All Forum Posts by: Sam Josh

I have seen 23 year old engineers at one of the FANG companies pull 175k. 125 of which was base. Director and above are a guaranteed 450k in total pay excluding benefits. Put 2 incomes together and we have a power couple situation making 700 or 800k. I would venture to think that at senior manager level people would pull at least 250k. In 2 income situations that is 500k. Lastly don’t forget many are selling house or apartment # 1 to buy in SV.

The only benefits are you will own the property free and clear and your monthly cash flow will be better but that is only symbolic as you are putting all the cash into the property to get there. I would reinvest the 210k elsewhere.

@Diane G, you are missing a big part of the “income” portion which is stock gains. As you well know equity is a big component of Bay Area tech compensation. To put that in perspective, in 2005, nasdaq was 1900. Today is 7600. Phew!!! Other data points (2005 vs today) : Apple stock was at $5, today at 189!!!!!!!! Market cap has gone from 25 billion to 943 billion. That is 900 billion of value creation !!! Google stock was at 140, today 1100 !!! Market cap went from 100 billion to 750 billion. Facebook did not even exist, that company is today worth $532 billion!!! nvidia was at $15 per share, today at $250 per share. Increase in market cap from 9 billion to 150 billion.

I use a spreadsheet. I track it on my own. As others have mentioned Personal Capital and Mint are two tools that can be used but I am wary of putting all my financial info in one place. That’s just me.

I think it’s clear that if you have the cash and are a long term investor who is not dependent on the monthly cash flows of your investment, larger markets are very appealing. These markets (NYC, SF, LA etc) will retain and grow in value over time. Smaller markets offer lower barriers to entry and are more accessible to the broader investor population. They can cash flow easily. So they are attractive especially in an economy that is growing. The trick is to identify the “gems” within the many location options available here. Basically pick cities that are seeing population growth and job growth. That way the investor is tapping the benefits of cash flow and participating in appreciation over time. Lastly, If we do the math, someone who has a good solid investment portfolio in large markets can now fund several MF investments in smaller markets using a relatively small portion of equity in their existing portfolio. So another hidden advantage of owning in large cities is the ability to tap equity and fund other investments. This takes time and patience.

I think it might be interesting to see what the plight of these tier 2 and tier 3 markets was during the Great Recession and the time they took to come back or likely they never did. The coastal biggies on the other hand bounced back many times faster to a point that they are out of reach for most investors now and that is driving the appeal of the tier 2 and tier 3 markets as potential investment opportunities. I have 0 experience in these smaller markets but definitely will be interesting to see why they have stayed so darn cheap in relation to the bigger one and how would they behave from a cash flow perspective in a “stress” situation. Likely not too differently than now.

@Daniel Bryant

Its not exactly speculation. Its confidence in the value of the market and ideally that confidence needs to be backed by historical trends and data plus some knowledge about the area of investment and its evolution.  Take NYC for instance, what are the odds that this market will lose its shine after 10 years or 20 years? It is the worlds financial capital and even withstood the shocks of the 911 attacks. So longer term, NYC will be valuable unless there is a major technological revolution and NYC goes the way of a Detroit which was the worlds automobile capital at one time.  But i wont bet on that happening.  In the end, if one is lucky enough then the ideal portfolio in my mind should have a mix of these high profile city investments (SF, NYC, London etc) and a holding for cash flow generating assets in lesser known cities that get discussed here on BP.

If you look from a near term cash flow lens, you won’t buy in NYC. But consider the value of the property over time. Say you buy for $800k and earn a rent that covers operating and costs. In 5 years that place could be worth $1m or $1.2m. That 200k or 400k appreciation. That is almost $40k or $80k per year.

I have been there so can offer some perspective. I live and invest in the SF Bay Area, never sold any of my homes. Just rented them out as I moved on to purchasing the next one. This all started in 1999!!!! I have also been lucky to add some investment properties on top. Upside is benefits from appreciation over the years. Downside is compromising on the size of the primary residence. In the end, there are only so much funds to access and invest and maintain a healthy debt to asset ratio. Ideally, given how amazing the SF Area is, you should be holding on to all your Bay Area assets for the longer term but I feel at this point in the cycle, best to cash out and buy your dream home that suits your family needs. Frankly my kids don’t care about the rental properties I own. They don’t live there, they rarely even see them. They could care less about the appreciation etc. They are just puzzled however as to why our home is smaller and more modest vs those of my friends. There may be other opportunities to invest down the road either locally or for sure out of state. Good luck !

Portfolio loans sound like a great idea. What are the downside of LLCs?