All Forum Posts by: Sarah Lam

Hi Eric! I'm a resident San Franciscan and REI newbie, too; welcome to BP! Good to see other people from my neck of the woods on here. :)

@Travis M. Congrats!! I went to school down there, and loooove that area. Was your first house in SLO proper or the outlying areas? I know rents have increased a lot, even since I left (which was only a year ago!).

@Leonid Sapronov great to hear from a similar beginner! We should definitely connect and compare notes throughout this process.

Your point about ignoring home equity was dead on. I think I was so focused on cap rate matching/beating market returns that I ignored that aspect. I've always considered net worth to be exclusive of home equity. I'm very debt averse, so it's been changing my worldview to learn that leverage is a good thing in REI.

@Chris Clothier I really appreciate your thoughtful response! I know from your articles that you really endorse the relational aspect of this business, and I totally agree that working with good people/companies is of utmost importance! I liked your article that compared turnkeys to the dot com boom (I'm from Silicon Valley, and witnessed the after-effects first hand!) in regards to the tension between intrinsic value and hard numbers, and will probably revisit it when I'm ready to buy. Thanks @Ali Boone for sending that article my way!

I'm trying to take a systematic approach with REI, to counter newbie enthusiasm with pragmatism while not letting "analysis paralysis" affect me. Mortgage rates are still low, so I do feel a sense of urgency to invest in the next 6-ish months, but am content to research and save in the meantime.

Really appreciate everyone's generosity with their time, expertise and encouragement! BP is awesome!

Thanks @Will Barnard for steering me to those topics! Any books you recommend? I literally just joined BP a month ago, and want to soak up as much knowledge as possible before risking any capital. I just bought What Every Real Investor Needs to Know About Cash Flow, and will buy The Millionaire Real Estate Investor after I'm finished.

Additionally, I'll be taking real estate license classes next month(my elective course is Property Management!), which I assume will be very helpful to deepen my understanding of operating expenses.

There's a lot of information out there, and I do feel slightly overwhelmed! Knowing what topics to focus on really helps me get focused on my game plan. Once I feel comfortable with my understanding of REI numbers, should I then turn my attention to qualifying markets/neighborhoods?

Thanks @Marco Santarelli and @Will Barnard for your helpful perspectives!

Glad to see you both agree on 8% cap rate as a rough guideline, which is dependent upon many other factors.

To give further details, I am concentrating on a buy and hold strategy for SFR and small MFR. The goal is to provide the "income" portion of my portfolio. Right now I'm about 97% in the market and 3% bonds. (I also have a small amount invested in a REIT, but I'm including that in the 97%.) I'm young (23) and expect the market to appreciate, so I'm not focusing on appreciation for my properties. As I said earlier, I'm drawn to REI because I'm looking for some stability. I also like that it's a tangible asset.

To further narrow my scope, I want to focus on suburbs of metropolitan areas (Marco, your housing market forecast is a great resource!), turnkeys/newer properties to minimize expenses, and as Ali pointed out in her aforementioned article, tenant quality. I'm still new to this whole real estate business, but it seems like those are the biggest factors to stable cash flow.

If either of you have any further resources you think would be helpful for my goals/investing strategy, please send them my way!

Hey @Ali Boone thanks for popping in to share your wisdom! That article was actually what got me thinking about minimum cap rates. Your article describes why it's not just about numbers (esp liked the point about tenant quality!) but I can't help but wonder about the numbers, just the same (my finance background is kicking in). Although turnkeys should hopefully be stress-free in the beginning, over time I'll have to start factoring in larger maintenance expenses, right? If the cap rate is already matching market returns, any larger expenses would eat away at cash flow, thus making the market a better investment.

I think for me, the reason why I'm okay with considering out of state turnkeys which already have lower cap rates than other forms of REI, is because I'm looking for consistent and stable cash flow. As a young investor, I have a pretty risky portfolio and I would want real estate to add some stability to market volatility. While that is a major redeeming quality, I'm trying to figure out the parameters for my REI strategy that will allow me to know when I should walk away.

Hi everyone! I'm just starting out in the world of REI, and I've really enjoyed reading @Ali Boone Chris Clothier's, and Marco Santarelli's articles on turnkeys. As a resident San Franciscan, there is no way I can afford to get started in my market! I am definitely leaning toward the turnkey route, and am making my way through every single forum post regarding turnkeys.

From what I've read so far, I understand that turnkeys are not the best deal for real estate investors (ie I could make a better return on my money doing most of the rehab work myself), but are a great choice for out of state investors looking for passive income. I'm fine with sacrificing some return for less stress and headaches, but I'm wondering at what cap rate I should walk away and dump my money into the market.

Since the market has historical returns of 7%, should I set my cap rate minimum to 8%? Is that realistic for a turnkey property?

Agreed! Giving myself a timeline of 9/1 to be fully enrolled in a real estate program. Glad to hear another endorsement for the online classes.

Sounds like fun! Anyone coming from SF and wanting to carpool? I am car-less, but will pitch in for gas! :)