All Forum Posts by: Tony Kim

$400 to $500 below market is actually not that bad. HACLA payment standards have been going up so fast, that even with annual increases, we generally cannot keep up with the max payment standard. I seriously can't believe I'll be renting my most recent 1 bedroom in one of the poorest areas of LA for $1,926. 

Implementing a rent increase for a Section 8 property is actually extremely easy, and for your reference, assuming your property falls under RSO, you will be able to increase rent by 8.6% this year. All you need to do is submit a rent increase request via the owner's portal. COVID restrictions on rent increases are no longer in effect. Quite frankly, the part where you will be submitting forms as the new owner will be the most tedious part.

Also, rent control in LA is not as complex as people are making it out to be. If your triplex was built before 1978 and you are in the city of LA, you will most likely be subject to the city's RSO program. That's really all you need to focus on. 

Agreed. We can play the semantics game all we want, but you can't get away from the fact that pretty much everything will produce cash-flow if you put enough money down. There is no secret sauce.... obviously everything is dependent on finding the right deal where you can put very little money down and still be swimming in monthly incoming cash. But these types of deals aren't exactly growing on trees these days.  Even examples from 1 or 2 years ago would legit, not apply to today's market. 

In California, people still earn up to 70% of their salary during maternity leave, so I don't think that will be much of an issue. I would definitely meet the person though as I would never rent to anyone that I didn't meet and have a brief conversation with for at least a little bit of time. He may very well turn out to be her beast of burden, but I think given the fact that he does actually hold a job and they will be Jointly responsible for the lease, I think you are OK....assuming the guy seems normal when you meet him.

OK, that's good to hear. Typically the escrow company needs consent from both parties before sending out any funds, even if it's a return of EMD. I'll bet the buyers reneged on signing the form pertaining to the return of funds.

In California, the standard form contains language that these types of disputes will go to a mediator instead of court. So typically, consulting an attorney for these types of situations is not needed, but at the same time it also sounds like your agent might be too green to do his/her part should this situation go to mediation. Your agent has to effectively present the steps you guys took along with the timeline...and clearly show that you took the proper steps to cancel escrow before the contingency period ended. BTW, you're under no obligation to accept seller financing. The sellers seem to be acting in a very predatory manner.  I sure do hope you get your money back...keep us posted!

Why did a week pass between submission of the release of funds letter and then the seller offering to carry the loan? It should not have taken that long... Did anything happen in that period that would cause the escrow company to delay returning funds to you? I hope you didn't have some kind of ongoing discussion with the seller on alternative methods of financing the loan.... 

 I agree, and thanks for the correction Michael. It should have been 30 years for the refi costs. 

Agree, it should have been over 30 years (no wonder TT was calculating a slightly different amount, lol). 

Depreciation can be considered a 'form' of amortization. They are not one and the same obviously, but amortization occurs for things like the question the OP posted. I'm not exactly sure how one would "combine amortization and depreciation" because that makes no sense to me at all. What DOES comply with GAAP is adding eligible refinance costs to the total basis of your property and aggregating the annual depreciation of those capitalized refinance costs as well as all costs associated with the original purchase of the property and then COMBINING them together to get your annual cash-less depreciation expense. Even though one schedule is on a 27.5 year schedule and the other is on a 30 year schedule, they are still aggregated together. Are you saying that's not GAAP?

That's correct. So you'd basically have two depreciation schedules going on.  One for when you initially purchased the property, and the second for when you did your refinance. Each instance would have their own 27.5 year amort schedule. Below is a screenshot from the schedule I created for one of my properties. where I remodeled and refi'd in 2019, and another remodel in 2021.

Leverage will magnify whatever direction you are going.....whether that is building up and growing or if that is bleeding money and losing properties. As such, arm yourself with as much knowledge as you can, not only from BP but also from other sites. You've gone beyond being an accredited investor. You're now a qualified client and there are investment forums out there where folks like you discuss deals. Spend at least 6 months learning as much as you can before pulling the trigger on any deal...regardless of whether or not that is a private syndication or direct ownership.

The last sentence above is spot on. In most markets, the property's increase in value (both appraised and actual market) will fall well short of the costs associated with adding an ADU. So this would be purely a move focused on increasing your monthly rental income, but would temporarily set you back from an equity perspective. However, this isn't the case for all markets. I would research how things play out in your area. In some markets, ADU's actually do add value at a premium to what they cost.

I was personally willing to eat the negative equity associated with adding an ADU to my So Cal home, but the thing that stopped me was the prospect of having a tenant live on the same property. It just wasn't for me.