Rental cashflow in Irvine

[YellowFever]

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[nyc to oc]

Almost everyone here sounds pretty discouraging.  Fawk it.  Time to call up a bunch of aunts and uncles in HK/Mainland for some connections.

I think I'll just stick to renting it to birth tourists from Chinese ladies.  I hear they pay $40,000-$80,000 per stay.  With that kind of money, I just need one tenant.  I'll even pick up lunch and dinner for them  And besides, there's nothing illegal about birth tourism.  It''s only illegal when you lie about your reason for stay.
https://www.washingtonpost.com/news...urism-at-californias-luxury-maternity-hotels/

Is it legal to rent out to birth tourists? That's like a hotel operation isn't it? Aren't there rules in HOAs against doing that? I hope to god my new neighbors aren't going to be doing that.

 

[nyc to oc]

Almost everyone here sounds pretty discouraging.  Fawk it.  Time to call up a bunch of aunts and uncles in HK/Mainland for some connections.

I think I'll just stick to renting it to birth tourists from Chinese ladies.  I hear they pay $40,000-$80,000 per stay.  With that kind of money, I just need one tenant.  I'll even pick up lunch and dinner for them  And besides, there's nothing illegal about birth tourism.  It''s only illegal when you lie about your reason for stay.
https://www.washingtonpost.com/news...urism-at-californias-luxury-maternity-hotels/

Is it legal to rent out to birth tourists? That's like a hotel operation isn't it? Aren't there rules in HOAs against doing that? I hope to god my new neighbors aren't going to be doing that.

 

[jayl23]

Being a landlord can be a pain in the butt, or a pain in your property manager's butt.  But let me repeat something that my first property manager told me.  She was taught to be a property manager by her father, who used to work for the railroad.  Her father sustained work related injuries and had to retire early, but he was able to purchase some 30 rental units across LA area during his working years, and he was able to afford early retirement and the medical bills without going on government dole.

Does it make sense to invest in Irvine?  This depends on your individual situation.  I wouldn't buy today because I think the price is too high, I would wait and buy elsewhere with better returns.  But my buddy just bought a 4 bedroom SFR in Irvine, he is single and will rent out 3 of the bedrooms.  His renters will likely be pretty girls who will pay for his mortgage.  It makes sense for him.

If you do plan on becoming a landlord, finding a good RE agent, loan agent, property manager, and befriending some contractors is essential.  It means the difference between being stiffed with $1500 bill to replace a clay pipe, or $300 + steak dinner and beer for your buddy.

Having investment properties mean if your work income declines (more plausible scenario than prolonged unemployment), you can still pay the bills and provide for your family.  Having gold/silver means if SHTF you have real money to get out of dodge.  Having a couple month's supply of food and water means you won't be joining the zombies at FEMA camp for a handout.

Be kind to your tenants, who pays rent to you from the sweat of their backs.  You're entrusting property worth hundreds of thousands of dollars to them, it doesn't pay to be a jerk.  If they're good and pay rent on time, try not to raise the rent.  The cost of renovation and finding a new tenant will likely outweight the small income gain.

How old is your dad and just how  old will these pretty girls be?  ;D  I reckon your dad is going to have one hell of a night every night.  ;D

via Imgflip Meme Maker

 

[YellowFever]

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[Cornflakes]

A good investment property will provide good appreciation potential and gross cap of 9-10%. Anything above 10% with a 15% cash on cash return in a good solid A/B+ class area is an excellent investment for long term buy and hold.

Panda, I agree with your viewpoint. However, I personally struggle to locate a ~10% cap rate property hat has appreciation potential. You can achieve one, not both. At least not easily. Would love to hear some ideas if you have key to the secret.

 

[Cornflakes]

I understand positive cashflow is a good thing since it eases your monthly finances and it works as a safety net. However, sometimes I wonder if the whole cashflow thing is just adding too much complexity in identifying a good deal or not.

Way I see it, assume you could finance entire 100% of the purchase price for your next project. Your annual costs will be 4% cost of capital, 1% property taxes (California), another 2% for insurance, maintenance, HOA, property manager, and anything else you'd like. The key is, this 2% is your somewhat controllable cost - say you buy in no MR area, no HOA community, do not hire property manager etc.

All told, you can have upto 6-7% costs to operate that rental.

Now, look at how much rent (gross Cap rate) you can command consistently. The higher the % above 7, the better it is for you. As you go higher up into double digit cap rate, the property appreciation factor starts to vanish as the properties you'd be looking at will be in less than desirable area, smaller home, smaller purchase price and so on.

You cna choose to go with lower 7-8% cap rate and gamble on appreciation. Or, you can choose 12% cap rate (in parts of FL) and know that in next 5 years your home will not shoot up 20-30-40% in value.

 

[panda]

Cornflakes,
The link below is a little dated, but the colorful interactive map will show you the Adjusted Gross Yield (Gross Cap Rate) in any county in the United States. I would agree that it is extremely difficult or almost impossible to cash flow with 20% down anywhere in southern California. Even in the Dallas/Fort Worth housing market you can no longer cash flow with 20% down in any 9 or 10 school zone. The housing market there is currently 10% higher than their previous peak in 2006 and property taxes are at 3% a year. A perfect example of a high Gross Cap area with very little potential for appreciation is Memphis TN. The sweet spot is being able to identify a good growth area for both jobs and population, with good demographics / income in a 9 or 10 school zone where you can achieve both cash flow and appreciation potential. Most of the population growth between 2010 - 2016 is taking place in the south due to lower cost of living and better quality of life. There are some good reasons why I do not recommend investing in Florida, but the Carolinas like Raleigh, Charlotte, Atlanta are still good markets where you can achieve both cash flow and appreciation. Over a longer term horizon (7-10 years), you will see that appreciation will trump cash flow in terms of building a solid foundation of real estate wealth that will continue to pay you monthly dividends for the rest of your life.

Link:http://www.realtytrac.com/content/n...orst-markets-for-rental-returns-heat-map-8023

 

[momopi]

A good investment property will provide good appreciation potential and gross cap of 9-10%. Anything above 10% with a 15% cash on cash return in a good solid A/B+ class area is an excellent investment for long term buy and hold.

Panda, I agree with your viewpoint. However, I personally struggle to locate a ~10% cap rate property hat has appreciation potential. You can achieve one, not both. At least not easily. Would love to hear some ideas if you have key to the secret.

I'm not a financial adviser.  Just saying what I'd do.

I'd bank 80% of my cash.  Be patient and wait for RE down cycle.  Look along the 15 FWY -- visit Maurice Car'rie Winery/Van Roekel Vineyards in Temecula for the baked brie cheese bread:

Look in LA County along the 605 FWY in cities north of Cerritos.  Also check Santa Ana in OC.  Look for SFR's with decent lot size (5000+ sq ft) in cul-de-sac's.  Avoid condos and town homes.  If I woke up on wrong side of bed, maybe look as far as the slums of Sacramento or suburbs of Rancho Cordova.

Play with 20% of the cash while waiting for RE down cycle (whatever floats your boat).  Buy some gold/silver if prices look good.

If your search somehow takes you to Palm Springs, be warned that their RE market can be like roller coaster.  Visit Wally's Desert Turtle in Rancho Mirage and order their excellent lamb and souffl?s.  If you order the saute?d dover sole you can ask them to bring you both sauces (amandine & meuni?re) on the side.  The souffl? is big and you can ask them to split into 2 smaller ones.

 

[WTTCHMN]

A good investment property will provide good appreciation potential and gross cap of 9-10%. Anything above 10% with a 15% cash on cash return in a good solid A/B+ class area is an excellent investment for long term buy and hold.

Panda, I agree with your viewpoint. However, I personally struggle to locate a ~10% cap rate property hat has appreciation potential. You can achieve one, not both. At least not easily. Would love to hear some ideas if you have key to the secret.

I'm not a financial adviser.  Just saying what I'd do.

I'd bank 80% of my cash.  Be patient and wait for RE down cycle.  Look along the 15 FWY -- visit Maurice Car'rie Winery/Van Roekel Vineyards in Temecula for the baked brie cheese bread:

Look in LA County along the 605 FWY in cities north of Cerritos.  Also check Santa Ana in OC.  Look for SFR's with decent lot size (5000+ sq ft) in cul-de-sac's.  Avoid condos and town homes.  If I woke up on wrong side of bed, maybe look as far as the slums of Sacramento or suburbs of Rancho Cordova.

Play with 20% of the cash while waiting for RE down cycle (whatever floats your boat).  Buy some gold/silver if prices look good.

If your search somehow takes you to Palm Springs, be warned that their RE market can be like roller coaster.  Visit Wally's Desert Turtle in Rancho Mirage and order their excellent lamb and souffl?s.  If you order the saute?d dover sole you can ask them to bring you both sauces (amandine & meuni?re) on the side.  The souffl? is big and you can ask them to split into 2 smaller ones.

Damn, looks like MagicJ1zz in a bun.

 

[panda]

Momopi,
I like your advice better than what most Financial Advisors will tell you to just diversify your stock portfolio between stock and bonds according to your age. The cool thing about the real estate market cycle in SoCal and the Bay area, is that it seems the market consistently takes 5 years forward and 2-3 years step back, then again a repeat of 5 years forward. If you are going to speculate and try to time the market, your hold cash and gold advice short term for 2 years and buying in OC/LA in 2-3 years while patiently waiting for the RE down cycle seems to make a lot of sense.

For those of you waiting to buy a brand new home at full market value in OC/LA, I would advise to wait couple of years, unless you don't mind losing 10-15% drop in your property value in the near term. Long term, I believe that the prices will continue to trend higher in the OC/LA housing market.

A good investment property will provide good appreciation potential and gross cap of 9-10%. Anything above 10% with a 15% cash on cash return in a good solid A/B+ class area is an excellent investment for long term buy and hold.

Panda, I agree with your viewpoint. However, I personally struggle to locate a ~10% cap rate property hat has appreciation potential. You can achieve one, not both. At least not easily. Would love to hear some ideas if you have key to the secret.

I'm not a financial adviser.  Just saying what I'd do.

I'd bank 80% of my cash.  Be patient and wait for RE down cycle.  Look along the 15 FWY.  Look in LA County along the 605 FWY in cities north of Cerritos.  Also check Santa Ana in OC.  Look for SFR's with decent lot size (5000+ sq ft) in cul-de-sac's.  Avoid condos and town homes.  If I woke up on wrong side of bed, maybe look as far as the slums of Sacramento or suburbs of Rancho Cordova.

Play with 20% of the cash while waiting for RE down cycle (whatever floats your boat).  Buy some gold/silver if prices look good.

If your search somehow takes you to Palm Springs, be warned that their RE market can be like roller coaster.  Visit Wally's Desert Turtle in Rancho Mirage and order their excellent lamb and souffl?s.  If you order the saute?d dover sole you can ask them to bring you both sauces (amandine & meuni?re) on the side.  The souffl? is big and you can ask them to split into 2 smaller ones.

 

[momopi]

Momopi,
I like your advice better than what most Financial Advisors will tell you to just diversify your stock portfolio between stock and bonds according to your age. The cool thing about the real estate market cycle in SoCal and the Bay area, is that it seems the market consistently takes 5 years forward and 2-3 years step back, then again a repeat of 5 years forward. If you are going to speculate and try to time the market, your hold cash and gold advice short term for 2 years and buying in OC/LA in 2-3 years while patiently waiting for the RE down cycle seems to make a lot of sense.

IMO most working professionals around Irvine already has 401(k) accounts with mutual funds that invest in stocks/bonds.  Buying RE and precious metals is actually diversifying your portfolio.  However, you can't do dollar cost averaging when buying a house (the actual house and not some RE fund), so timing in RE cycle is critical.

Many people have "money burn hole in pants" syndrome where they cannot keep cash in the bank and just had to mess with it, often with negative results.  Instead of imposing unrealistic expectations, I just tell them to moderate their playing money to a set budget.  Want to try your hand at investing in Dutch tulips?  Go right ahead and pay for your lessons.  And if you're already an expert at trading commodities, you don't need my amateur opinions.