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All Forum Posts by: Rick Albert

Rick Albert has started 68 posts and replied 2109 times.

Post: Which areas are best to invest for rental properties near Bay Area California?

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

Keep in mind single family home values are very different. There is an emotional aspect. That means a "retail" buyer is going to pay more than what you can offer. That is the issue across California.

Are you planning on renting out the house to one tenant or rent by the room? 

I would actually consider Turlock, where Cal State Stanislaus is. That's where I went to college. Student population, there is tenant demand because there is no Greek housing (Fraternities and Sororities) and you can rent by the room. I would compare rents there to Merced and see which one makes more sense.

The main advantage to new construction is you can starting renting it out on day one. Many investors think that you should buy fixers. Although there is a valid argument for it, you are losing opportunity costs because the house is uninhabitable. There is also an argument that your Cap Ex and repair costs are low with new construction, so it could be easier to manage.

The main downside to new construction is slower appreciation in the beginning. You buy brand new construction and pay the premium for it, but yet every year the systems get older and you lose that premium value. Therefore you are banking on land appreciation until things settle itself out. 

Post: Pricing Multiple Units in the Same Building

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

Hello!

I have a unit that is sitting on the market. I have another unit coming online in the same building.

Has anyone tried the approach where you list one much higher to make the lower one seem like a better value? Then once that unit is rented then address the pricing of the other unit.

Property is in Birmingham.

Thanks!

Post: Looking to sell after having squatters

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

I get it, you want to net as much as possible.

Yes, a buyer can take on some of the broker fee costs, but they are just going to factor it into the sales price, which means you ultimately net the same.

There are discount brokers out there, but you have to be fine with being just a number. Don't expect the same level of customer service that a full service brokerage MAY offer. I say may because some agents are not good at their jobs, but charge the same.

I would look for a broker that has sold similar properties to what you have. Especially if they sold at prices you like. Wholesaling can work but again, you are limited to the wholesaler's network, which is arguably smaller (those same investors are likely also looking in the MLS).

The middle ground options all come at a cost. The reality is though you are already saying that you have a non-paying tenant in the property. That warrants a very steep discount. That headache is being passed on and there is no set standard as to how much of a discount that is. An investor is going to factor in the cost of an eviction or cash for keys plus their time.

My recommendation, get the tenant out, clean up the place, and sell traditionally. You will likely net more than what a wholesaler can offer. I know it's not what you want to read but you, along with many other investors out there, are looking for this magically third option to get retail pricing with problem tenants and it isn't happening right now.

Post: Additional Principal payment: Focus on one of the property or spread out on all?

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565
Quote from @Sartaj G.:

@Rick Albert thanks for your input. I am invested in stock market and have been diversifying into real estate over the past couple of years. I have a good W2 job so I am not after cash flow at this time. I am planning to scale up the RE portfolio over the next 1-2 years and aim to pay off all/most of it over the next 8-10 years when I am closer to retirement. 

Given the high interest rate at this time I am wondering if I should pay down the high interest rate loans equally or pay all the additional principal to one house and pay it off faster adn then move onto the next house. When opportunity to refinance arise which option will be better? I am not planning on selling the rental houses for a foreseeable future.  


 If you are planning on scaling now, then don't pay off the loans sooner. That would defeat the purpose of having your tenants pay the mortgage for you. I would consider finding your retirement number and work backwards from there. Once the properties are established, then get aggressive on paying them off.

Post: Additional Principal payment: Focus on one of the property or spread out on all?

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

There isn't actually a ton of savings by paying them off early. Here's why:

1. The extra payments come off at the end of the loan. Because of the amortization schedule, the payments at the end are more principal than interest. You are paying the bulk of the interest on the front end. The savings aren't real.

2. Real Estate only really makes sense if there is leverage. Your cash on cash return is higher. Otherwise invest in the stock market with less headache.

3. Cash is king. At some point you are going to have to replace major systems like roofs, HVAC, and general remodels. If you spend all your cash buying down the loan, you are screwed when these system issues arise and you don't have the cash on hand.

4. Use the additional cash to buy another property that would cash flow the difference you would have made if these properties are paid off. Easier said than done but you get the idea. 

5. The only reason why you might want to pay off early is if you don't want any more rentals and heading towards retirement. Then it makes sense because you will need the cash flow.

Post: To get licensed or not to get licensed...

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565
Quote from @Craig Cann:

@Rick Albert Thank you for the detailed answer definitely opens my eyes. 


 If you really want to get into a real estate career that will help in the investing, become a project manager for a developer. Good pay, build great contacts, and you get paid every step of the way. 

Post: To get licensed or not to get licensed...

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

I think there is a misconception on being a real estate agent. Your job isn't to sell properties, it is client acquisition. That's what you have to focus your time on. Especially right now where there is an oversaturation of agents. I'm hearing veterans having problems getting clients right now. You also aren't going to find better deals just because you are an agent. You are networking just as much and it isn't like the courses are going to help you in better negotiations or real estate investing. 90% of the questions on the exam you never use.

My recommendation is if you are up for the grind (which in the beginning takes time away from your investing goals), then get the license. But if you are only looking at it as a way to save some money once or twice a year, your time is better spent elsewhere.

I would also do the math and compare it to your W2 job now. For example:

Let's say you make $100,000/year.

Average sales price in Fresno is roughly $400,000. 

2.25% commission (it varies so I'm averaging) is $9,000.

Take your split out with the broker (varies but let's say 80/20 split): Now you are at $7,200

Then you have various expenses at say 10% per transaction (transaction coordinator, E & O Insurance, marketing, gas, etc.):$6,480 per transaction.

This is all pre-tax dollars. That means you have to close over 15 deals a year to make the same at your W2 job, which may not require you to work nights and weekends. Obviously doable but the average agent does less. 

Post: New to REI

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

Hey Sonia,

Welcome! I'm a 2x Los Angeles house hacker and case study in the BP Book, The House Hacking Strategy.

Had I not started with house hacking, I wouldn't have been able to build my portfolio.

Some of the best advice I give not just includes understanding the LA market, but having clear rules in place. For example quiet hours, laundry uses, etc. You are building a community and it is important to set expectations.

Post: I have 20k ready to invest

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

It depends on the property and location. The challenge is $20K may be enough for a small home in a low priced market, but does that include repairs? You likely need closer to $50K for it to make sense.

What is likely a better use is to buy a new personal residence using 5% down and convert your current residence into a rental.

Or, if you want to make it more interesting, get a HELOC on your current residence while you are still living there and then use the HELOC money towards the next purchase. Preserve your cash and have the rents cover the mortgage and HELOC. That's what I did to get started.

Post: Annual Rent Adjustment

Rick Albert#2 House Hacking ContributorPosted
  • Real Estate Agent
  • Los Angeles, CA
  • Posts 2,140
  • Votes 1,565

The short answer is likely no. The question is, "why are there more people?" The likely answer is families. And now you are discriminating because of family status, which is against the law.

Then you have the political problem of "how do you define a family?" Just in case three roommates come in.

I'm not an attorney but I would not go down this path. 

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