All Forum Posts by: Brad S.

Quote from @Johanna Perez:

Quote from @Brad S.:

But, I have a question for you.

What are you trying to do? 

What are your goals, with career, investing, etc.? 

I would focus on being clear with that first, then you can see which routes fit.

 Thank you so much for your insight. I am trying to get into real estate investing. My goal is to start with wholesaling then move up to house hacking and then buy and hold. However, I do want to get into a good career as well that will help me gain the experience and knowledge to get into real estate investing. Not only that but I need a job to fall back on and use to pay my bills where as wholesaling I will use to invest. 

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Hey @Johanna Perez, Sorry for my delayed response. The issue I have with the appraising business was it was not always steady and sometimes unpredictable. And at the moment, the industry feels like it is changing. the bulk of work always seemed to be appraisals for lending purposes (bank appraising), and at the moment, that part of the business has dried up pretty drastically in many areas, due to low # of current transactions. But, there is always private work out there, as I mentioned above, with CPA's, attorneys, estate work, etc. 

And although the Assessor job was pretty good, and had a fair amount of freedom, it was still a fulltime obligation, which puts some limitations on doing side hustles (i.e. the RE investing). I'm sure it could be done, but I don't know if it is an ideal path. I definitely benefit from the great education, knowledge and experience I got there though. That is invaluable and has definitely helped in my investing. 

I do pretty well when business is busy, but, it does take a lot of time and energy to devote to the work, leaving less for other pursuits - RE investing, etc. I have been able to do it, but I do feel like I would've been able to do much better with other options. Now, having the knowledge, experience, and access to the resources (data, etc), has been invaluable. But, I have often used the saying "I have been too busy working, to make money." Meaning, when I busy and doing pretty well, it was taking up time and energy that may've done even better if I was able to focus on the RE investing. 

To me the ideal situation would be a fairly autonomous home-based job/career, which is steady, pays well and has flexible hours, to provide enough time and money to pursue the RE investing around the regular work. 

One area I had contemplated recently is Data Science. This has been a career that has seemed to be in demand in the recent past and should still be in demand in the future. I still may do some education in it to utilize within my investing and possibly business. The pay is supposedly really good (6-figures, etc), you can learn great pertinent skills to utilize in analyzing markets, and you may find it easier to find more flexible positions. To me, that would've been an avenue I would've look more closely at many years ago, to utilize my appraisal skillset within that newer career. And there are ways to get the training and education through education programs, which don't necessarily require a degree and may be relatively inexpensive (depending). But, not everyone has an interest in the areas it involves, so make sure to look into it deeply before jumping in. There are many resources to find more info and even message employment recruiters who specialize in this area, for more info.

Anyway, I hope that insight is somewhat helpful.  Good luck

Quote from @Barry Wong:

Hi!

I received a letter from Property Tax Advisors informing me they can appeal my property taxes and get an estimated refund. The refund isn't much, it's $2375, and they would take 30%. 

Is it worth appealing the property taxes?

Best,

Barry W

Hey Barry,

I'm assuming your property is in CA and that you purchased it relatively recently (the past couple of years). Since, in CA are property taxes are governed by Prop 13 and our assessments are limited to a maximum 2% increases annually. In other words, the assessed values do not annually adjust to market values. Therefore , most owned properties have assessed values under current market value. 

In CA there are only 2 times properties are assessed: 1) ownership tfrs and 2) new construction.

Anyway, I assume you think your property is assessed higher than current value for some reason. Send me your address and I can try and look at it briefly for you.

To rephrase what @Arn Cenedella said
1. Everything cash flows ...it just depends on how much money is put down. But, obviously, then the returns are affected. I just met someone who put 75% down on a property, in order to cash flow comfortably! And you know, that is perfect for them, since it fits with their situation, goals and comfort level.

We are in a current real estate cycle where the "easy" cash flow of yesterday is elusive, and the creative, skillful investor has the edge. In my decades of experience, the past few years have been an anomaly (exception to the rule).  Not long ago, there was no such thing as dscr loans, rates were only moderately suppressed at times, and much real estate was undervalued-(affordability-wise) still equalizing from the downturn, oh, and we didn't have a global situation which caused widespread disruption and general concern. Many beginning investors had an easy time throwing a dart on a map and finding cash flow properties they didn't have to qualify for. They looked like geniuses! And good for them! Now they can use their new found wealth in more conventional ways to continue their growth.

But, unfortunately, for the newer enthusiast, it may take some more understanding, acquiring knowledge and skill, resources, and creativity to strive for the similar results of yesterday. It is possible, but the tide has shifted and some people may find themselves with skimpier bathing suits.

So, with that little reality check, there are still ways to find cash flow.

* lease-options or "subject to" - find motivated sellers that want out from their property responsibility and are willing to allow you to take on (subject-to) their existing low interest rate loan, which may open up cash flow possibilities.

* Value-adds - the obvious-add value to a property (i.e. additions, rehab, build or convert adu's, develop vacant land), etc. 

* Look for areas that still cashflow - There will always be areas that cash flow, you may have to just turn over more rocks to find them, or alter your criteria.

* Look at bigger MF properties - Larger multi-family properties will typically cash flow more then sfr's, since they are traded based on investment return. You may need to find money partners for this.

And you can combine those strategies also. You can do some value-adds, like find good developable land, plan a build, raise the money, finish the project, sell for a hefty profit and then put it all down, or exchange, into property which cash flows now, since you put down your new found money from the flip. I realize it isn't that easy, but you asked.  :)

ok...that's what I got on that at the moment.

And then to reiterate what @Bill B. said. IMO and other experienced investors opinions, much wealth is created by appreciation more than cash flow. Cash flow may've been their vehicle to get the properties which eventually appreciated, but, in and of itself, the cash flow alone is a tougher hill to climb. I have used cash flow to support other non-cash flowing properties which had more favorable appreciation potential. 

Like Bill said, my first couple of properties cash flowed great on paper (%-wise), but only to be wiped out by one moderate expense in a year. 

Anyway, hopefully this stoked your mind gears somewhat productively!

Quote from @Matt Stoltzfus:

Is there any way to get the contract amount if the appraisal comes back to low. Appraiser is mostly going by the fact that I got a great deal when I purchased and claims he cannot justify my sale price even when there are other comps in area.

  They won’t allow me to hold a second mortgage but what about an option?

 Anyone familiar with this strategy? 

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The answer to your question is, Maybe.

First off, is it worth the contract price? Do the current comps, in similar quality, condition, location, etc, reflect the contract price? If not, then obviously, it's probably not worth the contract price.

Also, if it is an FHA loan, then unfortunately, you are stuck with the appraisal for some time. FHA would have the appraisal logged in for that property and a new appraisal won't matter. I think it is for 6 months, but not sure.

If it is a conventional loan, you can suggest the buyer have the lender do another appraisal and explain (to the Lender or Buyer) why the first appraiser did not do their job and undervalued it incorrectly (assuming it is undervalued). 

But, your job is to explain the "FACTS" of why your house is now worth the contract price and why you bought it below value. 
Some reasons are: 
* the seller was motivated when you purchased it. Maybe they had financial difficulty, foreclosure, behind on payments, job tfr, etc.
* the house was in poor condition, in need of major rehabbing, major roof damage, foundation damage, etc.
* The house was an off market sale when you bought it and therefore was not an open market sale, limiting the market exposure, etc.
* You fully rehabbed the house with new everything, etc. and high quality, blah, blah, blah.... and it is nothing like it was when you purchased it (show photo proof if you have it).

Basically, your job is to give the Appraiser the justification for them to properly appraise it at the contract price, and you do this with FACTS, not your OPINION. 

Of course, it may also be over valued and not worth the contract price and then, the answer is NO, you most likely will not get a higher appraisal.

Also, a good, seasoned appraiser would never discuss their opinion with you, like the fact they can't justify the sale price, etc. They/We are only allowed to discuss FACTS (size of house/gla, etc) with people other than our clients (client is the Lender, not the Borrower or Seller). If he's discussing his opinion, he may not be experienced enough to do a proper appraisal.

Quote from @Nimisha Doongarwal:

I rent out a condo in San Francisco, California. Yesterday, someone drove into the garage door at my property common area garage, severely damaging the door. The HOA decided to permanently close the door until the repairs can be completed.
Our renter is asking for reimbursement for however much I pay for parking at public Garage until the garage door is fixed. Please let me know if this is a landlords' obligation to reimburse the full parking amount.
Thank you!

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It's never a good idea to rely on legal advice from a worldwide social media site, but I'll chime in since you did ask.  :)

 And for the record, this is not legal advice and consult an attorney, etc.

Look at your lease, typically it will say whether it includes parking, carport, garage, etc. And if it does include use of the garage, then you may be responsible to your tenant to provide garage parking or a reasonable alternative. Then you could ask the HOA for their insurance information and talk to their (Which is Yours also, as an owner) insurance agent and see if you can file a claim to reimburse you, for reimbursing your tenant.

But, go ask an attorney, not BP!

Quote from @Shane Crockett:

Are there hard and fast rules around valuation math for STRs? Some like standard NOI and CAP, others believe it's a hybrid approach which also requires comps, others believe it's still just comps (which I personally dont agree with).

But regardless what I believe or have heard, I am curious what the community is seeing or hearing about how to value STRs, what investors are looking for from an STR perspective, formuals used, etc. Are single family STRs valued using NOI and CAP, or does it need to be a MF STR? Are investors looking for individual STRs of either flavor, or is the appetite for larger portfolios of multiple STR assets? I am eager to understand the perspective of others with more experience in this space, so anything is helpful and appreciated!

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Note quite sure what exactly you are asking with respect to "valuation."
There is the valuation You, an investor, would do to underwrite the potential deal and there is the valuation (appraisal) a real estate lender would use for their loan decision.

I'll respond to the appraisal valuation, since that is what I am assuming you are referring to.
An str is a commercial enterprise (i.e. a Business). It is a hospitality business, which the real estate is a part of, but not the only part. The str has value beyond the real estate (including furniture/personal property, goodwill, going concern of the business, etc). So, as far as the appraisal goes, if this is for a real estate loan and the property is 4 units or less on a residential zoned parcel, it is a residential property and valued as such. This means it will be valued using the sales-comparison approach and possibly the cost approach, but primarily sales-comp. 
NOI or Cap rates do not have any role in this, unless you are getting a business valuation for a business loan. 

Now, keep in mind, if the str is in an area that is primarily made up of str's or a substantial number of them (like the Smokies or other primary vacation markets), then theoretically, the business of the property would already be built-in to the comp prices in the area, since buyers would be purchasing for the business more than the physical asset itself. and there would also be no need to use NOI or caps, etc.

Quote from @Robert Ellis:

Quote from @Megan Roy:

Quote from @Robert Ellis:

Quote from @Megan Roy:

HI all I am hoping you can assist with your experience here. 

I have a client who purchased a duplex and rehabbed it. He worked with a licensed HVAC, Electrician and Plumbe. 

We are at closing and he's running into an issue with the property being zoned as "R3 Residential" after final compliance checks/quality control stating there is an issue here the zoning. How can I help clear this up? He purchased it as a Duplex, Permits were submitted, Title has this listed as a Duplex as well. However...

 The issue you are talking about is not because it's R3. Typically it will be another reason. I've had a similar issue on W Sullivant ave in Columbus where it had a commercial use overlay for a duplex but the lender ultimately didn't have an issue with it and closed the loan.. I think you should work more with the zoning office and lender to determine the issue. A nonconforming use is a use of property that was allowed under the zoning regulations at the time the use was established but which, because of subsequent changes in those regulations, is no longer a permitted use.

 Thank you for your response. R3 means units of up to 3 correct? Let me know if you know the answer to that. I don't see why a lender would have an issue closing this? I don't think the county can ever Gurantee it will be built back the same as is but it is legal and able to rebuilt as a duplex? Glad you were able to get it closed. Who was the lender?

 no issue at all if the lender has an issue it's a title question. yes r3 allows for up to 3. I would honestly say the appraiser doesn't know what they are talking about. I'd talk to the appraisal review board or get a second opinion if you have trouble. any appraisal issues I typically switch lenders and get a second appraisal and very rarely do I have trouble closing. it's hard to challenge an appraisal they rarely change. largest egos 

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Based on my quick and dirty research, for the city of Columbus, OH
the zoning of R-3 does NOT list a two-family dwelling as a permitted use.
The zoning R-2F does allow for a two-family dwelling

Of course, this doesn't account for any ordinances I'm not familiar with, like separate state ADU or JADU ordinances, which may supercede local code and allow for more than one unit on a single family zoned property. We have that here in CA, so that confuses the issue somewhat. That's why, as always, consult with a professional that is familiar with the appropriate area.

Here's a link to the Columbus Municipal code page showing the permitted uses
https://tinyurl.com/3kvhfe7e

Quote from @Megan Roy:

Got it,
Ok, a few things here:
*  I am little unclear on what jurisdiction covers the property, is it Franklin County or the city of Columbus?
In most markets, if the property is located in an incorporated city, that city has jurisdiction, and therefore, their planning dept covers the property. If the property is located in an unincorporated area, then typically, it is covered under the County. So, based on what you previously posted, it sounds like the property is in the incorporated city of Columbus, OH, and therefore, then the Planning Dept for the city of Columbus would be the ones governing the property. They would be the ones who say whether a non-conforming property can be rebuilt in their jurisdiction.

But, if it is within the Franklin County jurisdiction, then the county would dictate the rebuilding rules.
Maybe someone with more experience/knowledge of the area can chime in.

* Basically, if the governing body (city of county) states that the property can be rebuilt as it is, in the case of an "act of god," then it sounds like the appraiser should amend, clarify or correct their statement in the appraisal. The best way to do that is to provide them (through the lender) proof of this, either by a letter from the county/city or copy of their municipal code stating the rebuild criteria, etc.  If in your research you find out for sure that it can be rebuilt as a duplex and you provide official proof, then the appraiser should be ok revising the report. If they refuse, I would push back and put pressure on them through the lender. But, there is a chance that they (the appraiser) is correct, based on where the property is specifically located and what the municipal code says specifically.

As always, it depends on what your goals/plans are and then you work your way backwards from there. If you want to end up with a portfolio of rentals that bring in enough cashflow to support yourself, and you see you managing that business yourself eventually, then you may want to plan on managing a property or 2 when you are starting out. Or at least, learning about property management.

But, if you are hoping to acquire a relatively low maintenance portfolio, netting you enough cashflow to support yourself with little oversight or hand-on work, then your focus may be better spent on developing the skills to find a good PM to assist you in your goals. 

Or maybe you want to build a business syndicating larger multi-fam projects, etc. Then again, experiencing PM may come in handy.

But, I don't agree with some others, that you should always learn the hands=on PM part of this business. It may be good to know some of it generally, but, unless that is what you aspire to do (for yourself or others), I don't believe you need to take that on yourself. And, you should take your current situation into account (i.e. distance to rentals, available time, etc).

But, this is a business and IMO the property management should always be a line item on your spreadsheet - even if you do it yourself. The same way as you shouldn't buy an existing retail business that only makes money if YOU work there. The business should make money when you have employees work there, even if you decide YOU want to be one of those employees. Otherwise, you are buying yourself a job, not a business.

So, in real estate, are you building a hands-on business you want to be more involved with, or are you planning on building a relatively low maintenance longterm investment business that requires minimal oversight.

Now, as someone previously pointed out, it looks like you are forced to use a PM anyway, since you don't live in the city. So, ...decision made!

@Megan Roy

I think we are unclear on what the issue is. It appears that the property is legal non-conforming and cannot be rebuilt if more than 50% is damaged, as others and the appraiser have pointed out.

Those are facts. But, is the lender having an issue with the status of legal non-conforming (I.e. they won’t fund the deal) ? Or the title company (I.e. they won’t write a policy)? Or does the buyer or seller have concerns?

Legal non-conforming properties are not all that unusual in my market. So, I’m not sure where the concern is, I don’t see where you have stated the problem?

FYI -Here is Columbus zoning that I found online.

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3332.035 - R-3 residential district.

SHARE LINK TO SECTIONPRINT SECTIONDOWNLOAD (DOCX) OF SECTIONSEMAIL SECTIONCOMPARE VERSIONS

A. In an R-3 residential district the following uses are permitted: 1. One single-family dwelling; 2. An agricultural use, farm, field crops, garden, greenhouse, nursery and a truck garden; 3. A religious facility; 4. A school; 5. A public park, playground and recreation facility; 6. A public library; 7. A city approved soil conservation and watershed protection project, and water filter bed, reservoir and tower; 8. An adult and child day care center as an accessory use when located within a school or religious facility building. B. Each use shall conform to respective area district standards unless otherwise specifically provided.

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