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surveyor
Participant[quote=Shadowfax]Dan,
1st: Congrats on the kid–boy or girl? Kudos to the wife–she did all the work. 😉
2nd: PUT THE F*^$#-ING COMPUTER AWAY AND BOND WITH YOUR BABY! Oh, and change a diaper or two and give some attention to your wife.
[/quote]I bonded pretty effectively with my first daughter. Would hold her while playing Starcraft online.
Anyways, Dan, congratulations!
Participant[quote=Shadowfax]Dan,
1st: Congrats on the kid–boy or girl? Kudos to the wife–she did all the work. 😉
2nd: PUT THE F*^$#-ING COMPUTER AWAY AND BOND WITH YOUR BABY! Oh, and change a diaper or two and give some attention to your wife.
[/quote]I bonded pretty effectively with my first daughter. Would hold her while playing Starcraft online.
Anyways, Dan, congratulations!
Participant[quote=Shadowfax]Dan,
1st: Congrats on the kid–boy or girl? Kudos to the wife–she did all the work. 😉
2nd: PUT THE F*^$#-ING COMPUTER AWAY AND BOND WITH YOUR BABY! Oh, and change a diaper or two and give some attention to your wife.
[/quote]I bonded pretty effectively with my first daughter. Would hold her while playing Starcraft online.
Anyways, Dan, congratulations!
Participantgn:
There are several advantages to mult-units. One is vacancy – if a tenant leaves your SFR, you are 100% vacated, vs. one tenant departure in a 4 unit is 25%. It helps your cash flow. Also, 4 units is still considered residential so it is fairly easy to purchase. There are other advantages to SFR’s too, but my preference is multi-units.
It really depends on your disposition though and patience. Multi-units are for serious real estate investors and have more frustrations. They are more time intensive, so being a part time property manager may not appeal to most people. If that is the case, avoid multi-units, try SFR’s and see if it’s to your liking. That to me is a more serious question to answer as opposed to whether or not multis trump SFRs as a better investment (in which case, they do, if for no other reasons economies of scale).
As for appreciation, the multi-units have been appreciating like their SFR counterparts. However, there is not the same pricing pressure on multis because they have not been as subject to the funny loans and overreaching that has permeated the regular housing market. Or at least it hasn’t reached the multis yet as far as I know. Still, you can count on multis appreciating in certain ways similar to SFR’s, with a bit of stickiness in prices. I can see SFR prices going lower right now because of the foreclosures. Unfortunately, I don’t see multis going through that process for at least awhile (if at all) and you may get tired of waiting for multis to pencil out in San DIego (which also may never happen).
It is because of these possibilities that I have essentially given up on buying investment properties in San Diego (and California).
If there is a segment of multi-units to watch, it is the medium sized multi-units, from 5 units to less than 100 units. The commercial loan market has been absolutely terrible for loan applicants (something I can personally attest to) and it has been extremely difficult getting funding. The sellers or owners of these medium sized multi-units can be under a lot of pressure and I am seeing a lot of deals in those areas. Still, the problem is the difficulty in obtaining these commercial loans. They are not federally backed for the most part so they are extremely picky on who gets these loans and even if you find a good deal, you may not be able to find funding for it anyways. Catch-22.
Anyways, other comments:
1. This ROE calculator is NOT a rent-vs.-owning calculator. It is strictly for real estate investing purposes. The calculations for rent-vs.-owning are different.
2. Regarding estimating appreciation, in general you should use a 4% rate for appreciation for all properties. However, there is a catch because, like others mentioned, there are locations in the U.S. that do not appreciate at the same rates as others. There is also for those who are really savvy within the real estate markets they know, they can time the market and know what kind of appreciation to expect at certain points of the market. Somebody mentioned Detroit. For those in the know, Detroit (and that whole rustbelt area), you cannot expect to make money on appreciation. In fact, the prices there tend to DEPRECIATE (the rustbelt area is known to real estate investors as a “cash flow” market, cash flowing being the primary way to make money in that area). So if you are comparing a property in the rustbelt area vs. San Diego, you have to put in a 0% or -4% appreciation rate vs. San Diego’s 4% appreciation rate. From that you can take a look at how the ROE between the properties shake out and see which one is better.
3. Yes, the calculator is geared more towards investment properties.
Honestly there are so many variables you can play with in the ROE calculator. Unless you really know what you are doing, keep it simple.
Participantgn:
There are several advantages to mult-units. One is vacancy – if a tenant leaves your SFR, you are 100% vacated, vs. one tenant departure in a 4 unit is 25%. It helps your cash flow. Also, 4 units is still considered residential so it is fairly easy to purchase. There are other advantages to SFR’s too, but my preference is multi-units.
It really depends on your disposition though and patience. Multi-units are for serious real estate investors and have more frustrations. They are more time intensive, so being a part time property manager may not appeal to most people. If that is the case, avoid multi-units, try SFR’s and see if it’s to your liking. That to me is a more serious question to answer as opposed to whether or not multis trump SFRs as a better investment (in which case, they do, if for no other reasons economies of scale).
As for appreciation, the multi-units have been appreciating like their SFR counterparts. However, there is not the same pricing pressure on multis because they have not been as subject to the funny loans and overreaching that has permeated the regular housing market. Or at least it hasn’t reached the multis yet as far as I know. Still, you can count on multis appreciating in certain ways similar to SFR’s, with a bit of stickiness in prices. I can see SFR prices going lower right now because of the foreclosures. Unfortunately, I don’t see multis going through that process for at least awhile (if at all) and you may get tired of waiting for multis to pencil out in San DIego (which also may never happen).
It is because of these possibilities that I have essentially given up on buying investment properties in San Diego (and California).
If there is a segment of multi-units to watch, it is the medium sized multi-units, from 5 units to less than 100 units. The commercial loan market has been absolutely terrible for loan applicants (something I can personally attest to) and it has been extremely difficult getting funding. The sellers or owners of these medium sized multi-units can be under a lot of pressure and I am seeing a lot of deals in those areas. Still, the problem is the difficulty in obtaining these commercial loans. They are not federally backed for the most part so they are extremely picky on who gets these loans and even if you find a good deal, you may not be able to find funding for it anyways. Catch-22.
Anyways, other comments:
1. This ROE calculator is NOT a rent-vs.-owning calculator. It is strictly for real estate investing purposes. The calculations for rent-vs.-owning are different.
2. Regarding estimating appreciation, in general you should use a 4% rate for appreciation for all properties. However, there is a catch because, like others mentioned, there are locations in the U.S. that do not appreciate at the same rates as others. There is also for those who are really savvy within the real estate markets they know, they can time the market and know what kind of appreciation to expect at certain points of the market. Somebody mentioned Detroit. For those in the know, Detroit (and that whole rustbelt area), you cannot expect to make money on appreciation. In fact, the prices there tend to DEPRECIATE (the rustbelt area is known to real estate investors as a “cash flow” market, cash flowing being the primary way to make money in that area). So if you are comparing a property in the rustbelt area vs. San Diego, you have to put in a 0% or -4% appreciation rate vs. San Diego’s 4% appreciation rate. From that you can take a look at how the ROE between the properties shake out and see which one is better.
3. Yes, the calculator is geared more towards investment properties.
Honestly there are so many variables you can play with in the ROE calculator. Unless you really know what you are doing, keep it simple.
Participantgn:
There are several advantages to mult-units. One is vacancy – if a tenant leaves your SFR, you are 100% vacated, vs. one tenant departure in a 4 unit is 25%. It helps your cash flow. Also, 4 units is still considered residential so it is fairly easy to purchase. There are other advantages to SFR’s too, but my preference is multi-units.
It really depends on your disposition though and patience. Multi-units are for serious real estate investors and have more frustrations. They are more time intensive, so being a part time property manager may not appeal to most people. If that is the case, avoid multi-units, try SFR’s and see if it’s to your liking. That to me is a more serious question to answer as opposed to whether or not multis trump SFRs as a better investment (in which case, they do, if for no other reasons economies of scale).
As for appreciation, the multi-units have been appreciating like their SFR counterparts. However, there is not the same pricing pressure on multis because they have not been as subject to the funny loans and overreaching that has permeated the regular housing market. Or at least it hasn’t reached the multis yet as far as I know. Still, you can count on multis appreciating in certain ways similar to SFR’s, with a bit of stickiness in prices. I can see SFR prices going lower right now because of the foreclosures. Unfortunately, I don’t see multis going through that process for at least awhile (if at all) and you may get tired of waiting for multis to pencil out in San DIego (which also may never happen).
It is because of these possibilities that I have essentially given up on buying investment properties in San Diego (and California).
If there is a segment of multi-units to watch, it is the medium sized multi-units, from 5 units to less than 100 units. The commercial loan market has been absolutely terrible for loan applicants (something I can personally attest to) and it has been extremely difficult getting funding. The sellers or owners of these medium sized multi-units can be under a lot of pressure and I am seeing a lot of deals in those areas. Still, the problem is the difficulty in obtaining these commercial loans. They are not federally backed for the most part so they are extremely picky on who gets these loans and even if you find a good deal, you may not be able to find funding for it anyways. Catch-22.
Anyways, other comments:
1. This ROE calculator is NOT a rent-vs.-owning calculator. It is strictly for real estate investing purposes. The calculations for rent-vs.-owning are different.
2. Regarding estimating appreciation, in general you should use a 4% rate for appreciation for all properties. However, there is a catch because, like others mentioned, there are locations in the U.S. that do not appreciate at the same rates as others. There is also for those who are really savvy within the real estate markets they know, they can time the market and know what kind of appreciation to expect at certain points of the market. Somebody mentioned Detroit. For those in the know, Detroit (and that whole rustbelt area), you cannot expect to make money on appreciation. In fact, the prices there tend to DEPRECIATE (the rustbelt area is known to real estate investors as a “cash flow” market, cash flowing being the primary way to make money in that area). So if you are comparing a property in the rustbelt area vs. San Diego, you have to put in a 0% or -4% appreciation rate vs. San Diego’s 4% appreciation rate. From that you can take a look at how the ROE between the properties shake out and see which one is better.
3. Yes, the calculator is geared more towards investment properties.
Honestly there are so many variables you can play with in the ROE calculator. Unless you really know what you are doing, keep it simple.
Participantgn:
There are several advantages to mult-units. One is vacancy – if a tenant leaves your SFR, you are 100% vacated, vs. one tenant departure in a 4 unit is 25%. It helps your cash flow. Also, 4 units is still considered residential so it is fairly easy to purchase. There are other advantages to SFR’s too, but my preference is multi-units.
It really depends on your disposition though and patience. Multi-units are for serious real estate investors and have more frustrations. They are more time intensive, so being a part time property manager may not appeal to most people. If that is the case, avoid multi-units, try SFR’s and see if it’s to your liking. That to me is a more serious question to answer as opposed to whether or not multis trump SFRs as a better investment (in which case, they do, if for no other reasons economies of scale).
As for appreciation, the multi-units have been appreciating like their SFR counterparts. However, there is not the same pricing pressure on multis because they have not been as subject to the funny loans and overreaching that has permeated the regular housing market. Or at least it hasn’t reached the multis yet as far as I know. Still, you can count on multis appreciating in certain ways similar to SFR’s, with a bit of stickiness in prices. I can see SFR prices going lower right now because of the foreclosures. Unfortunately, I don’t see multis going through that process for at least awhile (if at all) and you may get tired of waiting for multis to pencil out in San DIego (which also may never happen).
It is because of these possibilities that I have essentially given up on buying investment properties in San Diego (and California).
If there is a segment of multi-units to watch, it is the medium sized multi-units, from 5 units to less than 100 units. The commercial loan market has been absolutely terrible for loan applicants (something I can personally attest to) and it has been extremely difficult getting funding. The sellers or owners of these medium sized multi-units can be under a lot of pressure and I am seeing a lot of deals in those areas. Still, the problem is the difficulty in obtaining these commercial loans. They are not federally backed for the most part so they are extremely picky on who gets these loans and even if you find a good deal, you may not be able to find funding for it anyways. Catch-22.
Anyways, other comments:
1. This ROE calculator is NOT a rent-vs.-owning calculator. It is strictly for real estate investing purposes. The calculations for rent-vs.-owning are different.
2. Regarding estimating appreciation, in general you should use a 4% rate for appreciation for all properties. However, there is a catch because, like others mentioned, there are locations in the U.S. that do not appreciate at the same rates as others. There is also for those who are really savvy within the real estate markets they know, they can time the market and know what kind of appreciation to expect at certain points of the market. Somebody mentioned Detroit. For those in the know, Detroit (and that whole rustbelt area), you cannot expect to make money on appreciation. In fact, the prices there tend to DEPRECIATE (the rustbelt area is known to real estate investors as a “cash flow” market, cash flowing being the primary way to make money in that area). So if you are comparing a property in the rustbelt area vs. San Diego, you have to put in a 0% or -4% appreciation rate vs. San Diego’s 4% appreciation rate. From that you can take a look at how the ROE between the properties shake out and see which one is better.
3. Yes, the calculator is geared more towards investment properties.
Honestly there are so many variables you can play with in the ROE calculator. Unless you really know what you are doing, keep it simple.
Participantgn:
There are several advantages to mult-units. One is vacancy – if a tenant leaves your SFR, you are 100% vacated, vs. one tenant departure in a 4 unit is 25%. It helps your cash flow. Also, 4 units is still considered residential so it is fairly easy to purchase. There are other advantages to SFR’s too, but my preference is multi-units.
It really depends on your disposition though and patience. Multi-units are for serious real estate investors and have more frustrations. They are more time intensive, so being a part time property manager may not appeal to most people. If that is the case, avoid multi-units, try SFR’s and see if it’s to your liking. That to me is a more serious question to answer as opposed to whether or not multis trump SFRs as a better investment (in which case, they do, if for no other reasons economies of scale).
As for appreciation, the multi-units have been appreciating like their SFR counterparts. However, there is not the same pricing pressure on multis because they have not been as subject to the funny loans and overreaching that has permeated the regular housing market. Or at least it hasn’t reached the multis yet as far as I know. Still, you can count on multis appreciating in certain ways similar to SFR’s, with a bit of stickiness in prices. I can see SFR prices going lower right now because of the foreclosures. Unfortunately, I don’t see multis going through that process for at least awhile (if at all) and you may get tired of waiting for multis to pencil out in San DIego (which also may never happen).
It is because of these possibilities that I have essentially given up on buying investment properties in San Diego (and California).
If there is a segment of multi-units to watch, it is the medium sized multi-units, from 5 units to less than 100 units. The commercial loan market has been absolutely terrible for loan applicants (something I can personally attest to) and it has been extremely difficult getting funding. The sellers or owners of these medium sized multi-units can be under a lot of pressure and I am seeing a lot of deals in those areas. Still, the problem is the difficulty in obtaining these commercial loans. They are not federally backed for the most part so they are extremely picky on who gets these loans and even if you find a good deal, you may not be able to find funding for it anyways. Catch-22.
Anyways, other comments:
1. This ROE calculator is NOT a rent-vs.-owning calculator. It is strictly for real estate investing purposes. The calculations for rent-vs.-owning are different.
2. Regarding estimating appreciation, in general you should use a 4% rate for appreciation for all properties. However, there is a catch because, like others mentioned, there are locations in the U.S. that do not appreciate at the same rates as others. There is also for those who are really savvy within the real estate markets they know, they can time the market and know what kind of appreciation to expect at certain points of the market. Somebody mentioned Detroit. For those in the know, Detroit (and that whole rustbelt area), you cannot expect to make money on appreciation. In fact, the prices there tend to DEPRECIATE (the rustbelt area is known to real estate investors as a “cash flow” market, cash flowing being the primary way to make money in that area). So if you are comparing a property in the rustbelt area vs. San Diego, you have to put in a 0% or -4% appreciation rate vs. San Diego’s 4% appreciation rate. From that you can take a look at how the ROE between the properties shake out and see which one is better.
3. Yes, the calculator is geared more towards investment properties.
Honestly there are so many variables you can play with in the ROE calculator. Unless you really know what you are doing, keep it simple.
Participantthanks CA.
I’ve made enough mistakes in real estate that I really advise not “cooking” the numbers. Those guidelines I put in the calculator are really for your protection. If the property doesn’t even meet those rules, then you really have to ask if the property is a good buy, even if it’s dropped 30% to 40% (and it also shows you how out of whack our fundamentals are). I admit that a property fitting those rules is a very good property, but do you really want to go against the rules and get a less than terrific property?
Now I’m not saying you shouldn’t buy the property. Will the Mira Mesa market bottom out and start shooting up more than the 4%/yr. appreciation I’ve assumed today? It’s certainly possible, but it’s still a big risk.
Anyways, I put up the rules because certain people always asked what criteria I looked at in order to choose properties. The rules are a beginning, not an end. The ROE calculator incorporates many principles that are basic for real estate investing, but it is not a substitute for your research.
Still, if anyone does not know how the ROE works, a lot more research needs to be done.
Participantthanks CA.
I’ve made enough mistakes in real estate that I really advise not “cooking” the numbers. Those guidelines I put in the calculator are really for your protection. If the property doesn’t even meet those rules, then you really have to ask if the property is a good buy, even if it’s dropped 30% to 40% (and it also shows you how out of whack our fundamentals are). I admit that a property fitting those rules is a very good property, but do you really want to go against the rules and get a less than terrific property?
Now I’m not saying you shouldn’t buy the property. Will the Mira Mesa market bottom out and start shooting up more than the 4%/yr. appreciation I’ve assumed today? It’s certainly possible, but it’s still a big risk.
Anyways, I put up the rules because certain people always asked what criteria I looked at in order to choose properties. The rules are a beginning, not an end. The ROE calculator incorporates many principles that are basic for real estate investing, but it is not a substitute for your research.
Still, if anyone does not know how the ROE works, a lot more research needs to be done.
Participantthanks CA.
I’ve made enough mistakes in real estate that I really advise not “cooking” the numbers. Those guidelines I put in the calculator are really for your protection. If the property doesn’t even meet those rules, then you really have to ask if the property is a good buy, even if it’s dropped 30% to 40% (and it also shows you how out of whack our fundamentals are). I admit that a property fitting those rules is a very good property, but do you really want to go against the rules and get a less than terrific property?
Now I’m not saying you shouldn’t buy the property. Will the Mira Mesa market bottom out and start shooting up more than the 4%/yr. appreciation I’ve assumed today? It’s certainly possible, but it’s still a big risk.
Anyways, I put up the rules because certain people always asked what criteria I looked at in order to choose properties. The rules are a beginning, not an end. The ROE calculator incorporates many principles that are basic for real estate investing, but it is not a substitute for your research.
Still, if anyone does not know how the ROE works, a lot more research needs to be done.
Participantthanks CA.
I’ve made enough mistakes in real estate that I really advise not “cooking” the numbers. Those guidelines I put in the calculator are really for your protection. If the property doesn’t even meet those rules, then you really have to ask if the property is a good buy, even if it’s dropped 30% to 40% (and it also shows you how out of whack our fundamentals are). I admit that a property fitting those rules is a very good property, but do you really want to go against the rules and get a less than terrific property?
Now I’m not saying you shouldn’t buy the property. Will the Mira Mesa market bottom out and start shooting up more than the 4%/yr. appreciation I’ve assumed today? It’s certainly possible, but it’s still a big risk.
Anyways, I put up the rules because certain people always asked what criteria I looked at in order to choose properties. The rules are a beginning, not an end. The ROE calculator incorporates many principles that are basic for real estate investing, but it is not a substitute for your research.
Still, if anyone does not know how the ROE works, a lot more research needs to be done.
Participantthanks CA.
I’ve made enough mistakes in real estate that I really advise not “cooking” the numbers. Those guidelines I put in the calculator are really for your protection. If the property doesn’t even meet those rules, then you really have to ask if the property is a good buy, even if it’s dropped 30% to 40% (and it also shows you how out of whack our fundamentals are). I admit that a property fitting those rules is a very good property, but do you really want to go against the rules and get a less than terrific property?
Now I’m not saying you shouldn’t buy the property. Will the Mira Mesa market bottom out and start shooting up more than the 4%/yr. appreciation I’ve assumed today? It’s certainly possible, but it’s still a big risk.
Anyways, I put up the rules because certain people always asked what criteria I looked at in order to choose properties. The rules are a beginning, not an end. The ROE calculator incorporates many principles that are basic for real estate investing, but it is not a substitute for your research.
Still, if anyone does not know how the ROE works, a lot more research needs to be done.
Participantgeez
You leave the san diego area for a few days and this is what happens…
No, the calculator is not specifically geared towards multi units.
The ROE/ROI value in the calculator should be noted is NOT appreciation. Many people do confuse the two. As for those who think it is too high, consider that ROE is composed of several elements of real estate value – appreciation, cash flow, loan reduction savings, and tax benefits. When all four are working well together, yes, virginia you can get ROE’s in the 20% or even higher.
For the San Diego/Mira Mesa area, the calculator is correct – you still have a ways to go before you are able to purchase a property, and have it cash flow as a rental. Certainly you can play with the factors and try to make it cash flow based on interest only or decreasing expenses, but you should do this based on knowing what you’re doing and as a way to compare other properties which don’t have those problems or non-issues. If you are serious about using the calculator to analyze the property, you should try to account for as many expenses as possible and try to also be realistic as to how you can change certain factors to make the property work. For example, you can be stupid and try to put in a 10% appreciation rate, which makes everything look supergoody. However, we all know the consequences of making such an absurd assumption.
As for me being a flipper, I have only flipped one property. My sister-in-law rented out her house in a very far off location, and the tenants trashed it. She wanted to basically jingle mail the property. I gave her an alternative, put in $20k to fix up the property and got it sold and made $20k in profits. I anticipate that is the only time I will ever flip a property.
Still, understand that the purpose of the calculator is not to flip (there are better calculators around for that) or to tell you the obvious – that it’s not going to cash flow in San Diego. The purpose of the calculator is to analyze and compare SEVERAL properties, each with its own ROE calculation, across the country. By using the ROE, you can decide which is a better buy – an SFR in Mira Mesa for $400k, or (in my case) a 4 unit property in Alabama for $115k. I put in there my criteria for choosing properties, but you should consider that for all the properties that meet my criteria, I have to choose which one. So depending on my wishes, I can choose a property with a low ROE or a high ROE, but my minimum is 20%. For more desirable areas and high vacancies, I will compromise with a low ROE (especially if the economy there is taking off). However, for lousy areas, I will require a higher ROE in order to offset the risk.
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