All Forum Posts by: Roxie Kim

I received some amazing feedback in another discussion I started here:

https://www.biggerpockets.com/forums/432/topics/584285

All the advice I received was great and I'd like to give a warm thanks to everyone who responded.

So as a follow-up, I just thought I'd post a more direct question with actual figures. So independent of my concerns with purchasing a C level, 8-unit apartment (this would be my first apartment), can you provide me with an opinion as to whether or not this property is something that you would purchase? This property is located in central California.

Sorry for sounding like such a newbie (I am one!), but part of me is worried that even with a PM, this property will turn out to be a big headache...and if I decided this was a mistake and wanted to sell, it would be impossible without taking a major bath. I know the idea is to make your equity in the purchase price, but as a passive investor who is busy with a full-time job, 2 kids and 2 dogs and a 104 year old house, finding great deals is just not practical for me. But still, I was able to negotiate the price down about $40K from the list price....which I was very happy about. And quite frankly, I think that within California, I feel as if this is the last piece of property listed on MLS that fulfills the 1% rule.

Part of me is weighing whether or not I should just pass on this deal and just purchase 5 or 6 nice turnkey properties (sorry, I know that's a very newbie-ish comment to make.. and a total disregard for proper asset allocation). I'm so used to my nice, cushy, low maintenance properties here in Los Angeles with perfect tenants that probably contact me no more than once a year for very minor issues... I feel that not only do I need to evaluate whether or not I want to invest in a C property, but whether I should invest in multi's at all.....especially one in California that makes the eviction process very complicated and costly. There are small private law offices in urban areas of Los Angeles whose primary source of income is taking 40% of the cut on 'cash for keys'  money from tenants who don't pay their rent. So I thought if I posted the numbers on this forum, I might be able to get some perspective on my potential purchase.

The expense figures below, with the exception of capex and vacancies, are from the actual P&L's received from the PM, averaged out for the past 12 months. What I did not include were the legal expenses associated with two recent evictions as I figured that a 55.6% expense ratio would probably be pretty accurate over the long run. Capex and vacancies were both estimated at 10%.

So far, we've done the initial walk-through and the property was a little better than I expected. Right now, every unit is rented and all rents is paid up to June (estoppels are still pending). Each of the units has central A/C, laundry hookups and each of the units I saw, other than some minor freshening up, did not appear to need any sort of major rehabbing. The property inspection is still pending, but I figure any issues that come up can be negotiated to a certain extent.

Also, keep in mind that this property is located in California, just two hours from where I live. Compared to some parts of the US, the figures might not look too impressive. But purchasing an apartment somewhere in the mid-west would be out of the question for me as I would not want to fly out. Part of the appeal of this property is the fact that it's relatively close to me as well as the potential for capital gains 10, 20 years down the line. 

Thanks in advance!

I think transitioning from a well paying W-2 to full time investing is a fine balancing act. How does one build their portfolio to a level where you can quit or work part time without causing a significant reduction in the money coming in? I just don't see how anyone would be able to do it without taking a significant reduction in pay. And the amount of passive assets required in order to have the freedom to quit your job seems staggeringly high. Even folks who are well within the boundaries of a qualified investor would be at a very high risk for having to sell some of their assets if they quit their job and decided to pursue a more active type of BRRRR or rehab/flip strategy.

Up to now, ie., before I found this website, I viewed my properties as nothing more than a means to a very comfortable retirement. But I must admit that spending some time here has changed my perspective. I've realized that much of my SFR's in Los Angeles, while debt-free, have very low cap rates and are not the type of investments that are conducive to providing the type of fixed income that would allow one to quit their job. I started down this road of investing in So Cal a while ago, and I suppose switching things over to higher cap rate properties is what I would need to do in order to create the type of passive income needed to have the freedom to quit my job. Is this something I want to do? Absolutely not. Everyone's situation is unique...and for me, I love my cubicle job and the benefits it brings. The small amount of landlording required for my SFR's has also made me realize how much I dislike it.

I'm in escrow for a MF property for around the same price and am putting down around 235K and am expecting minimal cash flow after accounting for debt costs... probably around .8 to 1K per month (using admittedly rosy figures). GRM for the property is just over 8.

Your questions are very general, but I had the same questions when I started out also. My only advice would be to spend lots of time on this site, read the articles and listen to the podcats, read through the articles here... https://www.therealestatecrowdfundingreview.com/investing-tutorials, and network with folks local to you.

This is fantastic feedback. Thanks to everyone to responded! I plan to work closely with the PM and emphasize some of the things mentioned here in this thread. Unfortunately, CA is notorious for being land-lord unfriendly in its laws.

When the previous owner took over the property just a few years ago, it was a short-sale transaction and he had to get rid of squatters and other nightmare tenants that weren't paying rent. I believe the last two evictions meant all tenants from the past had been turned over and things are much more stable now. I think I'll know better once I get the estoppels. 

Hello,

I am currently in escrow for an 8-unit "C" property in Central California and was hoping someone could help me with something. I received the property's one-year P&L statement today and there were a lot of legal fees and missed rental payments. The explanation was that two tenants had to be evicted about 6 months ago.  Can anyone tell me what to expect as far as the rate of tenants that turn out to need eviction? Is this a common occurrence for low-income apartments? This is my first multi-unit property so I guess I'm just trying to get a sense of how common something like this is.  I've never had a problem with any of my tenants in my single family condos which are located in Los Angeles, but that is obviously not an apples to apples comparison. I guess a lot of it would start at screening tenants properly which would mean the PM hasn't been doing their job properly. 

I entered escrow using an estimated expense of 45% of gross rents. Given the cost of my debt, if I had to evict two tenants within a year, this would destroy my cash flow.  Any insight would be appreciated.  Thanks!

 I'm not trying to get into the lease vs buy vs get a nice car vs get a practical car debate...  I'm just genuinely curious.  How would a busy real estate agent be able to lease a car and not go way over the allotted miles? I understand there are options for 10, 12 and 15K miles, but wouldn't an agent drive well over 20K a year?

Will driving a ten-year old minivan TRULY be a hindrance in your career, especially for someone as young as you? I would bet that it won't be any hindrance at all as long as the car is clean and tidy and you dress professionally and work hard while doing a fabulous job for your clients.

 There is an element of that with a lot of people that live in desirable cities....but no where in the US is that stronger than NYC.

 Hi Scott,

Thank you for the wonderful words. I'm so pleased to hear of your positive experience here in CA.  On a related note, we took at weekend trip to Denver a few years back because we enjoy visiting other cities whenever we get a chance. The folks there were extremely  courteous and were always so happy to hear that we were from out of town just visiting and enjoying the beautiful scenery here. You can feel the warmth of the people in Denver not only in the face to face interactions but also when driving. 

Sounds good, but why not just use California 2008 as your example instead of Spain 2008?