note dentists can apply for the PPP loan (SBA 7a) and can receive forgiveness of the loan if they use it for payroll (75%) and rent, utilities,phone etc. (25%). So they have options. Good luck Carl and know this is just my opinion based on the little information I have regarding your tenant.

@Andrey Y. I saw your posts on the SBA Disaster Loan thread a couple days ago.  Sounds like you're having problems paying for your BAM? :-)

And therein lies the problem with what you're suggesting.  Obviously the best way to get rich in real estate is through appreciation long-term, but you have to be able to survive the downturns.  And it's hard to do that if you don't have strong, stable positive cashflows.  Unless you're telling people to rely on their high income job to make payments on these BAM, which also isn't reliable during a downtown.

Have you been through a large recession yet?  I think I saw one of your posts on another thread that you've been investing for around 8 years?  I firmly believe that those who haven't been through a full real estate cycle are still newbies (including myself).  You may have learned real estate through some big guys who made it through a crash, but there are more investors that didn't make it than those who did, and there are perhaps better learning opportunities from them.

Dude, why are you so argumentative to anyone who doesn't share exactly your opinion? 

Ok Brian used one term slightly incorrectly,  Cap rate is a valuation metric for MF properties, not a return metric, per se.  But you also commit the error of Argument from Fallacy, by discounting his point wholesale due only to that one mistake in phraseology. 

If you replace cap rate with non levered cash on cash return, his point still stands and is a valid one. 

@Tony Kim    I've been thinking about this post for awhile.  Because it doesn't really explain what I've experienced.   IRRs reflect leveraged returns, so they are not easily comparable.  So I prefer to use Cap Rates, which is a non-leveraged rate of return.

Assume I have properties that have a 9 percent rate of return (cap rate) plus 4 percent annual appreciation.  That might theoretically be equivalent to a Los Angeles 3 Cap property that has an annual 10 percent annual appreciation.

Money inevitably flows pretty quickly to good opportunities, flattening out yield curves.  In other words, prices go up, and the next crop of buyers don't get that super yield anymore.

50 years of data of Southern California actually need to be interpreted.  It hasn't always been the same economy.  What is more interesting is what is happening now.

The boom that you experienced is wholly due to the super high building constraints that California faces for new housing stock.  For 20, maybe 30 years, they haven't been able to build to keep up with demand.  So housing is expensive now, in a region that certainly has a lot of land and ability to grow vertically.  The high prices have driven some middle class out of the State, created growth of homelessness, etc...

Back to rates of return.  For sure, a place like Southern California had outsized returns, probably from the years 2012 to 2018.  These are appreciation returns mainly.  But there was real rental growth.

But these investments are tough. Lots of smaller rentals would have negative amortization if I bought them. Feeding investments is risky in my opinion. For larger deals, banks still would require LTV ratios, so you will have to put down large downpayments. That impedes your IRR. And using that much capital restricts your growth.

My conclusion is that legacy owners have golden properties.  Newcomers bought risk, that is amplifying the last two weeks.  

Few more observations:  I see lots of California investors looking outside of their state for returns.  Novice investors are buying quasi toxic turn key properties in areas with regional decline.  This will not turn out well for them.  I heard a statistic that the far majority of turnkey buyers were from California.  On a larger scale, cash flush real estate investors from California have definitely targeted other states, including my City.  Probably they correctly feel that relying on a appreciation only model has risks.

The real game in California residential real estate is development.  And it is a tough to do.  The ability to get approval / zoning changes to build apartment buildings.  Drive around Echo Park and you'll see a new neighborhood emerging.  Wealth is being created through building housing stock that is totally in demand.  

Proposed Law SB50 would have been a game changer.  It would create the biggest building boom since the 1960s.  Instead there is a water down law that got passed, basically allowing people to convert garages to mini apartments, etc..

 I am a student in Brad Sumrok's program and the deals that his students offer tend to be more investor-friendly (in terms of structure) than many big-name syndicators. I have invested in these deals for as little as $25,000, but the minimum is typically $50,000.