All Forum Posts by: Rick Albert

Quote from @Kent Ford:

Quote from @Rick Albert:

Quote from @Kent Ford:

Quote from @Rick Albert:

Those are the reasons, although I wouldn't be surprised if that is short lived for the mom and pop investors.

I was exploring investing in Texas, but here are the problems I came across:

1. All that building that's happening means more supply which equals lower rents. I was analyzing a four plex and realized there are beautiful apartment complexes being built nearby. I can't compete with them except on price. 

2. Property taxes are wild. In California, it is capped at 2% per year. In Texas, it isn't and it could hurt your bottom line very fast. That was one of reasons why things started crashing in Austin. People couldn't afford the property taxes when they were going up so fast.

3. The no state income tax doesn't really apply when you are comparing to other investment locations. Because there are so many tax write offs, I would much rather invest in a state that has low state income tax and low property tax. The income tax may be written off anyways and I benefit from the lower property tax rate.

You bring up some solid points. The building boom certainly creates competition, especially when you’re up against newer complexes with more amenities. And those property taxes in Texas can be a real game-changer, especially without any cap, making it tough to predict long-term expenses. I also see where you’re coming from regarding the no state income tax—it can sound great, but when property taxes offset any savings, it loses appeal fast. Have you found other markets that seem to balance these concerns better?

 Tennessee can be a good one, even though they are also no state income tax. Alabama is also a good balance. The reality is you can make it work anywhere, you just need to understand the market and the numbers.  

Absolutely, each market has its nuances, and places like Tennessee and Alabama can certainly offer a compelling balance. Do you find there are specific factors beyond taxes and cost balance that you look for when assessing a new market?

 Nothing different from anyone else. Decent population, big businesses, etc.

Quote from @Kent Ford:

Quote from @Rick Albert:

Those are the reasons, although I wouldn't be surprised if that is short lived for the mom and pop investors.

I was exploring investing in Texas, but here are the problems I came across:

1. All that building that's happening means more supply which equals lower rents. I was analyzing a four plex and realized there are beautiful apartment complexes being built nearby. I can't compete with them except on price. 

2. Property taxes are wild. In California, it is capped at 2% per year. In Texas, it isn't and it could hurt your bottom line very fast. That was one of reasons why things started crashing in Austin. People couldn't afford the property taxes when they were going up so fast.

3. The no state income tax doesn't really apply when you are comparing to other investment locations. Because there are so many tax write offs, I would much rather invest in a state that has low state income tax and low property tax. The income tax may be written off anyways and I benefit from the lower property tax rate.

You bring up some solid points. The building boom certainly creates competition, especially when you’re up against newer complexes with more amenities. And those property taxes in Texas can be a real game-changer, especially without any cap, making it tough to predict long-term expenses. I also see where you’re coming from regarding the no state income tax—it can sound great, but when property taxes offset any savings, it loses appeal fast. Have you found other markets that seem to balance these concerns better?

 Tennessee can be a good one, even though they are also no state income tax. Alabama is also a good balance. The reality is you can make it work anywhere, you just need to understand the market and the numbers.  

Those are the reasons, although I wouldn't be surprised if that is short lived for the mom and pop investors.

I was exploring investing in Texas, but here are the problems I came across:

1. All that building that's happening means more supply which equals lower rents. I was analyzing a four plex and realized there are beautiful apartment complexes being built nearby. I can't compete with them except on price. 

2. Property taxes are wild. In California, it is capped at 2% per year. In Texas, it isn't and it could hurt your bottom line very fast. That was one of reasons why things started crashing in Austin. People couldn't afford the property taxes when they were going up so fast.

3. The no state income tax doesn't really apply when you are comparing to other investment locations. Because there are so many tax write offs, I would much rather invest in a state that has low state income tax and low property tax. The income tax may be written off anyways and I benefit from the lower property tax rate.

Quote from @Renee Coss:

These are great ideas!  

My garage is a two car garage. It does not have a bathroom. How will i rent out the garage with no bathroom?? How will that work??

To convert the garage into an ADU, you would be adding a kitchen and bathroom. The cost of a garage conversion right now is about $125,000-$150,000.

You could explore renting out the garage as storage for someone, but then you need to look into insurance, liability, etc.

Hey Renee,

It depends on your short term and long term goals. You are going to get a lot of agents here saying their market is best, so take it with a grain of salt.

Generally, as you get older, your focus would be on cash flow over appreciation. For example, I have time, so I can buy a property that cash flows low because I don't need the money today and in 30 years (retirement age), appreciation on rents and loan buydown will fund my future lifestyle.

If your goal is cashflow, then you are likely looking at markets that don't appreciate as well. This doesn't mean you should be looking at markets such as Detroit and Memphis, because even though it looks good on paper, if they are shady neighborhoods, you are going to spend a considerable amount more on property preservation (broken windows, stolen HVACs, etc.).

The easiest way to increase cash flow would be on your existing property. Adding an ADU (which I know you made another post about this but the cash flow wasn't there), is one way or moving and converting your existing home into a rental is another.

I would considering using funds you have to buy properties cash, get them up and running, and then do the cash out refinance (called Buy, Renovate, Rent, Refi, Repeat/BRRRR) in low cost states. I did that in Birmingham Alabama on a triplex and worked out well for me.

I would also put thought into WHERE you want to retire. Do you want to stay in California or is there another city you are considering. That is something to factor in as well.

Quote from @Renee Coss:

Funny you mentioned out of state, I have been considering investing out of state.  

Could you explain how the 150k could give me 500k buying power??  Do you mean a down payment on a property??

Thank you so much.

Exactly. I'm a huge fan of ADUs, but if you are saying that it won't generate enough money as a long term rental, then maybe you should be looking elsewhere. 

If you are going to stay local and considering a condo, you really have to look at fixer condos and at least 3 bedrooms for it to have potential. That way you are an alternative rental option for those that cannot afford a single family home. There are always exceptions as I have seen in the past some two beds and even 1 beds be opportunities. It just depends.

Hey Renee,

I have an ADU on my property here in LA County. It is a statewide rule that you cannot use an ADU for STR. The idea is they want to add more long term rentals to the market to help with affordability.

The mid-term market is interesting but then you are covering utilities, internet, etc. You may be netting the same.

It might actually make more sense to get the HELOC and buy another investment property. With the $150K that it would cost, that actually gives you roughly $500K in buying power. That could be into a small condo or even out of state. Just something to consider.

I don't necessarily tip, but here are a few things I do:

1. I don't push back on his prices unless absolutely necessary.

2. I refer him out. I remember last year I hosted a birthday party and he knew about half the guests just because he did work for them. 

3. If I feel like he is undercharging, I do let him know. It is important that he understands that he does need to make money as well. He has a family and bills to pay.

4. I haven't done this yet but I've heard of people offering incentives to finish early. So if he finishes X days earlier, than you pay him an extra $X.

I have a listing that would be a good fit for the BP community but wanted to get some guidance on the process.

I also wanted to hear other people's experience with listing on the BP platform. Any success stories?

Thanks!

Quote from @Cody Anderson:

Quote from @Rick Albert:

I've had clients do it and it has been fine. The big thing is the exit strategy. Are these business partners where you are growing a portfolio together or are you just trying to get your foot in the door? If the later, then set a timeline for say 5 years (don't care how long) and then sell and go your separate ways.

I do have a business partner/friend on the investment side and we have three properties/ten doors together. We outlined our responsibilities and our business philosophies to make sure we are compatible. We both have made compromises along the way.

I think that’s completely right and one of the reasons you hear the horror stories about these things going sideways (there’s no established timeline for exit), it literally just goes until something breaks. 

figuring out the ownership structure, and thus the use/access, as well as the exit feels like the two biggest items to get extreme clarity around. 

@Rick Albert assuming that in your situation you and your investor are owning/managing these as purely investments and thus holding everything via a partnership operating agreement? 

 I mean, we should have a partnership agreement, but he is also my brother-in-law.

Basically we discuss everything and we are 50/50 owners. However, he has 51% decision rights. This way if we have a disagreement, someone has final say. I agreed to the 51% because he has more experience on the investing side than I do (he happens to be one of my biggest clients here in LA so I've seen him work).