All Forum Posts by: Sam Yin

@Ravindra Gandhe I am also in SoCal. As for scaling, I do feel that there is a ceiling when doing it on your own. Getting creative does help. Risk tolerance and work ethic is the hidden factor that can set you apart.

For example, I have not yet used OPM, but I am trying to learn and do it. I have only been using my money. Timing has worked out because of real estate growth and low interest rates.

I too use 25 - 30% DP... my money. But because of the above, I have been able to purchase 4 properties in the last year, totalling 24 units. To be clear, I pulled 150k equity from my house, had 50k in savings. Bought two 3plexes at 25% DP each. Asking was about 385k each, I negotiated to 357k each.

Fast forward a few months, pulled equity, purchased an 8plex for 700k. It only appraised for 660k but the hidden value was in the details. I paid the additional 40k so I can take over an apt that is government subsidize. That 40k is to get to know the director of the program. Fast forward another 2 months, I'm now closing on a 10plex A FEW BLOCKS from the 8plex.

So let's add it all up monthly cash flow...

two 3plexes = 2000

8plex = 3500... will be 4200 shortly

10plex = 3500... will be 5000 shortly.

I have other properties with good cash flow as well, but not that multiplicity. The key component was my risk tolerance. I invest in the outskirts of Los Angeles county. I have had 100% occupancy. I feel it will always be 100%. I do my own management and most repair. It's an hour each way. I have a full time job. I hustle my butt off and I drag my 3 little kids with me to see it. It's a way to instill work ethic. I have a 5 year goal to grow to 100 units and build a management team so I can be free with at least 30k cashflow per month. I would like to begin to use OPM because I think I only have a few deals left in me with my own money.

It all started when I accidentally clicked on a bigger pocket video 18 months ago. It took me down the rabbit hole of youtube. I'm a refugee from Cambodian jungle and came to America about 30 years ago with 0 in my pocket. If I can do it, anyone can. And education is free so there is nothing to hide. Sharing can open up even more opportunities.

I am fairly new to this game and I have gotten close, but never to zero. I have always had to pay for the administrative costs like inspections and loan fees.  I have achieved zero out of pocket a few times through leveraging one property to purchase another, never having to touch my personal savings, but he actual cost was just past on to renters and I increase my debts.  

I am in escrow on a deal that I plan to use hard money for 12 months at 8% to fund it from scratch.  Then refi after 12 to 18 months (6 month extension) to obtain conventional financing and even pull out some cash to fund other deals.  This is achieved by a property that has a built in 500K equity that the owner (70s) does not believe/understand/ or care for.  I can grow another 500K equity on top of it through rent raise.  That is a 1M increase in 1 year (almost guaranteed).   This is a 1.6M (minimum) 10 unit property that the seller has agreed to sell for 1.1M.  All because he has no survivors, in his 70s, just wants to live in a house free of property management, does not want to pay city sewer connections, and does not believe in the current market. It just one of those deals.

In essence, it is possible but highly unlikely unless you stumble upon something similar to the above.  Other than that, if anyone finds a lender willing to go above an beyond for the average deal, I would love to hear more.  I am always open to new and innovative ways to raise money outside of the norm.

I have to agree that this does not seem too serious.  I have had to deal with many city and code issues upon change of ownership. Every area may have slightly different stipulations, but if I had to guess, aside for making sure you pit that ONE CO2 detector up, the certificate may end up being an amendment to all tenants to know that there is a new sheriff in town... or it could just me a filing with the local city to let them know you are doing business there.  Its their way of getting their cut.

For example, when I acquired properties in Victorville, CA, the city had me complete a profit and loss.  Then, almost a year later, their Code Enforcement cited me for not having a business license.  I called, got online, and filled out a permit to do business because I am a landlord of properties in that city.  They get there fees and left me alone.  It all comes down to money/revenue, most of the time.

As the last post suggested, call them and I bet its quite simple to correct.

Well put. 

@Cody Neumann I agree. I'm in contracts with 2 apts, each has at least 2 non-paying tenants and found out that they were a few months behind. Due diligence is VERY IMPORTANT. Is it grounds for lower offer? Well that depends on the current price, current market, current financing options, and your personal vision. If the price is decent, the market is high, the financing is good, and you plan on a long term hold, I would offer full price or A PRICE that would weed out other investors. There are so many factors that it would be difficult to give the right answer because we all have different tolerances.

Sam

@Jeffrey Donis

I agree with Jeffrey and Bjorn. Do your best to lock it down, then the due diligence comes into play.

I think I should have asked whether this was a commercial rental property or 4 units and below. The assessment would definitely be different.

Sam

Easy answer, No. never trust the rent roll 100%.  Always check to see if the tenants are current, any missed payments, any special agreements for possible manager units... etc. Same goes for the estople.

Now, as far as offers and such, from my experience, the value an any commercial residential depends heavily on the rent roll and so there fore the lender has to trust it.  If you feel the rents are below market and there is a tremendous upside, AND its lendable as is, I would not offer less in the current market.  I would actually offer at or over the asking price. 

This may be counter intuitive to some investors, but here is how it would play out:  You know there is upside.  You have a lender that will lend on the current asset as is with the current rent roll and price.  If you maximize your leverage, acquire it and raise the rents in time, with or without improvements, your cash flow will just increase.  Remember, if the current performance does not support the appraisal for the lender, you should be looking elsewhere unless there is some hidden gem within.  But if it appraises, there will be other investors chomping at it if they knew the rents were substantially below market.

That is just my .02 with my minimal apartment experience.  Perhaps others may have a different perspective. I am always eager to learn as well.

Sam

Perfectly said. I couldn't agree more. It's a difficult jump for many to leave a high paying W2 and depend solely on passive real estate income. It can be done quickly (1-5 years), but I takes up a lot of your time, mentally and physically.  I was able to match my W2 by hustling in the last 14 months, but it definitely took its toll. Regular workouts were missed, family time was shortened,  and sleep went for averaging 5 hours to 4 hours.  I think the hustle is worth it as long as you are focused and have a goal and set achievable limits.

My next goal is to 2X passive income by end of 2022 and then get into syndication realm. Ultimate goal is to leave my W2 by 2024 if I want to as that is where I have set a 3X bench mark. Everyone has their magic number, but keeping it in sights is best way to achieve it. Active investing has its rewards but it does require your time... all the time.

Sam

If the rent roll is strong, there are plenty of private or small local banks that will lend... at least in my area.  Be prepared to pay a higher interest rate.  at 20% to 30% down, I have found that you get the best interest rate, roughly 3%.  Private or small banks will get creative and help you out, but their rates are closer to 6% during this market and the property has to be solid.  It has to be occupied with leases that cover almost double the mortgage payment.