OFF MARKET 4plex – but not for long!

If you have $500,000 cash to invest and you want to make $2,000 cash per month after all expenses (5% cash return, 10% equity+cash return), I have an upcoming fourplex that you may be able to snag if you act fast. Please let me know immediately at davidlbrundige [at] gmail [dot] com.

Here’s the (potential) upcoming MLS description:

Beautiful four-cottage compound property on a gated, half-acre lot in the desirable hills of Glassell Park. This turnkey investment property is unlike anything you’ve seen in Los Angeles with three parking spots per cottage, private yards, shared gardens…the gem of the neighborhood. Each home has 2 bedrooms and 1 bath with original wood floors, character kitchens, and close to 1,000SF each! Three units are already rented successfully at market rent. The owner’s unit, with two garages and covered work area (it’s crazy how much space there is), is delivered vacant. Well-maintained by owner on property, with mostly copper plumbing and improvements such as new HVAC, water heaters, electric, landscaping, gate system, appliances, and more. Cash flow immediately with a still low 30-year fixed interest rate and watch the neighborhood (and all of the roses) continue to blossom.

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“Bullish on Drones”

Los Angeles Magazine wrote a piece on drones which features Yours Truly. The funny thing is, you’d be surprised how many listing agents won’t shell out for drone footage. Of course, all of my listings get drone videos for free, if requested.  Here is the paragraph in the article about real estate:

Comparatively inexpensive aerial footage is also changing the way real estate agents market properties, whether palatial estates in Beverly Hills, starter homes in Echo Park, or condos in downtown L.A. “It’s not like every buyer needs a drone video, but you don’t want to alienate anybody because they feel you weren’t selling them hard enough,” says Coldwell Banker realtor David Brundige. He’s so bullish on drones that he formed a company last year, DroneMyListing.com, with a former airline pilot.

Of course he didn’t quote the part of my interview where I describe the value of videos in marketing a property. The truth is, certain properties are served better from drone footage than others, depending on what that drone footage reveals. I’ve even used a drone to scout the roof of a property for a buyer. That could reveal good things or bad things. When you market a property, it’s always about what you want to highlight. Drones provide a special angle, and one that can pay off if used correctly.

Here’s the article. Here’s a video for my listing that sold for $130,000 over what top agents at my brokerage considered an ambitious listing price:

 

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Refinancing FHA Loans for Investment Property

Today I refinanced my triplex in Boyle Heights. I bought it with an FHA-backed loan, which is meant only for primary residences between 1-4 units. It’s quite difficult to use an FHA loan in most good areas of L.A. nowadays, as FHA loans have stricter closing requirements than traditional loans. However, I bought this Boyle Heights triplex in December, 2014 when it was a different world out there.

One interesting point about this refinance is that I actually refinanced out of primary residency and still saved money. When I bought the apartment building, mortgage insurance was higher and so were interest rates.  So now I’m saving $264/month and I can legally move wherever I want. I recommend it to you investors who still have your FHA loans.

 

 

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Corporate Achievement = Hooray?

Dear readers – most of you know I’m quite the practical real estate agent. But corporate marketing compels me to let you know that I’m now a top 2% Coldwell Banker nationwide agent. I’d be much prouder, however, if I could properly calculate the total net worth I’ve helped increase for my clients by selling and buying. Being a top 2% agent doesn’t quite reflect that – most of us in the top 2% sell giant mansions. I wonder how many of us work primarily in income property, and within that number, how many have repeat clients, etc. I think you get my point.

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What is Increasing Net Worth, Worth? (Guest Post)

I couldn’t really ask for a better testimonial from a client. Thanks, Paul.

“What is increasing net worth, worth?”

net-worth-clientI was signing papers in an escrow office a month ago when I came upon some vital and surprising statistics. Not as vital as my heart rate or blood pressure, but still, very meaningful to me:

Total Assets: $2.26M – Net Worth $1.122M – Total Liabilities $1.138M. (see image above)

Why was this meaningful? Three years ago I had a net worth that was negative – essentially my $45,000 of student loan debt.

In that same year, 2013, I decided to buy income properties to build wealth and have a good long-term plan for developing passive income. My realtor, David Brundige, helped me find an undervalued fourplex in Koreatown. I bought it and, through some strategy and work, rented all the units at 50% higher rents than the seller estimated was possible. Now I had a cash-flowing fourplex in Ktown, minutes from Silverlake, Echo Park and Downtown LA.

One keeps a solid, cash-flowing property for 30+ years, right? That was the plan according to the standard “buy and hold” strategy. But as I considered how much I’d already increased the value of the property in year one with higher than expected rents, and how long it would take me to save up enough for my next property, I began to seriously question whether to hold or to sell the property. I discussed my impatience with David and he told me if I sold the property through a 1031 exchange I could buy something bigger, or maybe two properties, to replace my original fourplex investment. Then I’d have increased my equity and assets considerably while shielding profit and cap gains from taxes.

Against the advice of the fairly vocal “buy and hold” crowd, and after owning it for only one year, I put my first fourplex up for sale in 2014. David helped me sell well-above list price and just as planned the significant profit and 1031 tax deferment allowed me to buy two more properties with the proceeds. And a year later, in 2015, using the same formula that we used to sell my first fourplex, I sold my second fourplex and bought two more properties, bringing me to a total of three properties.

This brings me to my post’s title: What is increasing net worth, worth? Is it worth selling a property that will likely appreciate over time? Is it worth the energy it takes to reposition your property and increase its value? Is it worth the risk that when selling and buying in a 1031 exchange you may not hit your targets? For me, the answer to all of these questions is an emphatic yes. David helped me go from a negative net worth in 2013 to a $1.122M net worth in three years through two 1031 exchanges. If you feel handcuffed by your current property’s income stream and you have the potential to become a successful income property investor, David can help you to develop that potential—and you’ll find yourself making much smarter real estate decisions than you imagined you could.

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Cash vs. Loan on Income Property

Many clients who read this blog shop for investment properties with the understanding that they will need a loan. The idea of a loan is pretty simple (for a brush up read here), but what you may not know is the actual implications on the real estate transaction, and why on earth there is so much power granted to cash buyers.

The main issues lie in

(1) time,
(2) hassle, and
(3) the value of going through only one escrow.

Off the bat, a cash transaction requires no more than a 21-day escrow, whereas a loan requires between 30-45 days or more. No deal is done until escrow is closed, so those extra weeks cause not only expediency problems, but psychological ones, as well. That’s 2-3 extra weeks that everyone has to worry about closing the deal.

The hassle is real but manageable. Here are the extra steps for closing a loan deal from the Seller’s point of view:

a) pre-approval process to determine the buyer’s ability to close
b) initial appraisal of property by bank
c) loan and appraisal contingency periods
d) fixing physical issues that the bank finds objectionable (this could be anything from exposed studs to unstrapped water heaters to chipped paint — yes, chipped paint)
e) re-inspection by appraiser to confirm those fixes are completed
f) field review by second appraiser to confirm value (this is a new one)

For example, yesterday and today I went to two different properties my clients have in escrow and personally fixed two last-minute physical issues that the Sellers weren’t willing to fix and for which my Buyers couldn’t get a handyman in time. That wouldn’t happen with a cash deal.

There are only two reasons why a loan is more likely to fall out of escrow than a cash deal. The first is that the Buyer may not qualify for the loan. The second is that the property does not qualify for the loan if those physical issues above cannot be fixed. If a deal falls out of escrow, the property may lose value because (a) its market momentum slows, (b) it’s tinged with the question of “what’s wrong with it,” or (c) the backup buyer finds another deal in the meantime.

So what is the real consequence of needing a loan? If there are enough buyers interested in the property, one or two of them are likely to be cash and they have an advantage if your offers come in around $10,000 of each other. That’s why, as a buyer using a loan, you have to be slightly more creative than cash buyers in the types of properties you buy, the terms you elect on your deal, and our approach with the listing agent.

All that said, 83% of my closed deals have used one kind of loan or another. Don’t count yourself out; just know what you’re up against.

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