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ever see a landlords bill of rights ???? nope , me neither . tenants get all the protections . all landlords get is basic contract law and even that can be on shaky ground in court .
Not quite, but you have the basic situation. So do you wanna invest in California, or elsewhere?
Also soon may not be an option and already not an option in some areas.
Property Management team in Washington State just sent out a letter to every owner stating under Washington Law residential owners can no longer blanket refuse to accept Section 8...
I did not read the law which was cited but this is a huge turnabout as the company strongly advised against accepting Section 8 and now says this is not possible...
Of course the Section 8 Holder could be disqualified with a low credit score as long as this is applied equally...
Several Statewide Rent Control Initiatives on the November California ballot... some Statewide and others local...
I have worked under rent control in Oakland since day one... it was originally a very simply program and over the years continues to grow... the biggest change is Just Cause Eviction... which allows non renewal or eviction in only a limited number of cases from an official list of reasons.
Prior to Just Cause... a simple approach to get rid of a problem tenancy was non-renewal... not an option without an approved reason which opens the door to litigation...
For my purpose and goals leaving the Bay Area worked out well. The Bay Area has always had poor cash flow overall. Appreciation has been extremely high there though. Now you can always get a positive cash flow if you put down enough, say 70% or more, but that generally ties up a lot of cash. The other thing is to carry the negative cash flow for long enough to pay the house off then reap the rewards of rental cash flow and likely high appreciation.
For me I didn't want to carry the non cash flow for that long but wanted it immediately to live on.
The exception is if you were able to buy at the last big recession when everyone thought real estate was not going to go up for a long time. Then values and rents skyrocketed. I don't know if we will ever see that again.
The last rental I sold in California for 350k has gone up to about 450 k in the last 3 years. It could generate 22k a year in profit. I sold it and bought 6 rentals in flyover country. Those generated about 38k a year in rents. Their value had gone up to about 600k. So over a 3 year period flyover beat California 414,000 to 166,000.
Now jumping from 22k to 38k a year may not sound like much, especially if you live in California. But moving to a lower cost of living area one can pretty much live on 38 k a year if they are frugal. For me I had a second California property I lived in and paid about 45k a year in Payments on. I sold that and repeated the process with another 6 rentals. So now the income goes to 76k a year. For a lot of people that is enough money to retire comfortably in many parts of the country so that's what I did.
A house here I can rent for 1600 a month. The same house in Pleasanton in a comparable neighborhood would run about 3500.
In my case with just those two properties in California they cash flowed a net of negative 23k a year. Moving to Atlanta the swing was to positive 56,800 enabling me to not have to work a job.
I'm not saying you won't make money in California real estate, it just usually takes a long time to do it unless you are successful at flipping houses there.
That’s what I said.....a long slog. At least here in the Bay Area. All the landlords I know here paid cash for their rentals. They are also scared to death of the stock market. I’m not saying that’s everyone, but it sure seems to be a common theme.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,576,900 times
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Quote:
Originally Posted by Cabound1
That’s what I said.....a long slog. At least here in the Bay Area. All the landlords I know here paid cash for their rentals. They are also scared to death of the stock market. I’m not saying that’s everyone, but it sure seems to be a common theme.
When I lived in the Bay Area I never new anything but the long slog. Cash flow?.. what's that? Oh you mean 15 years out
But in other areas it can be a much shorter time span depending on your goals. Two of the people I know that quit their jobs in their 30s we're both Californians. One did it all in a span of about 5 years with Bay Area real estate, he knew more than I did. The other lived in Los Angeles and did it investing out of state.
So it can be done with effort and care.
All of my rentals now are too far for me to manage from Atlanta, so the whole thing can be done from California too since in either case self managing is pretty tough.
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,576,900 times
Reputation: 16698
Quote:
Originally Posted by Ultrarunner
Also soon may not be an option and already not an option in some areas.
Property Management team in Washington State just sent out a letter to every owner stating under Washington Law residential owners can no longer blanket refuse to accept Section 8...
I did not read the law which was cited but this is a huge turnabout as the company strongly advised against accepting Section 8 and now says this is not possible...
Of course the Section 8 Holder could be disqualified with a low credit score as long as this is applied equally...
Several Statewide Rent Control Initiatives on the November California ballot... some Statewide and others local...
I have worked under rent control in Oakland since day one... it was originally a very simply program and over the years continues to grow... the biggest change is Just Cause Eviction... which allows non renewal or eviction in only a limited number of cases from an official list of reasons.
Prior to Just Cause... a simple approach to get rid of a problem tenancy was non-renewal... not an option without an approved reason which opens the door to litigation...
How does income factor in? Is the sec 8 income added to their qualifying income?
In the Bay Area in Ca the 1 million house for $4k a month makes a cash flow pretty much impossible.
All my rentals were bought and fixed up in the 40 to 65K in the midwest. Rents run from $1,000 to $1200 a month.
Appreciation is pretty slow compared to Ca and other areas if you are talking about just sitting on them. But he result was increasing their value in fixing them up. That and the little appreciation they got pretty much doubled their value over the last 3 to 4 years from what I paid, so 100% total. Compared to the Ca real estate in the same time period without forced appreciation came out to about 30%
The tenants are a bit more work, but the property manager deals with all that stuff.
You got great financing doing the owner occupied route.
Nice! $50k may get you a parking space around here, very jealous of those numbers. Since you're managing remotely, have repairs and operating expenses been a problem? I'm so stingy I have to DIY everything, from finding tenants to remodeling a kitchen which helps with my returns quite a bit.
I'd say both sides have their ups and down. The high end you don't get much cash flow, it's mostly made through appreciation. The advantages there are taxes, easier to scale (e.g managing 4 homes instead of 20), during a downturn such as 2008 the higher end areas hold up a lot better, lower operating costs (4 roofs vs 20) and better tenants. The cash flow on the lower end does sound amazing, having that liquidity is sure nice. Another advantage of the lower end areas are multifamily homes, you have to have millions if you want a decent multi unit property around here.
The great thing about RE are there are so many strategies, from co-op buyouts, trailer parking, $50k homes, $1m homes, and so on.
That’s what I said.....a long slog. At least here in the Bay Area. All the landlords I know here paid cash for their rentals. They are also scared to death of the stock market. I’m not saying that’s everyone, but it sure seems to be a common theme.
Never was able to pay cash for any rental... but almost always a large down and never less than 25%...
I avoid the stock market so I would fit into the above description.
I am also cognizant of the political forces against housing providers and because of this I have been transitioning out of residential rentals the last 20 years... Triple Net Leases are a wonderful thing!
At one time... the majority of my residential consisted of Section 8... met a lot of good people but the program today bears little resemblance to how it was and this is why I stopped accepting new Section 8 tenants...
When the Housing Authority went to contract inspectors and got out of the Security Deposit guarantee citing too many claims paid the handwriting was on the wall...
I still have Legacy Section 8 that will be with me as long as they wish...
It's too bad all the bad tenants and bad rental owners couldn't slog it out and leave the rest of us alone...
About half of my tenants eventually buy a home... I couldn't be happier for them... they worked hard and achieved their goal and it is nice to see it happen!
Operating under rent control is how it has always been for me... it now looks like Rent Control could go statewide... which probably means fewer Mom and Pop providers of single family rentals and will leave the bulk of the business to large corp providers with lawyers to fight it out...
How does income factor in? Is the sec 8 income added to their qualifying income?
It takes Income qualifying out of the equation since the rent is subsidized and makes blanket statements such as No Section 8 illegal.
Separately here in Oakland it was not a law but demographics.
The demographics of my city have changed dramatically and I have seen it all...
The higher prices that spur renovation had priced out Section 8 in many cases... only 1 out of 10 new Voucher Holders was able to secure housing here... it was dire but holders were priced out or owners such as me had one too many bad experiences... like having to paint an exterior in January!
I lost a lot of Section 8 tenants when Voucher became portable... families left Oakland for Antioch, Hayward, San Leandro, Vallejo...etc. Many cited newer housing and better schools... several have stayed in contact wanting to come back... the new housing was due to the foreclosure crisis... but these homes were often sold so several had to keep moving... the better schools did not quite pan out because kids in trouble seem to get into trouble and location isn't the only factor...
I did take back two families that bought homes and walked away from them... quite bitter too...
They were paying me $1500 a month for a 3 bedroom home and bought nearby... as a new owner they found their housing expenses more than doubled... and when prices dropped they decided what is the point... one went from $1500 to $3600 with PITA plus being responsible for repairs...
Last edited by Ultrarunner; 10-13-2018 at 01:32 PM..
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,576,900 times
Reputation: 16698
Quote:
Originally Posted by Ultrarunner
It takes Income qualifying out of the equation since the rent is subsidized and makes blanket statements such as No Section 8 illegal.
Separately here in Oakland it was not a law but demographics.
The demographics of my city have changed dramatically and I have seen it all...
The higher prices that spur renovation had priced out Section 8 in many cases... only 1 out of 10 new Voucher Holders was able to secure housing here... it was dire but holders were priced out or owners such as me had one too many bad experiences... like having to paint an exterior in January!
I lost a lot of Section 8 tenants when Voucher became portable... families left Oakland for Antioch, Hayward, San Leandro, Vallejo...etc. Many cited newer housing and better schools... several have stayed in contact wanting to come back... the new housing was due to the foreclosure crisis... but these homes were often sold so several had to keep moving... the better schools did not quite pan out because kids in trouble seem to get into trouble and location isn't the only factor...
I did take back two families that bought homes and walked away from them... quite bitter too...
They were paying me $1500 a month for a 3 bedroom home and bought nearby... as a new owner they found their housing expenses more than doubled... and when prices dropped they decided what is the point... one went from $1500 to $3600 with PITA plus being responsible for repairs...
So Wait. Let's say you require 3x the rent as a qualifying income. Let's say your rent is 2000 a month so they need $6K a month to qualify. Let's say sec 8 gives them $1K a month for rent as a subsidy. If they make 2k a month in wages the certainly don't hit the 6K a month you have for all tenants equally. How does that work out? Or is sec 8 100% there?
Location: Formerly Pleasanton Ca, now in Marietta Ga
10,351 posts, read 8,576,900 times
Reputation: 16698
Quote:
Originally Posted by 22003yo
Nice! $50k may get you a parking space around here, very jealous of those numbers. Since you're managing remotely, have repairs and operating expenses been a problem? I'm so stingy I have to DIY everything, from finding tenants to remodeling a kitchen which helps with my returns quite a bit.
I'd say both sides have their ups and down. The high end you don't get much cash flow, it's mostly made through appreciation. The advantages there are taxes, easier to scale (e.g managing 4 homes instead of 20), during a downturn such as 2008 the higher end areas hold up a lot better, lower operating costs (4 roofs vs 20) and better tenants. The cash flow on the lower end does sound amazing, having that liquidity is sure nice. Another advantage of the lower end areas are multifamily homes, you have to have millions if you want a decent multi unit property around here.
The great thing about RE are there are so many strategies, from co-op buyouts, trailer parking, $50k homes, $1m homes, and so on.
So far repairs and expenses have been about what I projected. This year has been a bit tough as a neighbor's tree fell on one of my rentals and the deductable was over $3K. Exceptionally heavy rain had a few more roof issues than normal. Then I bought another rental and rehab went from 28k to 42K so numbers aren't as good on that one. Still all in for $72K and rent is 1200. Of course that was the one the tree fell on.
As far as scale I hear you on the capital costs like roofs. Managing 4 or 20 is all the same-the property manager does it for me. Actually she dropped her management fee 33% once I hit 20 and I do get her attention when I have requests as I am a bigger fish compared to most of her owners as far as dollar volume.
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