All Forum Posts by: Brad S.

I posted this on a similar thread about a month ago. I have an example of the differences between specific real estate investments in CA vs TX, with a 1031 exchange I did in 2006. Maybe you will find this interesting, but obviously there are A LOT of variables and it isn't a perfect comparison. 

I had a great rental in a good suburb in the city of Los Angeles, but studying what was going on in the market and how unstainable it was, I decided to sell my 1 rental and exchange into multiple properties in a more stable market. At the time, TX was generally known to be pretty stable, with maybe 3%-5% appreciation and not prone to significant downturns or volatility.

I recently did a general analysis over the time period of when I did the exchange till today (16 year period). Again, there are a lot of variables, so this doesn't necessarily prove anything, but it is interesting and does help me personally, to see what my decisions produced (or would've, if I held on to all of the houses). 

Feb 2006
Sold a CA rental for around $800k, after it more than doubled in value in about 3 years.

May 2006
Purchased 5 rentals (3 different TX markets) for around $800k total

Sep 2022 Estimated Values
CA property - $1,650,000  vs  
TX properties (all 5) - $2,160,000

Monthly Rental Estimates (after taxes and insurance and hoa)
2006  vs  2022 (estimated)
CA property
$2,100 vs $5,320

TX properties (all 5)
$4,655  vs  $7,086

This was pretty much an almost equal exchange, with no additional cash or mortgage for the exchange. Obviously, it would've been different if I kept the CA house and took money out to buy more CA houses or a couple of TX houses. Any of those scenarios would've probably been good, but this above analysis shows a real life scenario of an equal money shift from CA to TX over a long time period.

Well, one of my concerns would be giving up the secure homebase for the unknown circumstance of becoming a tenant, and giving up the security of knowing how much your monthly housing expenses will be, control of where you live, how you live, what you can and can't do with your rental home, etc.

Are you planning on renting in the same area, or moving to a different state or less expensive area? How much are you projecting rent to be? I would put those #'s into the equation, and then look at the #'s and plans and see how they relate to your overall goals and potential returns on what you would do with the cash you would get from the sale.

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Let's look at your current housing expenses.

Mortgage - $3,418

Taxes - $1,210

Insurance - $150 (estimated)

Total piti = $4,778

Your monthly principal paydown is around $1650 (and will keep going up slightly over time) So, your effective monthly housing expense (not including utilities or future tax/insurance increases) is $3,128/month ($4,778-$1,650)

I would look at the potential of building an ADU and possibly a JADU on your property, to help lower your housing expense. If you build an 800sf ADU at around $240k, you may be able to get around $2,500/mth for it. $240k loan (or heloc) may be around $1,600/mth, estimated at 7% rate (I don't know what heloc rates are now).

Then, your net housing expense would go to around $2,228 ($3,128 - $900 from ADU) and if you can do a JADU, your expenses would go down even further. And if you look at the potential ADU cost, that is around the 1% rule ($240k cost for $2,500/mth).

Alot depends on what your plans are, where you would move, how much rent would be, what you would do with your cash if you sold, etc?

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 :)

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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.