JLM: Real Estate Company San Diego
Article published on August 22, 2022.
Jason Lee answers your very important questions regarding real estate
Here are the most common questions asked:
1. Where would you start to look for investments?
This is a great question.
I think the place where you should start to look for investments is educating yourself and building a good team. So having a good broker lender, property manager is extremely important. And then after knowing that you have a good team behind you knowing what kind of property you want is the most important. So do you want a property that is completely renovated and turnkey and ready to go, that’ll maybe bring a lower return or do you have the time to fix up an older property and boost the rents, increase the NOI. And that’ll give you a higher return on your capital, but it’ll be a much harder project.
So, knowing who you are educating yourself and building a good team is the first place I would start. And then of course location is extremely important. So, I would do a lot of research on the submarket You’re looking to invest in. Cause multifamily is vary street by street. You know, you can go two blocks over and it might be a much worse area than a location that’s, you know right down the street. So that’s very important to know.
2. Is $20,000 enough to get started?
The answer is yes, but it’s not enough to purchase a property outright on your own.
Especially in San Diego, maybe in like other markets, like, you know, small rural towns and like Ohio or something like that. But if you’re looking in a class A market like San Diego County where the average home price is over a million dollars, it’s going to be very hard to buy something with $20,000 down.
So, if you’re looking to get into real estate and that’s how much money you having to invest, I would highly recommend partnering with good partners or a good operator to invest your money with them. And then they can manage the property for you. And you can get, you know, passive income each month if you’re working with a good operator. So, I would recommend investing in like a syndication or some sort of partnership to where you can get in the game with that much little down with $20,000 down. I see it happen all the time.
3. How do you know if a certain property will be worth it?
This question is kind of depends on what you’re looking for.
So, like I said, in question one is you got to know exactly what your goals are. If you, you know, if you’re going to ask yourself if this property’s worth buying. So, to answer that question, I would say that it’s very subjective.
And if the property, in my opinion, if a property cash flows and there’s, you know, an easy path to upside, which means there’s an easy way to increase the cash flow and increase the value that property is worth it for me, but everyone is different. So yeah, I guess me, and you would’ve to have a one-on-one conversation and see what kind of property would fit your needs and your goals.
4. Do I self-manage or should I use a property manager?
I definitely use a property manager. I use two or three different companies that manage my assets. The reason being is because I like to focus my time on, you know, helping clients buy and sell. And I’m looking all the time, working all the time for my clients, and trying to find properties for them. So, if I am, you know, spending most of my day working as a broker, I can’t spend, you know, my time managing an asset day to day because I simply don’t have enough time in the day.
So, I prefer to, you know, make income, and make commissions to invest on my own and help other people buy property rather than, you know, leasing units or, you know, getting calls from maintenance cause of a loose toilet. That’s not what I want to do. I want to acquire assets and I want to help other people acquire assets. So, my time is better used elsewhere. For someone who is looking to maybe, if you enjoy managing a property and you like running your own portfolio day to day, and you like dealing with tenants, it is a good way to save money if you do self-manage. But honestly, property management fees are very, very reasonable. Usually, they take anywhere from 5% to 8% of the collected rents each month. So, it’s a very little amount.
So, if you own like a fourplex and your property’s getting, you know, $10,000 a month, you’re paying maybe, you know, $500 to $800 a month for that manager to literally handle everything with the property, manage the financials, the books, the expenses. So, I personally think it’s extremely worth it.
5. Why would you sell an investment property rather than cashflow it?
And this is a great question because you know, when people look to buy property, they think of having passive income or cash flow. The reason why me or someone else would sell a property is to complete a 1031 tax deferred exchange. So, I personally don’t think it makes sense to sell an investment property, especially if you’re young. Like when you’re older, it makes sense to cash out and, you know, enjoy the fruits of your labor. But if you’re young and trying to grow your portfolio, I don’t think anyone should ever be cashing out of an investment. I think utilizing the 1031 exchange is extremely powerful and I can make another video explaining the 1031. But basically, it’s when you sell a property and you defer the taxes, you defer the capital gains and you use the money, the profits from the property that you sold, and you buy a like kind property. So, another investment property and basically buy it for the same value or greater.
So, a good example to increase your portfolio is let’s say I sell a four-unit property for a million dollars, and I profit $500,000. I can now take that $500,000 and buy a bigger property, like a six or an eight unit. So now I’m scaling from four units to eight units, and now my portfolio doubled if I just own that four-unit property. So that’s how you know, the best real estate investors have scaled their portfolio and kept their money compounding and working for them.
So that is the reason why I sell my properties. That’s the reason why make client sell properties. Rather than that unless you’re cashing out. And you’re older and you want to, you know, exit the business, I would definitely do a 10 31 exchange into a better asset or an improved asset of greater value to increase your unit count. Or if you’re looking to maybe sell an asset in a location that’s tougher to manage like a class C location and you want to buy, let’s say a class A property by the beach where the tenants are easier to work with, and it’s much easier to manage. There’s many reasons why people do a 1031.
Another reason is they want to maybe sell their apartment complex and buy a triple net lease property or a DST, which are much more passive assets. They’re more like coupon Clippers. You get a check in the mail every month and it’s much easier to manage. Cause managing multifamily is not easy.
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