Investing for Cash Flow in Irvine

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[quote author="IrvineRealtor" date=1211320029]

I'm not the speculator, though. My job is to pass out the shovels and pans to the real gold-miners.</blockquote>


That's the way to go. It worked out very well for Leland Stanford, Collis Huntington, Mark Hopkins, and Charles Crocker.
 
[quote author="graphrix" date=1211294184]I'm not saying it is a bad idea or bad investment. Without going into ethnic stereotypes, (I leave those sh*tstorms for BK to handle), this could work out very well due to the potential tenants. My neighbor owns a few props in SA, and he loves his tenants. I also have a good friend who owns a few props in the less desirable areas of Orange and she to loves her tenants. I also have heard nightmare situations from amateurs, who think it is a cake walk and wonder why the closet was used as toilet because they kept trying to jack the rent and never could keep a tenant.



Don't get me wrong, these are good rental properties, for the right owner and right tenant. I may sound conservative, but it is more that I am selective of the area and type of rental property I am looking for. I want 4 units or more in Orange or Costa Mesa. I already have CM, and my tenants are great and I plan on keeping it that way. I am just trying to keep a level headed perspective on this idea/thread. Be sure to let me know when something like that comes up, if it cash flows. I know a few that are in trouble, and I expect more to come with the amateurs that bought the last few years. It was the depreciation they were buying for, not the cash flow. They missed that point in Rich Dad.



And, you better hope momopi doesn't catch a whiff of this thread (hard to do now, and gawd... I unfortunately know), otherwise you have some shrimp paste with your name on it.



Also, I am sending you and Ipop a PM, $450k for that place is a joke when it could be had for $250k these days. It will be great when you can laugh at the other broker for killing his comp.</blockquote>


There is also one other consideration for rentals in SA: your renters might very well pay you in cash. I'm not suggesting or encouraging anything, just sayin'. And if you really want a rental property there, keep looking. The HotPads foreclosure map for SA is <em>ug-ly</em>. If someone can buy those properties and get them into reasonable shape rather than letting them revert to dens of sin, I'm all for it.
 
Panda,



Are you first generation Asian? I notice in the Asian culture being a landlord or owning a business is the sign of success and a dream for many immigrants.





[quote author="PANDA DREAMING OF IRVINE" date=1211356053]Perhaps, after reading this thread I should continue to invest in Atlanta rental properties, instead of Irvine, atleast for now. I bought a new SFR home (3 years ago) as my first rental property with 10% down / 90% mortgaged and i am still cash flow positive with a 30 year fixed loan (after paying mortgage, insurance, HOA, etc). I have a dream tenant who never calls me, his payment of $3000/month is always on time/ and also volunteered to build out the unfinished basement and the fence around the house with his own money, therefore adding value to my rental home.



If i decide to buy a rental property in Santa Ana, my mexican tenant would be probably call me every week to fix his clogged up toliet. Thanks, but no thanks.</blockquote>
 
[quote author="PANDA DREAMING OF IRVINE" date=1211356053]I have a dream tenant who never calls me, his payment of $3000/month is always on time/ and also volunteered to build out the unfinished basement and the fence around the house with his own money, therefore adding value to my rental home.</blockquote>


I dunno about Georgia tenant laws, but if he did that here, he could send you a bill for the materials and the time. If he is slow $60 an hour can add up really quickly. You better hope that Atlanta laws are different, or he never decides to turn on you. I'd make sure you give him his full deposit back when he leaves.
 
Panda,



Are you first generation Asian? I notice in the Asian culture being a landlord or owning a business is the sign of success and a dream for many immigrants.



Bkshopr,



Nope, I am an Asian2.0. My parents immigrated to the states when i was about 4 around 1980/1981. Are kidding me? Becoming a successful entrepeneur, owning several properties in Irvine, and upgrading to Newport Coast is also a WHITE man's dream.
 
[quote author="IrvineRealtor" date=1211277825]and is now at $357,700 asking



20% down = <strong>$71,400</strong>

opportunity cost of $71,400 at (2.5% in a CD) = <span style="color: red;"><strong>$148.75</strong></span> ...

IHB thoughts? Bring out your bears.</blockquote>


Opportunity costs of downs for investment properties should be weighed against competitive market returns using 8-10%. The risks are comparable, IMHO.



If a person's comfort level with risk has them holding CDs, they shouldn't be buying property. The risks of a $357,700 rental property is far greater than $71,400 invested in stocks. There's far more at risk with the property and not just the $357,700. There are lawsuits, repairs, hassle, etc.
 
NSR,

Don't I know it, but I don't knokw if the risk of hold a moderate cost property is high. It will enventually evaluate.... the cost of opportunity will be high sure, just how much higher is a good question.



I very much agree with the hassles of being a landlord. I look forward to selling everything and punching out....



good luck

-bix
 
Your parents must have influenced you over the years.



[quote author="PANDA DREAMING OF IRVINE" date=1211361436]Panda,



Are you first generation Asian? I notice in the Asian culture being a landlord or owning a business is the sign of success and a dream for many immigrants.



Bkshopr,



Nope, I am an Asian2.0. My parents immigrated to the states when i was about 4 around 1980/1981. Are kidding me? Becoming a successful entrepeneur, owning several properties in Irvine, and upgrading to Newport Coast is also a WHITE man's dream.</blockquote>
 
[quote author="PANDA DREAMING OF IRVINE" date=1211356053]Perhaps, after reading this thread I should continue to invest in Atlanta rental properties, instead of Irvine, atleast for now. I bought a new SFR home (3 years ago) as my first rental property with 10% down / 90% mortgaged and i am still cash flow positive with a 30 year fixed loan (after paying mortgage, insurance, HOA, etc). I have a dream tenant who never calls me, his payment of $3000/month is always on time/ and also volunteered to build out the unfinished basement and the fence around the house with his own money, therefore adding value to my rental home.



If i decide to buy a rental property in Santa Ana, my tenant would be probably call me every week to fix his clogged up toliet. Thanks, but no thanks.</blockquote>


I do not know Atlanta building codes and permits on a basement, but I personally, would never want a tenant to build anything or modify anything in a lease/rental. Who knows what shoddy construction, cost cutting techniques they would use since it's not his property. It would be catastrophic if a year from now a fire starts due to shoddy electrical wiring or having mold from an improper buildout of basement walls and moisture between the wall and sheetrock. All of a sudden what was a huge FAVOR to you turns out costing you a whole lot of money and liability. Please be careful about what they are proposing to do.
 
that house would be similar to one of those IAC rental townhomes in woodbury or one of the smaller calpac detached condos. in irvine those would go for ~$2200/mo. in costa mesa much less. if you can finish the build out to make your total cost around $350k it might be worth it. don't know enough about construction though. anyone care to guess the cost of completing that place based on the photos?
 
[quote author="stepping_up" date=1211423082]http://www.redfin.com/CA/Costa-Mesa/1769-Crestmont-Pl-92627/home/4580766



I expect that this will require an all cash purchase, but what do you guys think of it as investment property?</blockquote>


That depends upon you and your lender. I've looked into purchasing unfinished places and it would start as a "to build" property. So you need to come up with 50% of the purchase price and then have 30% of the building costs in cash. You must also have a VERY good budget, schedule and contractor on call. That was the way it USED to be, now i'm sure it will be more stringent.



good luck

-bix
 
[quote author="stepping_up" date=1211423082]http://www.redfin.com/CA/Costa-Mesa/1769-Crestmont-Pl-92627/home/4580766



I expect that this will require an all cash purchase, but what do you guys think of it as investment property?</blockquote>


Just looking at those crappy pics that thing is going to cost you quite a bit more than $50k to finish. I'd have to see it in person, but you might have quite a bit of do-overs from the mistakes, and damage from being exposed for too long.
 
It's definitely not something that we would take on, but was wondering if it had some good potential for a contractor or someone with good contractors. There was a tear down, I mean absolute tear down that sold on Dogwood back in March for $390K.
 
[quote author="biscuitninja" date=1211412678]NSR,

Don't I know it, but I don't knokw if the risk of hold a moderate cost property is high. It will enventually evaluate.... the cost of opportunity will be high sure, just how much higher is a good question. </blockquote>


Bix, I hear ya. Depends on your definition of moderate cost property. As Graphrix mention with the Rich Dad comment, too many in SoCal look with rose colored glasses at the scenario and it doesn't pencil out near term and the costs far exceed expectations. It really depends on what kind of reserves the buyer brings to the table. If you have reserves the risk is likely smaller and your ability to absorb the negative cashflow from a mistake or unexpected cost is higher. Without good reserves, IMHO, for a single property with a single (couple) owner the risk is far greater.



I wonder what the sharpe ratio on rental property is for newbie landlords?



Figuring the opportunity cost is only good if you're looking to live there, if someone is buying it to invest, they should be figuring the NI to get to a cash on cash return figure before tax. SoCal is too competitive in that regards, too many are buying with the thought that in the future it will appreciate or the renter will cover all the expenses.



$350K for an SFR that can be used as a bunk house, probably not bad, but I'd want to see and understand what the real target tenant is, who is managing it, etc. Ultimately, the purchase puts the buyer on the hook for $750,000 over the next thirty years.



Long term, it may wash out. But short term, even a moderate home like the above will leave a mark with the owner/landlord needed to belly up $2500 a month it sits empty. Or belly up $1000 for a plumbing fix etc. If you've got the reserve's the risk is small and with either enough units or enough info, predictable. Without the reserve's the risk is far greater.
 
NSR,

Yes that is one of the things that I ALWAYS preach to the newbie-would-be landlords. Always have WAY more capital than you need, trust me, you will need it. I tell them to pencil in something like 6-8 months of rent as well as a "new roof" cushion. Of course I always preach an insurance policy just in case you get a sue happy person (like that ever happens in CA (/sarcasism) or idiot people burn the house down... AND then sue you.



good luck

-bix
 
I'm looking at Palmdale right now for a rental property. I know the area so I know the best rental areas. If I put 20% down I will have postive cash flow. Also the payment is so cheap I can afford it if its vacant. That's the key. No what you can afford. I can have 4 properties out there for the price on 1 here.
 
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