All Forum Posts by: Shiva Bhaskar

(Older) millennial here. I think one big issue for millennial with buying is that our generation seems to have gravitated towards more urban settings (and I don't just mean NYC or SF or LA, but cities in general, as compared to suburbs). I hear that trend is starting to shift as folks age and some start families, which suburbs are better for, but being in a city, where costs are higher, often makes renting more realistic. Plus, if the rate of marriage or having kids is lower for millennial (we know it is), doesn't that dampen the desire to buy a house? 

Also, a LOT of folks remember the 2008 crash very freshly in our minds (I was 24 when it began), and I wonder how much it shaped folks thinking around home ownership and finances in general? I know it scared plenty of my friends, especially those who might not have the same interest in financial matters as the BP audience. 

I think this is great news for us as rental property investors. More people will be renting well into the future, even once they have families - recently read a Wall Street Journal piece that some bigger institutional investors are planning on acquiring lots of single family's in good markets like Florida, Texas, Arizona, because they anticipate plenty of relatively affluent folks (millennial mainly it seems), renting well into the future. We can all follow that trend to some degree and make money from it. 

Speaking for myself, I moved back home with the parents here in the LA area, after leaving my job in NYC after many years in that city. It's been great, but now, I'm seriously considering renting in a few areas in LA that I really like, even though at the same time I have rental property. My parents think it's crazy that a guy who invests in real estate doesn't want to buy a house for himself (and I will eventually), but I love the flexibility (I can always move to a new area that seems cool, and with the amount of new construction in LA, we can often get a month of free rent), not to mention, living in cool areas where the sort of house I'd want either isn't commonly found or is not worth the price, in my view. 

So here's my issue: I have not done a 1031, but we have buy and hold property (single family) that we would like to sell, thanks to solid appreciation, a bit down the line. The goal would be to use those proceeds to buy a multifamily, hopefully something in the range of a 10 unit building (We'd be financing the deal, but these sales would allow us to put 25 to 30% down without a problem). 

Now, I know that 1031 is for a "like kind" exchange. Would I run into trouble because a single family is in a different category from a multifamily of that size, such that it would not count towards a 1031? Am I required to do another single family purchase, for 1031 purposes? 

Also, if I were selling two buy and hold houses to fund this one acquisition, is that an issue? Since the proceeds of each property, from sale, are both going into acquiring the same property? Obviously, I would list and hopefully sell both houses around the same time, and in my market (LA County), both would sell pretty quickly. But would love to defer those taxes! Any feedback appreciated. 

Can't hurt to chat with a local landlord-tenant lawyer on how the laws in this city tend to operate, as far as verbal or other agreements. Also, I like the idea of asking for at least a month to month lease at closing. I'd definitely ask for seller's bank statements or proof of payment by tenants. Not an unreasonable request at all. 

Haven't done this myself BUT have a friend who worked for institutional players and has been on the buyer side for this. Think companies like Colony Capital or Blackstone Group, whom I believe each own tens of thousands of single families across the US. 

You probably want to do this as a portfolio sale - might take a bit of a bit on the price but will save on transaction costs (commissions), and the hassle of each deal. Also, I would look into a broker with significant commercial experience, ideally one who specializes in portfolio sales or multifamily, or just a commercial brokerage outright, because they are more likely to have experience with and access to these larger investors. Of course, there may be local or non institutional investors who are into this deal, but I feel like a package of 6 houses is going to be the sort of thing the bigger players do all the time, depending on your market. 

Yup, you dodged a bullet on this one. Sometimes having a deal fall through is the best thing we can have happen - this sounds like a money pit waiting to happen. 

I agree with what Ned said - come up with another parameter/factor to bring into the deal, in exchange for a higher offer (if you have done your due diligence, and think this deal might make sense at the higher price). Obviously, the one contingency you never give away is inspection, because who knows that will uncover, but we can think creatively of other things.

We won on an SFR here in the LA area, despite not having the highest offer. It was a deal I liked for buy and hold, with a few renovations. We offered $525K on an asking price of $535K (we thought about going for lower, but this is an emerging area with a lot of interest, and we knew below that was unlikely. The seller ended up getting two offers above the asking price, for $540K and I think $544K or maybe even $545K, can't recall. Both of those were at 20% down.

The seller asked if we would move up to $540K. We said no, but we did up to $535K because we figured it was worth it based on comps and the monthly rents we could get. We were putting 25% down, which helped. We also came in with 2 pre approval letters, when I think other buyers had just one, and we informed the seller's agent that we had done full documentation pre approvals with both very recently, which would mean a quick closing, and we encouraged them to confirm with the loan officers. This all helped push the deal through - point being, extra preparation and showing you are even more qualified, can be a great negotiating point. 

Thank you all for the feedback. Much appreciated! 

This week, I spoke with a multifamily broker in Cleveland, whom I found on Loopnet. I'm new to this market (based in Los Angeles, where I mainly invest today), and trying to build a team of capable folks in CLE. 

He indicated that a lot of multifamily deals, maybe most, in the range of maybe $350,000 to as much as $900,000 in CLE are cash purchases, and investors take out a mortgage with a bank later. Is this accurate? It's not a deal breaker by any means, and I"m familiar with this in many markets, but I wanted to make sure this isn't complete BS.

He also said that a lot of more local lenders don't want to work with out of state investors on multifamily loans, perhaps because of a lack of recourse on the loan? He suggested working with larger national lenders like US Bank, Wells Fargo etc, and offered to connect me with loan officers in Ohio for those banks. Not opposed at all to working with larger lenders (current WF customer actually), but again, I want to know that this is accurate, because I have found that smaller and local lenders sometimes offer better deals. 

Any feedback appreciated. 

Do you live in California? Yes, Los Angeles area

Have you lived in California in the past 5 years? I moved back to CA in late 2016, before that was in NYC for 5 years or so, and before that, been in CA since I was 3 years old. 

Will you be staying or leaving? Love to travel abroad and in the US (and invest elsewhere as well as here), but I'll be staying. 

Why? Lots of reasons. I mainly grew up here and my family and lots of friends are here. Love the climate, outdoors activities, like hiking (even something indoors like going to the gym, I feel more motivated to do it here than I did in cold NYC weather) and beach. Love the variety of food, cultures and mix of people. I feel like for what I do, professional opportunities are strong. 

That's not to say I agree with everything our politicians do, or that I always like the amount of taxes and regulation here, but I think that overall, those negatives outweigh the rest. No plans of leaving, though again, for real estate deals I'll look in any market that meets my criteria, but personal preference of where to live is a different matter. 

What is your full time income producing job? Attorney by training, co-manage a credit repair and restoration company, plus income-producing real estate (just started that in the past year). 

One question I'd have would be what the guaranteed portion from Section 8 is, for any particular tenant. If Section 8 is OK with the place going for $1585, but they are putting up, say around $1450 or even $1500, I"d be careful of assuming you'll get the tenant's portion of rent consistently. Of course you can boot them if they don't pay, but is all of this worth the hassle? 

I agree with what a lot of other folks have pointed out in terms of screening, and that will reduce some of your risk, but it really depends on your market. I am sure you can find some decent Section 8 tenants in Atlanta, just as you can here in Los Angeles where I am. In some really impoverished cities, might be tougher. $1585 vs. $1500 is a nice bump in your return, so if you can find a good Section 8 tenant, sure, do it.