Real Estate and All That Jazz: October 2009

I have some advice for anyone interested in renting a home with less then stellar credit in a very tight rental market in San Diego. Don't get discouraged and automatically think the agent/owner will reject you if there are alot of prospects. Smile, be sincere, be yourself AND:

1. Be punctual.

2. Be honest. Explain to the agent (or owner) that you have had a past bankruptcy, credit issue etc. and bring proof of it. One of my best tenants brought a "discharged" bankruptcy form with her when she came to see the home I had for rent. She explained she did some dumb things when she was younger. I rented the home to her and she was never late with the rent and it was immaculate when she left. She turned out to be one of my best tenants in the San Diego rental market.

3. Bring a copy of your credit report, phone #'s of your employer, copy of your driver's license etc. ANYTHING that will make filling out the application easier. Blank spaces left on applications, and even illegible applications have been tossed by me, when I have 10 other prospects. It shows lack of respect or fear of disclosure.

4. Be polite and non-confrontational! Leave your bad attitude at home.No owner wants to deal with a disgruntled tenant from day #1. What will the tenancy be like in 3 months?

5. Wear clean clothing. Casual is fine but neatness is important. The owner will assume if you show up in tattered clothing, that is the way the apt. will look when you live there.

6. Watch your language. Profanity is not acceptable and most owners will be turned off.

7. Don't be afraid to follow up if you have not heard from the owner.Expressing your enthusiasm about a house in the San Diego rental market always helps:("we have always wanted a pool and this is one of the loveliest I have seen" or "I love the kitchen, we enjoy cooking"). I like to choose tenants who LOVE the property. Passion is contagious.

8. Don't badmouth your present landlord. The San Diego rental market is a tight community and word gets around.

9. Don't leave your checkbook at home. The one with the check for the application fee or first month's rent is always seen as a more serious tenant.

Remember, you are going on an "interview" and first impressions are lasting. Put your best foot forward and I bet you  that home you want in the San Diego rental market will be yours.

Contact me for all things Real Estate.

"And the day came when the risk it took to remain tight inside the bud was more painful than the risk it took to blossom"   ~Anais Nin~

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There are no investment strategies in the "rule book" of  Metro San Diego Income Property that are “black and white” which means you can never say that in every case these facts are true. But these 3 basic rules have allowed me to “dodge many bullets” in changing economies over the years. Whether you are thinking of your first real estate purchase as a home to live in or as an investment for the future, these rules are great caveats and have created a blueprint for my success.

1. 1.The $150K Rule: In most cases, condos are only good investments when they are very well located: downtown, oceanfront or located near hospitals/universities. If you find a great buy on a condo elsewhere (suburbs) then $150K maximum is the upper limit of what you should pay. Why? The amortization of a $150K loan at $900-$1200 month will fit the needs of most “bread and butter” renters, so in a down market, you will have the ability to attract tenants. Condos are the first sector to feel the pinch since they are usually considered 2^nd choice to SFRs. In a down market on a $3000+ month debt, you may not have a large enough pool of tenants. This should make no difference if you're buying as your primary residence or as an investment since resale value should be your utmost consideration when purchasing property.

2. Single Family Homes (SFR's) are always a better investment than condos in metro San Diego. Dollar for dollar SFR's have a higher resale value than condos. Why? If you could spend $1200 to rent a 2 BR condo in a building with shared walls/parking/barking dogs/HOA rules etc. wouldn't you prefer a private home with no neighbors and private parking? So would I...and most tenants would too. Of course in many cities ie.(NYC, San Francisco) one cannot find a SFR so this is a moot point. But if you have a choice of a condo with a few more amenities or a SFR with similar square footage, you will be increasing your net worth in the long run by purchasing the SFR.

3. Multi-units are a great way to get into the market in metro San Diego. If you are a first time Buyer, and you have the choice of a duplex (or 2 on 1 as they are called in City Heights, North Park, Normal Heights, Hillcrest and Golden Hill) or a SFR, choose the duplex, if all other things are equal. Why? The added expense of the higher price will be offset by rental income and that rental income most likely will be more than 50% of your debt, taxes and upkeep. Thus, you will have a tenant help pay for your expenses while the property is appreciating. Then when you really want to buy the SFR, hold onto the duplex as an investment property, leveraging the equity for your new home.

In these times, approach buying property with the mind of an investor. Look at the bottom line, and figure future appreciation into the equation.

Contact me to purchase your first investment in metro San Diego income properties.. I offer a FREE consultation and there is no such thing as a stupid question. Your metro San Diego Income Property Specialist: Downtown, City Heights, Normal Heights, North Park, Golden Hill

Maybe you already own income property, or perhaps you are thinking of buying an investment for your retirement portfolio. Did you know the number one reason income properties do not succeed is due to poor management?

That's right! So why not learn to “self-manage” and reap the rewards of extra cash flow and peace of mind. It really is not that difficult or time consuming. I wish I had someone tell me the following things before I became a Landlord 25+ years ago.

1. Treat your tenants fairly. They are paying your mortgage and it is because of them you are going to have a successful investment.

2. Never ask for rent. Everyone knows their rent is due on the first of the month, and asking for it just sets up a “Landlord as Beggar” scenario.

3. Always do credit checks. You never know who is hiding an eviction or worse.

4. Don't micromanage your property. Or if you do, don't make it obvious. No one wants to see a “nosey” landlord on a daily basis. It makes for animosity and distrust.

5. Accepting late rent even once without a late fee just because you are a nice guy sets up a bad precedent. After 2 late rents, I have it in my lease the tenant will be given a 30 day notice to leave.

6. Accepting dogs can be a disastrous decision. Not only can some dogs be noisy and bite, but some Insurance Companies do not allow some breeds and will not pay for a claim if there is an incident. You cannot imagine the problems many Landlords have from dogs. It's just not worth it.

7. Be “friendly” with your tenants but never “friends”.

8. ALWAYS have tenant fill out a “Move-in Checklist”. This is the single best protection for you in case you have to go to court.

9. Empower your tenants by allowing them to make some decisions. For example, I do not assign parking spots in one of my 4 plexes, I let them figure out amongst themselves who parks where.

10. Cats may not be your favorite animal, but 75% of the renting population has a feline. A cat cannot bite neighbors, is quiet and doesn't chew wood work. An extra pet deposit can be taken on top of the security deposit.

    

                                                    Meow-Meow

Your metro Income Property Specialist: Serving City Heights, Normal Heights, North Park, College Area, Hillcrest and Golden Hill.

 In the early 2000's the best investments were multi-unit properties: 2 units or above. A single family home was not considered to be an investor's arena. Why? Price too high to even approach a “break-even” point with a modest (10%-20%) down payment. Sure, ok to buy for future appreciation and tax shelter, but for the most part single family homes were not the arena of the small investor in San Diego, CA.

The San Diego income property market in some zip codes has changed all that. One area that has been hit exceedingly hard by the sub-prime disaster has been “City Heights” thus prices are really low. A densely packed multi-ethnic area of single family homes and small condo buildings, City Heights has been gentrifying rapidly. There is a huge mix of housing options: single family, condo, rental apts. And from low-end to (although I would not call it high-end) nice urban digs, close to downtown (5-10 minute drive) and city services (public transportation). City Heights also has one other benefit going for it: the benefit of a “coastal climate” with cool ocean breezes much of the time. Just a few miles inland and you can see temperature differences of 10-15 degrees. This a HUGE benefit during Fall in San Diego....and it's a bonus!

I manage a property for an out of state owner. It is a clean house, 3BR 1.5 BA on a small lot of land and I woud classify it in reasonable condition. There is a lovely family room w/fireplace, and private entrance (think Granny, roommates, teens).The front yard is a small enclosed area with some fruit trees and parking for 3 cars.The house is set far back from the street. The lot is non-existent, but that translates into no upkeep.

 FRONT OF HOUSE

KITCHEN 

 FAMILY ROOM

OK let's talk monthly numbers. At $170K present market value the down payment is $20K (10% down and 3K closing costs)

P & I =$848 (5.5%)

Taxes =$156.

Insurance =$50.

Maintenance =$50

Basic Expenses = $1104.00

The rent is $1350. That would bring the cash flow to $246 /month.But for argument sake, let's say the house breaks even the first year, investing the $246 back into the house for new paint/repairs/upgrades. You would now have a single family home in an urban market in San Diego for $20K down, and you could ride the next wave of appreciation with not a care in the world. Oh and did I mention I had 12 calls on this rental the first week? And that rents usually go up after the first year? This is a great start in City Heights for the new investor in San Diego income property.

Seems like a “No Brainer” to me.  Contact me, let's talk.

In the early 2000's the best investments were multi-unit properties: 2 units or above. A single family home was not considered to be an investor's arena. Why? Price too high to even approach a “break-even” point with a modest (10%-20%) down payment. Sure, ok to buy for future appreciation and tax shelter, but for the most part single family homes were not the arena of the small investor. 

The San Diego income property market in some zip codes has changed all that. One area that has been hit exceedingly hard by the sub-prime disaster has been “City Heights”. A densely packed multi-ethnic area of single family homes and small condo buildings, City Heights has been gentrifying rapidly. There is a huge mix of housing options: single family, condo, rental apts. and from low-end to (although I would not call it high-end) nice urban digs, close to downtown and city services. City Heights also has one other benefit going for it: the benefit of a “coastal climate” with cool ocean breezes much of the time. Just a few miles inland and you can see temperature differences of 10-15 degrees. This a HUGE benefit during Fall in San Diego....and it's a bonus!

I manage a property for an out of state owner. It is a clean house, 3BR 1.5 BA on a small lot of land and I woud classify it in quite reasonable condition. There is in addition, a lovely family room w/fireplace, and private entrance (think Granny, roommates, teens).The front yard is a small enclosed area with some fruit trees and parking for 3 cars.The house is set far back from the street. The lot is non-existent, but that translates into no upkeep.

KITCHEN

                       VIEW OF FRONT YARD FROM HOUSE

                                                                                      FAMILY ROOM WITH F/P and PRIVATE ENTRANCE

FRONT OF HOUSE                                                             

OK let's talk monthly numbers. At a selling price of $170K the down payment is $20K (10% down and 3K closing costs)

P & I =$848 (5.5%)

Taxes =$156.

Insurance =$50.

Maintenance =$50

Basic Expenses = $1104.00

The rent is $1350. That would bring the cash flow to $246 /month.But for argument sake, let's say the house breaks even the first year, investing the $246 back into the house for new paint/repairs/upgrades. You would now have a single family home in an urban market in San Diego for $20K down, and you could ride the next wave of appreciation with not a care in the world. Oh and did I mention I had 12 calls on this rental the first week? And that rents usually go up after the first year? This is a great start for the new investor in San Diego income property.

Seems like a “No Brainer” to me.  Contact me, let's talk.

  (4th in a 4 part series)

Investing for Dummies: Investing in San Diego Income property

Paying Capital Gains Tax on the sale of your San Diego income property could defeat the purpose of your investment strategy. If you have to give back the profit to Uncle Sam, consider this:

 You can defer the entire gain by purchasing a property (or entity used for business) of equal or greater value ~within a specific time frame and adhering to specific rules~. That's right! The I.R.S. says go ahead, sell your income property and if you do this within the guidelines we have stipulated "you don't have to pay us a dime". Well, you may be thinking "What if I don't want to be a Landlord anymore, I have other areas of my life that keep me busy? I'm sick of all the headaches. If I sell my income property, then what?"  

 Here are some "1031 Tax-Deferred Exchange"  ideas :

1. Purchase a condo for your child to live in while they go to college.

2. Buy a future retirement home in an area of your choice (U.S. only) and rent it out until you are ready to retire.

3. Buy into a TIC investment.

4. Downsize your life to a multi unit dwelling,live in one apt. and you will be able to defer a percentage of the gain.

5. Buy a Farm

6. Buy a vacation condo/house you use less than 2 weeks/year. (this does not include a time share).

7. Purchase raw land.

8. Purchase a Corporate Jet used for your business.

There are many more legal ways to reinvest the gain from your income property using a 1031 Tax-Deferred Exchange.

For more information contact me.

Disclaimer: Always consult with your CPA before undertaking a 1031 Tax-Deferred Exchange or other tax startegies.

Investing for Dummies:

Investing in San Diego Income Property

(3rd in a 4 Part Series)

For all intents and purposes, investment property appreciates in value. If someone asked me the single best reason to own investment property in San Diego I would say APPRECIATION. What is appreciation? Appreciation is the increase of value of property over time due to inflation, supply and demand, capital improvements and other factors. Increase of value adds to your net worth.

The beauty of appreciation is that if you buy low and sell high, you can make money while you sleep.

What does this mean? It means that if you buy a property for below market value (poor condition, short sale, desperate owner) and you sell it at a future point in time for above market value (nicely upgraded, strong Seller's market, above average location) than you have just hit the jackpot!

The timing of a property purchase is everything, kind of like the stock market. Holiday time is easier to find a bargain than Spring time. If you find a property on the market in mid-December, you can be assured you have a very motivated owner. (and motivated owners tend to negotiate more).

If you buy low and sell high, you have nothing to gain but money. 

Yes, but you may be thinking that you will then have to pay taxes on all that money. Well, yes, you will but you could always do a 1031Tax-Deferred Exchange and roll over the gain tax free......as long as you follow some I.R.S. guidelines.

Stay tuned for part 4 of San Diego Property Investments:1031 Tax-Deferred Exchanges.

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