All Forum Posts by: Andrey Y.

@Andrey Y.

Dumbest thing i heard in a while. Can you have both? Yes! But casflow will not fluctuate as much. Appreciation will. So you cant act like you have cracked some code that no one has figured out. Its a matter of a balanced portfolio. Some properties cash flow more than others some appreciate more.

If your so intetested in having a big mortgage i would love to sell you one of my properties in philadelphia. You can have my $500k mortgage. I will take the cash right about now and buy a similiar property in 6 months when prices come down AND have enough left over to buy another cash flowing property 15 min away from that one in NJ. This way we are both winners in your book.

Well lets look at a real life example 684 Encina Grande Palo Alto CA  one of the highest cost per sq ft in the country .. I bought it in 85 for 180k  I think it peaked at 2.5 or a little better.. lets say in 2019  so in 35 years it went up 2.315 million.. and of course rents at what I paid would have by the mid 90s given me massive cash flow of 3k a month easy on that one house..   2.315/  35X12  =  420 months/ 2.315 = 5,511 per month of appreciation gains.. add in 3k a month for Positive NET NET NET cash flow for say 25 of those years or 300 months X 3,000 = 900,000 in positive cash flow over that time.  for a grand total of 3.215.000 gain on a property bought in 1985 at fair market value and just a basic 1400 sq ft rancher on a 6k sq ft lot.. And now you know why I cant even think about why I sold that house for 500k in 91.. 

So total net gain in this real life home in the SF bay area and not even the BEST part of Palo Alto ( Barren Park)  saw a return if I had kept it and rented it starting in 95 for the 5k a month it would have rented for then.  my monthly gain would be 7,654.47 PER MONTH.. 

So while the statement that not all of CA grows at 5k a month over time is certainly very true.  there are parts that have and do and have done better.. but its a long game cant take a snap shot.. like if you bought in 07 peak and sold in 2011 probably lose money you bought in 2011 for the 900 or 1 mil would have sold for then. you make massive gains the last 9/10 years. 

its kills me to write this out and the shoulda woulda coulda just comes screaming back.. And I owned another one in the same neighborhood I built as new construction and was all in at 700k and today that one is easy 3.5 mil.   

Any way back to the appreciation versus cashflow regularly scheduled thread. 

If I lived in another part of the country and I did the same thing started as an agent at 18 and a broker at 20 and the play was to stack cash flow rentals because appreciation is gambling etc.. that's what I probably would have done and would done.

Keep in mind in the 50 60 70s and into the 80s people got started in real estate buying cheap land all over the country as an investment

it was not until about 2001 2002 that smart folks said hey CA real estate is sky hi lets start selling mid west rentals to CA people and other high priced markets.. that's how the turnkey industry or OOS investing industry started.. No one was rushing to Memphis in the 90s to buy rentals from CA. for an example.

@Andrey Y.

And you'll never realize any gains until you sell. Why can't you have both cash flow and appreciation?? Your logic is ridiculous and there is no need to over analyze numbers down to per sqft.

@John Teachout

Positive cash flow is good. Negative cash flow not so much.

BAMs are also good today because you will be paying back your loan with less valuable money. The dollar today will have more buying power than tomorrows dólar or the 2040 dollars. Dumping $2T in the country debt diluted the dollar and could be considered manipulation of our currency.

BAMs are a play in the currency market while tenants make your payments for you.

Borrowing as much as you can at a low rate should be a great move at this time-it may make you thrive not just survive. Think about it.

The reality is that the Government has taken a lot of the decisions out of the hands of the homeowners. We've got strategy and backup strategy in mind yes, but it's a fluid situation with a lot of unknowns right now. What exact course of action landlords and property managers should take to attempt to make the most out of a bad situation won't be totally clear until the shoe drops.

This is truly an unprecedented situation, so those that think they've got themselves totally prepared for it are kidding themselves. We just won't know how everyone's portfolio is going to react to this until they've been given the chance to do so. 

A lot of this is simply playing the cards your dealt.. when I was starting in the industry in the mid 70s I lived in the SF bay area so that's were we invested Northern CA.. the thought of going across country to buy a rental was not contemplated..  It was the only thing we knew. And as luck would have it the SF Bay area has seen some pretty dramatic appreciation over the decades coming out of the 70s prior to that prices were no different than almost any other part of the country and maybe lower than many..  You also have investing philosophies at play you have the refi till you die have no real equity in any property no matter were it is thought process.. then you have other investors who are far more conservative and don't want debt.. Its personal choice at that point.  

lastly its hard to time the market but there is no denying when you enter and when you exit directly correlates with your success.

The bigger issue I see as of today is the threads of Lenders pulling out of financing rentals either raising the bar or freezing all together.. Freezing is what caused much of the melt down in the so called Cash flow markets in 07 to 2011.. you start to have markets that can only be traded in for cash and your not going to have price appreciation your going to have prices go down.. At least that's what everyone saw happened in the GFC..  I Mean you could buy homes in Detroit for 10 bucks.. you could buy new construction in Fort Myers at Sherriff sales for under 50k.. 4 plex's in AZ were selling under 100k that were sold 5 years earlier for 350k..  

I for one am all for partaking if deals come up.. its the business we are in.. But I certainly do not want to see a repeat of the GFC mortgage market.. 

Lol, yes... if everyone had Kushmer and Trump's parents we could all play that game but the majority of people need to stay afloat while being landlords. Specifically while starting out, which is people on BP. They don't all cruise out to a cushy 500k a year job at a law firm between collecting rent checks.

You can't talk big before you have the means to do so. 

The $60k/yr appreciation is flat out incorrect. Capital gains taxes, erosion of the property ,depreciation and a cap all cut into it. I have followed homes in Van Nuys, Burbank, Studio City (well, much more expensive there) in that price range and followed them over the past 13...14 years. They've hit a ceiling and will succumb to sprawl as well as new builds after a certain point. 

You can have artifically inflated markets like 2011-2019 but really, there is a cap and it's not infinite. No one is earning 60k/yr in appreciation on a 800k house in a neighborhood like Burbank with no tenants. 

What the hell are you talking about? You can cash flow without rental income? At what price point, what mortgage did you take out and how much interest are you paying on it? Simple math is all I ask for.  

Cash Flow is a great goal...if your analysis and decision making (choosing markets and properties) is solid.  Accepting low CF, just because it's CF, is just as foolish as increasing your DP in order to CF higher due to the lower loan payment.  Thinking that way is a result of a lack of understanding of basic math.  It's a result of focusing on the answer...instead of the formula itself.

It's also a complete lack of understanding of the difference between Total Cost and Actual Cost...and why the Actual Cost is the only one that matters.

I disagree and do not see this virus as a long term issue. Real estate falls last in a downturn (often many months to show any affects) and by the time that comes the virus will likely be a thing of the past. You can get a rough estimate by how long it took other countries to flatten the curve. I expect the market to rip back quickly when this is over unlike past recessions. Lenders are offering a lot to mitigate foreclosures/hardship on home owners. From Wells Fargo site... They also will waive payments up to 12 months if home owners need it extended. 

"Home Mortgage customers

If you're unable to make your payment due to COVID-19 related hardships, we're offering a 90-day payment suspension. To request this assistance, sign on to online banking and email us through our secure Message Center. We'll respond to you within 3 to 5 days. If you set up automatic payments with Wells Fargo or another bank, you'll need to manually stop those payments."