All Forum Posts by: Brad S.

CA for wealth creation/appreciation and elsewhere for cashflow. TX will get you for the high property taxes and insurance, but recent appreciation has been good and cashflow is ok. Although, there may be creative opportunities in CA these days, to increase potential cashflow and create value.

You can go here for all the CA forms you want.

https://journal.firsttuesday.u...

They are CA based on have been providing these for decades. Good luck

Basically, it depends on the Lender. The Lender may be ok with doing the appraisal "Subject to" installation of finished flooring, or they may want the appraisal done with a "cost to cure" adjustment, to take into account the cost to add the flooring. It is unlikely the Lender will be ok with doing the appraisal "as-is," with no flooring, for a conventional loan. Ask your potential Lender to see what they would require.

But, there is no "new strict thing" that I, as an Appraiser, has to do, with regards to that situation. I observe and report the property as I see it and the Lender will let me know how to deal with that specific situation (lack of flooring).

Hi @Bei He

I used to work at my local tax assessor (Los Angeles), so let me help clarify this for you.
In CA, due to prop 13, the ASSESSED VALUE can increase up to a maximum of 2% per year. You were calculating your PROPERTY TAX increases. Here are your past few years of assessed values:

Year    Assessed VALUE
2020 - $350,260
2021 - $353,888  -  Difference = 1.04%
2022 - $360,964   - Difference = 2%
* I'm guessing they reduced the increase to 1.04% for the 2021 year, due to the pandemic, but typically, the assessed value will go up to the maximum 2%

The actual property taxes are only 1% of the assessed value, due to prop 13, but the actual amount (and %) on the property tax bill is higher, due to local voter indebtedness, special assessments, and local fees. 

Hope that helps :)

Quote from @Eliott Elias:

In Texas appraisals are valid for 90 days and the number can't change unless you can suede the appraiser, which is tough. These appraisers now want to correct the market 

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As a 25yr+ Appraiser/Broker/Investor, I have never heard of an Appraisal having an expiration date or becoming "invalid." Maybe you're referring to some lenders having specific guidelines of not accepting appraisals over a certain time period, typically 180 days. 

The way to "suede" an appraiser, is to provide better, more reasonable DATA and FACTS, to justify your opinion and hope the appraiser is reasonable enough to reevaluate their opinion. But, if this is happening on more than 1 property, I would question whether YOUR evaluation is off and needs some tweaking.

Practical steps would be to specify why you think the appraisal is off. Are the comps used not similar to the Subject? Are there better, more recent, more similar sales available in the neighborhood? You need to hit them with reasonable facts, and hopefully new facts they didn't see or that better represent your property.

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And @Eliott Elias, sorry, but you are really showing your ignorance with that last line. "These appraisers now want to correct the market" I'm going to assume that's due to you being a relatively newer licensee. 

Keep going! Maybe you can there over the weekend!

I would not have an issue buying more rentals in Cape Coral right now. Although, prices have gone up since I bought last year, I still like the future potential. I still like the metrics (population growth, wealth, wages, employment, etc.) and now, unfortunately, there is going to be more of a housing shortage (at least temporarily) due Ian's devastation. This should just fuel more demand, at least temporarily.

I had no trouble finding insurance for my rental and changed companies earlier this year for a better rate. I think you may see a bump up in value, including rents, in the near future, but since you haven't started building yet, building costs may go up and it may take longer to build, due to shortages and increased demand, after the storm. You may be in a good position, since you are already in the permit process and your 4 bed + den is a great choice. I had to get a 3/2, since I had time constraints with my exchange and that is what was available.

I bought a new build through a group last year and the head person had experience in the FL real estate market after Hurricane Andrew (1992). And these are bullet points from their experience and their current expectations since Ian:

* overload for construction and insurance business
* The destroyed homes need to be built to current standards, which will take time, and this contributes to lower inventory and increased demand for existing real estate.
* Owners of damaged properties get an insurance check and need to either buy or rent existing houses, since their homes are not habitable.
* Construction workers increase in the area and they either buy or rent houses
* They have over 100 homes in current stage of construction and none had any major damage, most were fine with minimal damage

Bottomline, I think you are in a very good position and I really like SW FL market for it's great potential, probably significantly better than a midwest market, at least for appreciation potential. If you do want to sell your lot and deal, I could probably find a buyer for you, but honestly, I would go through with it, if I were you.

It sounds like a partner strategy would be perfect for you. That will limit your outflow and financial liability, but the negative is that you will be splitting income and equity with others. But, if you can do more deals, that would even out and definitely be worth it.

You seem to bring alot to the table, with your real estate knowledge (RE Broker) and GC expertise. You can control the whole deal from start to finish, which is a HUGE positive! You have an edge that many people don't, by knowing what it would take to build and/or renovate a property and then you can keep those costs down as well. 

If you can find someone (or multiple people) with the money or income to pay for the money (service a loan), you can bring all the other benefits and have a homerun team!

I almost had that in a previous partner. I am an Appraiser and RE Broker, generally well-versed in rehab  knowledge, and have the financial connections. Years ago, I partnered with a good GC that was able to do amazing things for amazing prices. I was hoping this was going to help propel our business to another stratosphere, but unfortunately, there were a lot of personal issues on their side, which threw a wrench in that plan. Anyway, you seem like those would not be issues for you, since you control important aspects. 

So, I understand the trust hesitation, but I do think those issues can be fairly dealt with agreements and structure of the deals, etc. I am happy to discuss any specific ideas, if you like. feel free to DM me.

Quote from @Stetson Miller:

@Aaron S. I would say that largely depends on how soon you're looking to be in the property. There certainly will be some decent buying opportunities in these areas you mentioned, but that would be a direct result of the damage still needing to be remediated. This would mean that you may have a house or even a new construction property to move into, but there might be highly limited or no restaurants nearby to eat at, no great shopping options, and limited access to the things you need daily such as gas stations, grocery stores, etc. 

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This also will be helped by those who were well insured and eventually get their insurance settlements. Theoretically, they will be made whole again and some will want to sell at a discount and move elsewhere. I understand from other's more in the know, that this was a common outcome historically. 

Quote from @Don Spafford:

@Ellie Narie As mentioned by others, those low price markets sound good on paper. But reality does not match. I have dealt with that having properties in Idaho and Arkansas. The Idaho market is higher priced. I bought 1 fourplex in 2017 in Idaho and 2 fourplexes in 2018 in Arkansas.

Basically the prices in AR were like half priced what they were in ID. So it was like getting 2 for 1. But, those properties really never cash flowed. There was so much turnover, evictions, repairs, etc that were needed that I pretty much just broke even every year. With covid and the eviction moratoriums, I had 2 tenants that went about 10 months without paying in 2020 and we could not evict, and when they finally were taken out, had to spend a few thousand to repair each unit. While my property in ID never had a single eviction, tenants always pay on time, take care of the property, and there has been high appreciation. I refinanced the ID property at the beginning of the year and pulled out 6 figures, basically about 5 times what I put as the initial down payment, so now it has infinite returns and still cash flows about $1200/mo. Took all of that refi cash and put it back into a development syndication where it will double that amount by the end of this year.

I just sold those two AR properties because I decided they were not worth the trouble. Taking ALL of those proceeds and investing in syndications with RV Resorts which achieve the cash flows I was searching for (double digit) and will also receive great equity to basically almost triple my investment. And it is completely passive. Much better way to do it to still get the results I want without dealing with all the problems.

That may be an option for you as well. Feel free to DM me. I am trying to be smarter about where I place my funds to grow them faster and easier without all the headaches.

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@Ellie Narie I would pay attention to what @Drew Sygit posted, with regard to the different classes of properties and areas and I would also take to heart what @Don Spafford posted (quoted above). My experience is similar to Don's. My first rentals, were OOS and had amazing gross ROI's, 45% and 30% respectively. But, those returns would get wiped out very quickly with any moderate issue, even when accounting for V & C and capx. And flash forward 17 years later (a few years ago), and I finally sold them for a loss, due to the expense of fixing them up for sale and the time they took to sell. Even after all that time, rents didn't go up significantly and neither did values. I would've done better to pay attention to the specific class of area those properties were in. The houses were not bad and relatively newer, but the market in general, was a more secondary market I wasn't familiar with. They really ended up being more of a liability and I was happy to rid myself of those anchors, after all that time.

Now, contrast that with another OOS rental I purchased around the same time as the others. The price was about 70% more than the others at the time and I had to put more down, about 3.5x as much down, but when I sold that one about 17yrs later, I sold it for about 70% over the original purchase price and 5x+ my original investment, along with more cashflow, less problems, vacancy, headaches, and shorter marketing time to sell, etc. This one was a better class property and market area and in a growing area.

So, now I pay more attention to QUALITY of cashflow, rather than just the QUANTITY. I also would rather find a market area in the path of progress or growth (quality area), to have a better potential for appreciation. For example, In 2021, I exchanged a lower performing rental from an "ok" area into a brand new property in a good area with good population growth and potential. And the new rental benefited from this growth and unexpected Pandemic growth, of over 50% equity growth and more than doubling the cashflow, in the first year! And when I look up the current values of the first 2 rentals I mentioned above, their values (including rental) still seem anemic in comparison to the others, even with the recent run-up in appreciation. 

Bottomline for me, is to assess the quality, in addition to the quantity. I'd rather have 10 properties throwing out a consistent quality $1k/mth, than 40 properties giving me a precarious $250/mth. 

That said, I am sure there are other investors that have a better system for the lower priced properties and areas, and they are doing well - just not my cup of tea.

Also, remember, there is a reason those cashflowing properties are cashflowing that much and it is usually due to lower demand (i.e. desire). If people want to live in a certain area, they are willing to pay more and sacrifice more to do it, and this partly drives up demand, which in turn drives up prices. This typically translates into more stability and greater appreciation over time. Then you can take that appreciation and spread it over many more cashflowing properties, than you would be able to with your work income alone.

You may be better off buying a $200k property today, that may be worth $300k in 10 yrs, than buying two $100k properties, which may only be worth $125k each over that time period. Then again....I may be all wrong!  LOL  :P