All Forum Posts by: Tom Kastorff

@Tracey Robinson Feel free to share as much, or as little, additional info as you want, but you said "novice" yet are netting a not-small sum of $400k from a condo. Either you inherited well or invested incredibly well. What other RE experience do you have? I ask because buying $800k+ properties is not small peanuts. You also don't state what part of the country you live in or what part you want/prefer to invest in. Stating PS probably means you are in SoCal?

Thoughts
-very bad time to be a seller
-very good time to be a buyer, especially if you can wait longer as prices will drop in harder-hit regions (like vacation rental towns)
-very bad time to be Airbnb operator - they are dead in PS right now. PS is hard on a good day (most restrictions in the US), impossible in the current climate.

Taking the cap gains hit might be safer, as Brian stated, than risking buying a property that could either drop in value or be un-rentable for a period of time. Hard to tell. All we know is you put yourself into a very time-limited situation and have to do all your diligence as to which option makes the most sense in the immediate term. I guess you could also look at it this way - if one side of the coin involves paying the gov't $66k in taxes, can you afford to float a new purchase for a few months (meaning it will lose money - you are eating the monthly carry cost against no renter income) until things open back up? Basically eating cash from your pocket rather than giving it to cap gains. It would take a financially sound and savvy person to afford to do this. If not, paying the taxes may be the simplest way to come out and not forcing yourself to do something you aren't in love with. I would be making a lot of calls to a lot of top realtors in a lot of target markets, every day, if I were you, to find a way to escape this without paying taxes and buying something(s) you are happy to hold for a long time. I would be calling folks like Victor and Alyssa and coming up with a few viable scenarios that could meet your needs. Working backwards from July 15 you will have to pull the trigger on something soon.

I appreciate your gung-ho nature and willing to get started. That being said, you might be trying to do too much too fast with too many life variables in front of you the next 12-24 months. Doesn't make buying/investing/managing impossible, but certainly much tougher, just slow down and get all your ducks in a row. Unless you have rock solid boots on the ground (your team - realtor, lender, prop manager, contractors, local family) in the places you want to buy, I would be very careful to do anything quickly.

Unless you're looking at a suburb, $200k for a "decent sized SFH" sounds a bit low. I live in the military town you may be stationed in, and have been eyeing Dallas and Austin, and most quality SFH in the heart of the major metro areas are not that cheap. Who would inspect it for you? Do any work? Manage it monthly? @Jaysen Medhurst lays it out pretty well, he made some great points about DFW and SD. I would be real leery to trust family with my investments, unless they are well established professionals in this space already. "Cousin Ricky" ain't touching my stuff ...

Have you spoken with a lender in TX? most NOO (non owner occ) rentals require 25-30% down, then you will need closing costs, capex/maintenance reserves, plus any costs to upgrade the place and get it listed and carry all the costs till a full time renter is in there (could be tough with COVID). You may need more cash no matter what you do for OOS investing.

$500k in San Diego doesn't buy you much, depends on where you want to live and what type of property. Donald A. has posted some new builds around Oceanside recently for around that price (you are one of many SD type new buyer threads recently, do a search), and that is very close to Pendleton, but that is very north of town and not near PB or Gaslamp or Mission Valley or really anywhere. Depends on what sort of lifestyle you want in SD. Most Navy kids want to rage the beach and party at Fluxx and living in O'side would make that pretty tough to do without 30-45 minute Ubers each way every night. $500k for a SFH would be nearly impossible unless you went north or east, and those are not really "San Diego" and where young military single dudes want to live IMO. We need to know more about you to understand your limitations of where you'd want to live, assuming you even know a thing about SD.

MF in SD will be $1M+ nearly anywhere unless Twana has links to otherwise. The last "decent" (not a s___-hole) 4plex I saw in North Park was $1.6M. The only way it made sense to buy that (from a cashflow perspective) is to 1031 exchange a crap ton of equity into it, so the payment is decent. Otherwise at surface level you would lose your pants renting out at that acquisition cost. Thus you see very competitive buying in MF because they are havens for 1031 exchangers.

My thoughts

1. do whatever you want, that you feel comfortable doing. it's your life, your money, just do your homework. A lot of it.

2. I would wait if I were you, two reasons

a. too much uncertainty with your military career and moving around, that makes managing property tough unless you go full turnkey

b. COVID is going to drop prices in many places, waiting should net you a better deal. It will take time for RE to really feel the pain of evictions, non-pay, foreclosures, job loss, etc. It is a trailing result, where stocks drop by the minute, RE takes time to sort out because no one moves quickly in that industry. The longer you can wait, the better a deal should be out there. If you are in your 20s, sure you want to get started, but these are expensive decisions, don't make them too quickly.

@Verenna Huerta - good luck. Very tough time to be starting out in a town with 20000 licensed agents and a pandemic going on, making it tough to market yourself and build relationships, which is how you become successful in RE.

The agency brand matters far less than the actual agent (person) and what they can offer you. Although do your research on agencies, they are all different and use different tools and methods and branding and have varying costs.

@Kobe Xin is spot on, and I would even turn it around a bit, putting more pressure on you - agencies are going to be real tight bringing on new agents (my guess) for a while, as there is overhead when hanging a shingle, marketing costs, license costs, CRM and software costs, MLS costs, dues owed to the mothership (keller williams, compass,) etc. They will and SHOULD be interviewing you hard, and you should do the same. You NEED a mentor as it sounds like you have zero actual RE experience. It's not quite as simple and easy as Tarek and Christina or MDLLA make it seem..

This is where @Joseph Cacciapaglia's response is so money. You need a mentor and need deal flow and volume and experience more than you need big whopper sales. You learn more by doing more. Sort of like Gladwell's 10000 hours theory. You need to get in the dirt, roll up the sleeves, and do whatever it takes to learn, like Gary Vee says in all his YT videos. It will be tough sledding for a while, who knows how soon you can actually go show a home in CA in person. Weeks? Months? Years? We don't know. How can you successfully kickstart your career during this uncertainty? Reading. Learning. Grinding. A lot.

I would scan your neighborhood, or desired selling area, and find the sneaky gal that does 25-50 deals per year. Doesn't necessarily have to be the one with his or her name on every bus bench or mailer, but someone that is ninja good and can teach you the ropes and is willing to foot the cost and time of hiring a brand new agent, in trade for the long term success you will hopefully bring the both of you. But you need to craft a damn good message and story and sales pitch, because on the surface a case manager > wyndham timeshare rep > overnight licensed RE agent doesn't tell us much about why you would make a great salesperson. Create a rock solid elevator pitch. Go sell yourself to agents. Make it happen. I am born and raised here and know FAR more failed wannabe agents than friends that are still active. Very, very small list. You need to craft a plan while you have all this down time to ensure you outlast the typical agent in this town. Good luck.

@Joseph Cacciapaglia

^^^ The mortgage calc numbers I posted also included 20% down of $114k, so unless you have a VA for much less, you will either not nearly afford anything in this price range, or have a much larger payment which includes PMI, and further makes "cutting your overhead costs" less feasible. I think we need more clarity on your goals and plans and thinking.

@David E. -- Unless I missed it, I am still struggling to understand how going from $2000 rent to a $570k+ property is going to "immediately cut overhead costs and to begin investing in myself instead of someone else's back pocket" and "being financially free will not be attainable in the near future unless I make a fundamental change to reduce expenditures" - can you explain further? This will dramatically increase your overhead costs. A quick scan using a mortgage calc on $570k would be $2700-3000 / mon depending on any HOA if buying condo/townhome, including taxes and insurance. Not including your new costs of ongoing CAPEX (maint, repairs, $100/hr plumbers, furnishing, etc). Yes you will get some savings back at tax time but your monthly "overhead costs" will go up (unless you plan to rent rooms but I didn't see that anywhere). And historically in SD the condo/TH's don't appreciate nearly as much as a SFH, so from an investment standpoint it's not the best, especially if you ever move out and plan to rent it - it will be tough to cashflow a $2700-3000/mo rental (I am assuming it is not very big or near the coast at that cost).

Buying a home and having a mortgage and various expenses does not make you financially free. Having enough cashflowing assets (rentals, stock, other investments) can make you financially free once you accumulate enough income against expenses. In fact some finance gurus (JL Collins, excellent $12 book on Amazon called "A simple path to wealth") believe in not owning RE at all as a primary residence (as one strategy), you can be more liquid and free to move anywhere and rent anywhere at any cost you want, let landlords finance your living with minimal CAPEX cost (landlord pays for landscaping and plumber etc.)

Just things to think about. I am always weary for folks that come on here (or in personal life) stating they only have "$45k liquid" and "want to cut current rent" yet buying a property will require far more than $45k and not cut your overhead. Also the fallacy that rent is throwing money down the toilet. Everyone needs a place to live, it is a cost that every human has to pay in some form. Sure, it is often better to own than rent, but not always. Just watch the news over the next 6+ mos as many fringe homeowners (folks that went all in with their last $45k to buy with no savings net) lose their homes while unemployed during this pandemic and the ensuing shakeout. That is why you want to wait and watch and dial in your needs vs. wants vs. affordability and so forth. Wait for deals to happen (although as noted by others, SD retains values much better than most of the nation). Good luck.

Interesting article by a vegas-based Motley Fool writer. Makes a lot of sense. And if it bears out, or even any fraction of the possible delayed opening of the strip, it would likely hurt LV RE pretty harshly (every high end pit boss, restaurant GM, baller club boss, etc. will get crushed). Curious everyone's thoughts on this. @Eric Fernwood

https://www.fool.com/investing/2020/04/09/why-re-open-the-las-vegas-strip.aspx

@Ryan Phu  Welcome Ryan and congrats on your confidence and gusto. Not many get hip to the potential and power of RE at such a young age. Keep reading, learning, watching webinars and videos, and soaking in the data and strategies. You have 80% of your life left, plenty of time to grow your empire.

As Whitney pointed out I assume there are many legalities that you will have to overcome. Do you know a good lender to chat with? Real estate agent? Those two conversations would probably be my starting point. Can you even get a loan? (for a BRRRR or any other deal that requires you to buy the property). Without a credit score and job showing income I doubt it is possible to even get a loan. Your debt to income ratio would be negative. A lender has nothing to secure the loan against unless you have some rich family savings accounts and your parents on the title. It could get messy, and do your parents want to get involved and share all their finances (loans require a lot of paperwork) and have their names on the hook if something goes wrong?

Wholesaling could be your best (and only) option but you don't see many 17 year old's driving for dollars, door knocking, and getting Mr. and Mrs. San Diego Homeowner to give you the hot lead on their $650000 property. Not saying it is impossible, but you should have a pretty dialed-in plan and approach to overcome the age barrier, which any homeowner will instantly recognize and throw up as your biggest hurdle. When you show up on their doorstep they are going to assume you are trying to sell high school candy bars, not acquire their home. Things to think about.

My guess is it will be pretty difficult to engage in either plan, but you'll need to confirm that with a lender and agent, and then ultimately your parents. From there, you can continue to learn, build your plan(s) of attack, fine tune what areas of RE you want to go deep in, and frankly start building a career and income that can support REI in SoCal, perhaps the most expensive place to buy alongside SFBA/NY. Brandon Turner's free weekly webinars are great, his books are awesome, the forums always have interesting ideas and methods, and I've found Youtube videos by folks like Chandler Smith to be engaging and learning opportunities. Also do heavy research on out of state (OOS) investing, which could be a better option to make your dollars go farther.

And continue to post and ask questions! Learning is the key, this is not a cheap business to be in.

Exactly what I would recommend. Keep dumping into 401k, right now is the best time you have to do so in years. The market is down, you are buying at a discount, dollar cost averaging even lower as the market drops. When things come back roaring, as they did for the last 10 years since the 2008 crisis, your money can double or triple very quickly. My Vanguard and Fidelity accounts outpace anyone's RE holdings I can promise you that, for the last ten years. Highly recommend Vanguard Bogleheads forum for investment advice, and JL Collins "A Simple path to wealth" as a cheap easy read. He is not necessarily an advocate for buying RE, but his investment style and advice is widely followed (it is the Boglehead way) and easy to understand. 

FWIW I am investing heavily in the market right now - my employer's 401k and match, I fully fund my HSA account (google it, commonly used as another 401k type resource), and send weekly automated investments to Vanguard VTSAX in my taxable account (which I could pull anytime to use for RE if I wanted, after paying capital gains tax on it). But as Sam said in #1 - I am able to do all of these AND fund an RE cash fund because I have heavily invested in myself over the years and have a considerable income to be able to fund multiple investment avenues. That truly is the #1 key to long term success and growing your investments and available cash for investing. The more you make, the more you have to spread across multiple strategies. If you want to buy in OAK/CA, you will need serious cash. 

This. Perhaps OP changes the rental model from long term rental to a vacation STR? STR requires you to be even savvier with forecasting costs, because you then foot the bill for all the utilities, but in theory you can at least double your monthly revenue. But then you also need a true STR focused property manager, which is expensive (20-35%).

My vacation STR has a high HOA, but that's required because it's a mountain town and you need hefty funds for daily snow plow of the complex when it snows. Otherwise no one is driving in or out. I sit on the HOA board to ensure no wacky changes or rules go sideways, I want to protect my investment. Requires a few hours a year of phone calls.

I would say I wouldn't rush to buy more condos, because the HOA dues and restrictions can be burdensome, but just like any investment, do your research and homework and model out the costs vs revenues. In some cases, in some towns, a condo is safer and easier as an investment/rental because it has built in security being part of dozens or hundreds of other units in a community. "Someone" is always watching your condo because you have so many neighbors. It is unlikely to get robbed or burn to the ground with no one paying attention.

Tyler, as Julie stated, you need to do a lot more reading, and I highly recommend you attend every one of Brandon's weekly webinars (he has one today at 4PST. Just sign up and they email you the recording after, I watch most of them late at night in bed, never live. 

It is good to ask questions, but you are asking very newb questions that tell us you are barely even at first base. It would behoove you to go educate yourself more, so your questions here are more pointed and serious, and you will get better responses. This one line is confusing - "this in no way is something I'm looking to invest in, rather I saw this price and researched comps expenses and monthly rental to see if there's an opportunity or not" is saying both! First you say "no way something looking to invest in" yet you finish the sentence saying "to see if there's an opportunity or not." Huh? It is great to run numbers in the Pro calculator (it looks like you haven't signed up. go watch a webinar and Brandon always gives out 20% off codes for the membership, worth it's weight in gold just for running the rental calculators 100s of times, which is exactly the practice you need). The calculator will also walk you through, every time, how "to structure the expenses." You don't need a virtual assistant, you are getting way ahead of yourself. Just like his webinars preach - you need to practice looking at 100s of properties and running 100s of calculator simulations. Your insurance price is wrong, you don't appear to have any vacancy / repairs / maintenance factored in, this is a bad opportunity across the board. What others are saying above is, for most here, this wouldn't even warrant a post because it's so underwater. There is no way to make this a viable investment with the stated cost vs. income numbers you have. You move on. I tried to make 5-10 properties in an entire popular wine country town work, could not, and have basically moved on from an entire city simply because with 35% property manager fees (the lowest you can find, and the town requires a PM), no rental will ever be profitable. The more you run numbers, the more you learn things like this just simply by repetition. 

And the FHA statement just slams the door on the newb status, no offense. Highly recommend you start first with Brandon's book on rental property investing, it walks through everything related to buying and renting, the loan types, etc. FHA is for first time home buyers, meaning home owner occupied. It's a program devised to get first timer's into a home at a lower down payment. A rental that you don't live in ... is not owner occupied. So you need an investment property loan which is typically minimum 20% down and a slightly higher rate. A common way to house hack with FHA is to buy a property, live in it, then move out and rent it while still having the lower-down cost FHA loan in place. Then go do again. Watch the webinars, read the books, there are MANY strategies to learn, but you cannot post here 1000 times asking, it will get tiring. You go learn the knowledge, then come back here with more specific questions that folks love to help with.

Good luck dude. Now is a great time to sit on the sidelines and learn, learn, learn. There will be deals to be had in the coming months. Start with Brandon's webinars and the Pro membership, there is so much material to begin with there.