Covina, CA Real Estate Podcast

2 Methods of Helping Buyers Compete

reoagent@shawnluong.com (Shawn Luong) — Thu, 15 Apr 2021 07:00:00 -0700

Here are two strategies to help buyers find success in our market.

I’m sure that you’ve heard about all the bidding frenzies we’ve seen in our market. Listed homes are currently receiving five, 10, or even more offers apiece. That has left many buyers wondering what they can do to increase their chances of getting their offers accepted and ultimately winning the house. Today I’ll share two methods that I have used to help my buyers secure a property.

“

Since homes are selling fast, sellers

will likely need extra time to secure

a home for themselves.

”

One way that we help buyers is with an escalation clause. An escalation clause is a section of your contract that states you will pay a certain amount above any other offer but not more than a limit that you set for yourself. For example, if you were in a bidding war and one of your competitors offered $600,000 for a home, you could put a clause in your offer stating that you were willing to pay a certain amount over that offer up to a limit that you set.

Another way to differentiate your offer from another is to allow the seller to stay in the house for 30 to 60 days while they search for a new home. After all, most sellers in this market are also buyers—since homes are selling fast, they’ll likely need the extra time to secure a home for themselves.

If you’re interested in buying a home, don’t hesitate to reach out to me. I can schedule you a free consultation so you can learn how to navigate the process and ultimately purchase the home you want. Hope to hear from you soon!

Great News for Homebuyers With Recovering Credit

reoagent@shawnluong.com (Shawn Luong) — Thu, 1 Apr 2021 04:30:00 -0700

Here’s some key info regarding changes to the lease-to-own program.

When ‘lease to own’ was introduced in 2011, the program sponsor would agree to purchase a home for

up to $600,000 and lease it out to a would-be buyer with bad or recovering credit but a qualifying income.

It was designed for people who had just gone through a bankruptcy, short sale, or foreclosure.

So long as you had the necessary, dependable income to pay rent each month, you could build up your credit while renting with the goal of eventually buying the house a few years down the line. While the program was good through five years, your obligation to lease was only through one year. In other words, if after one year you didn't like the property or needed to move elsewhere, you could choose not to renew the agreement.

“

With the new sponsor purchase limit, this

program is great for single-family

homes without an HOA.

”

This program offered a great deal of flexibility for couples who were ready to settle in an area but didn’t have the passable credit to do so. Generally speaking, it takes most committed individuals about six months to a year to build up their credit enough to qualify for a decent interest rate. With the ability to purchase the leased property extending through five years, the lease-to-own program was great. So why am I bringing it up again?

Several years ago the sponsor purchase limit was brought down from $600,000 to $350,000, which, as you already know, is nearly impossible here in Southern California. As you can imagine, the practicality and popularity of this program greatly decreased in our area. Thankfully, they’ve recently increased that sponsor purchase limit to $500,000, which has once again created new avenues for a bigger pool of prospective tenants.

With that new limit, we can find plenty of homes for these buyers-in-progress. In the Lancaster and Palmdale area, for example, you can find a beautiful 2,500-square-foot home with a pool. Fontana and Rialto are on the table, too.

If you’re as excited about this information as I am, then please don’t hesitate to reach out to me by phone or email for more details and next steps. I’d love to help make the dream of homeownership a reality for you and your family. Let’s get the conversation started today!

What to Know About the Mortgage Credit Certificate

reoagent@shawnluong.com (Shawn Luong) — Wed, 3 Mar 2021 07:00:00 -0800

First-time homebuyers should take advantage of this little-known program.

I discussed mortgage credit certificates a few years ago, but now we have so many millennial first-time homebuyers that I thought it was a good idea to remind you about them. Be sure to ask your lender if they’ve been approved by your state and local governments to sponsor you for the MCC.

So what does the MCC do for you? Suppose that you pay $20,000 in annual interest. With the MCC, Los Angeles County allows a tax credit of up to 20% on that amount. If the credited amount has already been deducted from your paycheck, you’d get a refund back.

“

Many people who do qualify for the MCC aren’t

aware it even exists.

”

To be eligible for the MCC, your FICO score has to be above 620. For a two-person household, you can earn up to $135,000 and still be eligible. For a three-person household, you can earn up to $153,000. Most first-time buyers in Los Angeles who can afford to buy a home are also eligible for the MCC—that’s great news that you should share with any millennials and first-time buyers you know who are thinking of buying a home. Many people who do qualify for it aren’t aware it even exists.

If you have any questions about the mortgage credit certificate, don’t hesitate to reach out to me. In the meantime, stay safe!

What If Your Appraisal Price Doesn’t Match the Contract Price?

reoagent@shawnluong.com (Shawn Luong) — Wed, 17 Feb 2021 09:15:00 -0800

You have a couple of options when your sales price differs from your appraised value.

What happens when there’s a difference between your home’s sale price and the appraisal value? This

conundrum comes up a lot when there are big increases in property values over a short period.

Well, we have a couple of ways to address the issue:

1. The agent can submit a rebuttal. Your agent can compile a list of comparable sales and send it

       to the appraisal company to show them why the appraised value was formed in error. Appraisers
       aren’t perfect, and increased business can add pressure to their jobs, causing them to make
       mistakes. However, most rebuttals aren’t accepted, except in the cases of short sales.

2. Try to negotiate. If the rebuttal isn’t successful, it’s time to try negotiating. Most of the time, buyers

in our market have to come up with the difference between the appraised value and the sales price,

so a good negotiation tactic is to cut that difference in half—especially in the case of FHA loans.

The reason that sellers must yield half of the difference is that the appraised value will stay on the

record for 120 days. If you don’t sell to the FHA buyer, you’ll be locked into that appraised value for four

months.

“

This conundrum comes up a lot when there

are big increases in property values

over a short period.

”

If you’d like more details on how to navigate this issue, don’t hesitate to reach out to me. I love to

respond to your questions. Hope to hear from you soon!

How Do SBA Loans Make Commercial Property Cheaper?

reoagent@shawnluong.com (Shawn Luong) — Tue, 2 Feb 2021 08:59:00 -0800

Here’s what you should know about the SBA loans in the new stimulus bill.

You all know by now that I’ve been following the financial world for the last few years. Today I have a piece of information that I’m excited to share with you, and I hope you share it with your friends and family.

With the new COVID-19 stimulus package, SBA loans are here. Traditionally, it carried a 2.3% rate on a guaranteed fee, but that has now been cut in half to 1.5%. The origination fee has been eliminated as well. When you close a loan, SBA will also pay your first three months of your mortgage.

Why is this so exciting? Buying property for yourself or your business will end up costing less than renting if you take advantage of these rates. With the SBA loan at 2.5% over 25 years and 3.5% fixed for 25 years, the two-blend rate is roughly 3%, for conversation's sake.

“

The payment on these loans is fixed for 25 years.

”

Here’s a real example of the savings you could see on an industrial building: Let’s say you found something for $210 per square foot and finance $189 per square foot of the purchase after putting 10% down. After a 25-year amortization period at 3%, the cost ends up being 90 cents per square foot. That’s pretty much the rent you’d be paying right now for this kind of building.

Now an example of a commercial property: Let’s say it’s $400 per square foot and you finance 90% ($360 per square foot) after a 10% down payment. That will be a payment of $1.71 per square foot, which is considerably lower than the $2-per-square-foot average for rent. The payment is fixed for 25 years and the rate will stay the same.

Finally, let’s compare apples to apples by talking about the net lease, which covers the insurance on the building. On top of that, I always talk about appreciation in California, which is roughly 6% per year. Let’s say your industrial building goes from $210 to $250 per square foot, a 15% increase. The magnified return from your down payment on this is 1500%.

If you have any questions for me about this topic or other real estate questions, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

Still Not Convinced Real Estate Is Better Than Stocks?

reoagent@shawnluong.com (Shawn Luong) — Tue, 5 Jan 2021 14:24:00 -0800

Real estate offers more leverage than stocks; 2020 is the proof.

If you’ve done business with me or have been a follower of my blog, you know that I’ve always said real estate gives you leverage. In 2020, the real estate market has outperformed the stock market—one slice of “normal” we can be thankful for. If you don’t think that’s normal, consider this: As I’ve pointed out in past videos, the stock market didn’t effectively change in the period between 2000 and 2009; if you had put $10,000 into the stock market in 2000, you would have ended up with $10,000 in 2009. Meanwhile, during that same period, real estate would have given you a massive double-digit return.

“

A home is an asset you can enjoy in real time while it appreciates significantly.

”

This year alone, the Los Angeles County real estate market has increased by 17%; the San Bernardino market increased by 19%; the Riverside market increased by 16%; and the Orange County market increased by 12.5%. What does that mean for you? Well, if at the start of the year you had financed your purchase of a $600,000 house with an FHA loan, then you would have been required to put down 3.5%, or $20,000 in this case. By year’s end, the value of that $600,000 home could have easily increased by 15%, which would be $90,000. If you put in $20,000 but gained $90,000 in equity in just a year, you’ve seen a return on your investment and then some! That’s leverage.

At 3:18 in the video above, I’ve included some graphs comparing data from the S&P 500 and the Dow Jones Industrial Average to our surrounding area real estate markets so you can see why real estate is better than stocks when it comes to building wealth. A home is an asset you can enjoy in real time while it appreciates significantly; stocks are intangible, and they can’t offer you peace of mind on a day-to-day basis (not to mention all the tax advantages that accompany homeownership). Even though 2020 has been a stressful year for many Americans, it’s been a phenomenal one for homeowners or those who are looking to purchase a home soon.

If you have questions about building wealth through real estate or have any buying or selling needs for the year ahead, don’t hesitate to reach out to me. I’d love to hear from you, and I’m always happy to help!

What Do the Latest Stats From September Tell Us?

reoagent@shawnluong.com (Shawn Luong) — Wed, 25 Nov 2020 14:29:00 -0800

Here’s what you need to know about our market as we head into the holidays.

We now have the complete market report for September 2020, so let’s compare it to September of last year

for a clearer picture of real estate’s remarkable comeback:

- Home prices increased 15.2% year over year (note: average yearly appreciation is only about 5% to 6%)
- The median price for a single-family home in Southern California increased from $570,000 last year to

$656,000 this year

Of course, most of you are only concerned with the communities that fall within the following perimeter: the

710 freeway as the western limit (Pasadena down toward Montebello and Monterey Park); the 210 freeway

as the northern limit; the 60 as the southern limit; and the 15 as the eastern limit (Rancho Cucamonga,

Ontario, and a small portion of East Bay). The good news is that the market within that boundary is

doing quite well—better, in fact, than Southern California as a whole.

Our market is very strong.

Here at the important takeaways from the September report:

-Home prices in this market have increased 16.4% year over year

-The median price increased from $660,000 last year to $769,000 this year

-There were 2,212 listings taken this year compared to 2,032 last year

-1,751 closings closed this year versus 1,480 last year

-The total number of units sold increased by 18.5% year over year

Due to a variety of compounding factors, our market is very strong. As you may recall from my April, May,

and June market reports, I expected the market to fly back up after its hard COVID-induced nosedive.

Sure enough, thanks to historically low interest rates (now sitting anywhere between 2.5% and 2.75% for

qualified buyers) the market stabilized and has been soaring smoothly ever since. We lost about three

months’ worth of business earlier this year, but a phenomenal summer and an unusually busy fall have

helped real estate rebalance nicely.

I can’t stress enough how impactful these low rates have been; just a 1% dip in the average rate represents

a huge leap upward on the affordability index, meaning buyers can get more home for their money despite

rising prices.

I hope you found this market update insightful. If you have questions about any particular statistic or real

estate in general, please feel free to call or email me. I’d love to be your trusted real estate resource. As

always, stay safe, and stay tuned!

Q: What’s the New Construction Market Doing?

reoagent@shawnluong.com (Shawn Luong) — Wed, 28 Oct 2020 08:59:00 -0700

Here’s everything you need to know about new construction right now.

With interest rates historically low, buyer demand remains high in our market. Furthering this demand is the fact that more buyers than ever before have the freedom to work remotely, which means that they don’t have to settle for a cramped apartment in the city—they can use their increased purchasing power to move wherever. Resale inventory is still scarce, so all of this demand has begun spilling over into the new construction market.

From Riverside County all the way down to Temecula, we’re seeing a lot of new construction homes. Recently, I joined clients of mine to go look at some new construction homes, and this outing gave me a pretty good idea of what’s been happening in this sector of the market as of late.

For example, in Bellflower, you can get a 1,500-sq ft. home that costs you roughly $600,000 or more. If you were to move over to Murrieta, Menifee, or Lake Elsinore, you’d find some 2,500-sq ft. homes with four bedrooms, three bathrooms, and a three-car garage for less than $500,000.

Just like the resale market, the new construction market is incredibly hot. As a result, some of the attractive and wide-ranging incentives that builders regularly advertised have virtually disappeared; the buyers are out in force, so there’s no need to lure them in with special deals. (First responders, however, are still able to receive a few thousand dollars’ worth of incentives).

“

If you’re willing to be patient and make peace with little to no buyer incentives, the price for a new construction home is great.

”

Instead of building lots as they go, builders today are finishing lots and laying roads ahead of time because they know there will be scores of people lining up to buy space in whatever new community they create. That said, the homes themselves are still customizable—just like in a fine restaurant, you’re not being served pre-cooked and reheated meals.

Builders are still providing the lender incentive, which is roughly 3% of the purchase price.

That’s great, but consider that you could get a loan for a resale home at 2.25% or 2.375% and use

equity to make any upgrades you want down the road. I have plenty of experience negotiating with

builders, so I’m ready to help protect your interests throughout the new-build process, but it’s

important that you as a homebuyer weigh all your options carefully.

Another factor to keep in mind is time; if you buy a new construction home, you’ll have to wait six

to nine months before moving in because there’s simply no existing homes for you at the moment.

However, if you’re willing to be patient and make peace with little to no buyer incentives, the price

for a new construction home is great. If you’re seeking a more affordable home, move into Inland

Park, where you’ll find those 2,500 sq ft. homes are starting as low as $480,000.

If you’d like to know more about which areas are prime hunting grounds for new build buyers or

how to negotiate with the builder in a market like this, don’t hesitate to call, text, or email me. I’m

always happy to be a resource for you.

Q: What’s Your Real Estate Investment Journey?

reoagent@shawnluong.com (Shawn Luong) — Thu, 1 Oct 2020 10:29:00 -0700

If you’re thinking about investing in real estate, think about ADUs, too.

I’ve been building wealth through real estate for years, and today I’m going to share my journey with you.

Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch it in its entirety, or use these timestamps to browse specific points at your leisure:

0:55- Why my property’s location doesn’t allow me to take full advantage of the ADU laws

2:00- How our tight market factors into investors’ plans

3:30- The different costs investors should take into account when calculating their cap rate

4:45- Why building an ADU or two can significantly increase your profit margins and cash flow

7:30- What your investment could look like 10 years down the road

8:15- Wrapping things up

If you have any questions for me about investing in real estate, ADUs, cash flow, or anything else, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.

Q: Is This a Good Market to Build Wealth in Real Estate?

reoagent@shawnluong.com (Shawn Luong) — Wed, 22 Jul 2020 13:41:00 -0700

Here’s what the market looks like for homeowners who want to build an ADU.

Continuing my series about how to create wealth through real estate via an ADU, I’m going to shift my focus to the market and how it is right now for investors. I’ll take a look at the second quarter numbers of 2020 and compare them to the second quarter numbers of 2019.

In April of 2019, we had 2,500 new listings come on the market, and 1,787 homes went under contract. That means 71% of the listings were going to escrow each month, and that gave us 1.4 months of inventory. These figures were pretty steady throughout May and June 2019 as well.

In 2020, we saw a big drop in homes under contract in April. There were 1,344 homes listed in April and 869 of them went under contract. That’s a 65% drop.

However, since then, we have seen a recovery. In May 2020, we had 1,828 new listings and 1,435 homes that went under contract. That was a 65% jump from April, which is great news.

“

You can benefit from adding an ADU because demand for housing is so strong.

”

In June, we saw a 6% increase in the number of listings from what we saw in June 2019. That’s a great sign for the future of our market. This is a result of pent-up demand being released as stay-at-home restrictions slowly lifted.

How’s pricing? In June 2019, the average price per square foot was around $378. Right now, we have an average price per square foot of $387. We haven’t seen a big jump, but we’ve seen a healthy increase, which is a good sign.

If you ask me, it’s a great time to invest in building an ADU for your home. Many sellers aren’t selling, so you can benefit from adding housing to your home because there is demand for it.

If you have any questions about the market, investing, or real estate in general, don’t hesitate to reach out via phone or email. I look forward to hearing from you.

Q: How Can I Get an ADU If I Don’t Have the Cash?

reoagent@shawnluong.com (Shawn Luong) — Mon, 6 Jul 2020 07:02:00 -0700

Today I’m explaining how to get an ADU even if you don’t have the cash.

This is my first week back to work in my regular office after more than three months of lockdown! In my last video, I discussed ADUs (accessory dwelling units) and received a ton of feedback from people who are telling me they’re interested but don’t have the cash and want to know how they can pull it off. Today I’m going to be sharing all the information about the Fannie Mae program that can assist with this. I’ve helped clients use this program before with great success. This program can also help you refinance, too. To learn more about this excellent program, watch my latest video above.

Q: How Can You Build $330,000 in Equity Quickly?

reoagent@shawnluong.com (Shawn Luong) — Mon, 8 Jun 2020 12:51:00 -0700

Here’s how to build wealth quickly via real estate with one simple plan.

As mentioned in Part I of my series about how to retire and build wealth in real estate, my case study focused on an Accessory Dwelling Unit (additional unit) in the city of Burbank, California.

Now, I’m using data from Burbank for houses between 1,100 and 1,500 square feet that have sold within the last six months; that makes my average 1,300 square feet, valued at around $511 per square foot and totaling $664,000 (approximately). This will be my baseline for the home on which you could add an ADU that’s 1,200 square feet in size.

In the end, your property’s total square footage will equal 2,500. The building cost for an ADU like that will be roughly $150 per square foot, totaling $180,000. So, when factoring in everything, let’s say you’re looking at a total cost of $850,000 (the initial home purchase of $664,000 plus the $150,000 ADU building cost). How much value will this ADU give you? I used homes of 2,000 to 2,500 square feet in the same neighborhood as my comps. Those homes averaged out to be $1,178,000. This means you will build roughly $330,000 in equity immediately upon completion of the ADU.

ADUs are truly a great strategy to employ when seeking to build wealth quickly through real estate.

Keep in mind that this example is based solely on square footage. You may ask, “What is a duplex going for in Burbank right now?” Here’s the data I pulled for duplexes: They’re currently going for somewhere between $575,000 to $600,000 per unit. So, if you times that by two, you’re at $1.2 million—right on the money for our ADU example.

What is the time frame for the ADU approach? After studying up, I feel confident in saying that purchasing a home for $664,000, building an ADU, renting it out, and then refinancing to get your cash out can take as little as 18 months. In my next video, I will explain the duration of the process in more detail, but 18 months is plenty of time; when an ADU plan is submitted to the city for approval, it has to be addressed within 60 days. Let’s say the architect and the structural engineer are both very busy, so they give an estimation of two to three months to get the plan ready for submission, two more months for the approval, and then six to eight months for construction. Afterward, renting it out and refinancing will take much less time.

ADUs are truly a great strategy to employ when seeking to build wealth quickly through real estate. As always, reach out to me via phone or email if you have any questions about this or other real estate topics. I’m here to be a resource for you!

Your May Market Update

reoagent@shawnluong.com (Shawn Luong) — Thu, 14 May 2020 14:53:00 -0700

Here’s why ours is still a strong seller’s market with multiple offers.

Are we headed for a housing market crash? Today I’ll share the latest market data from April to draw contrasts between the calamity of 2008 and our current crisis. Believe it or not, we’re still currently experiencing a strong seller’s market, and prices are stable. Though total sales were down significantly year over year for April (1,087 compared to 1,683), the average sale price this year was much higher, and inventory remains low.

To clarify, the data that I’ve compiled describes communities that fall within this perimeter: the western limit is along the 710 freeway (Pasadena down toward Montebello and Monterey Park); the northern limit would be the 210 freeway; the southern limit is the 60; and the eastern limit is along the 15 (Rancho Cucamonga, Ontario, and a small portion of Eastvale).

Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch it in its entirety, or use these timestamps to browse specific points at your leisure:

0:46 - Total sales, average sale price, and average price per square foot for April

1:41 - Comparing April 2020 to April 2019

2:26 - How the strong market of early 2020 (January through March) outpaced early 2019

3:40 - Using our low inventory to explain how the current crisis differs from the 2008 crash

4:53 - Offers subject to inspection in our marketplace

6:08 - Low rates are keeping employed buyers motivated

7:00 - My final thoughts on whether or not we’ll experience another housing crash

As always, I welcome your comments. If you have any questions about what was discussed in this message, or if you’re interested in buying or selling a home soon but aren’t sure how to proceed in these times, please reach out to me. I’m here to help, and I look forward to hearing from you!

How Homeowners Can Pay Down Their Mortgage Through ADUs

reoagent@shawnluong.com (Shawn Luong) — Thu, 7 May 2020 06:30:00 -0700

Today I’m sharing how first-time buyers can use ADUs to help pay down their mortgage.

Welcome to part one of my new series on how to retire without savings through real estate. This information can benefit anyone, including millennials who have just purchased or are about to purchase their first homes. A quick note before we settle into today's topic: Remember that we do have down payment assistance programs for first-time buyers through FHA and conventional loans which only require 3% to 5% down.
One way new homeowners can utilize real estate is by having tenants essentially pay their mortgage for them. This can be achieved through a combination of mortgage interest deductions and accessory dwelling units (ADUs).

Let’s say that you have a mortgage PITI (principal, interest, taxes, and insurance) of $2,800, and that home can be rented out for $2,500 or $2,600. Well, the deduction on the interest rate and then on the property tax will mean your PITI will be lowered.

The ADU law allows you to build an addition to the main house with its own separate entrance.

If it’s 20% on the federal tax and then 5% on the state tax, then from $2,400 in interest you can deduct roughly $600. Now you’re looking at $1,800 instead of $2,400. This means that renters could cover your mortgage for you if they rent for $2,500 or $2,600.

The ADU law has changed the whole landscape for first-time homebuyers. If you purchase a home that has a garage, you can convert it into a rental unit complete with a kitchen, bath, and its own water heater and electric meter. So already you’ve turned an existing space into rental. Then, the ADU law allows you to build an addition to the main house with its own separate entrance up to another 500 square feet to 1200 square feet (whatever you can afford).

So, you could have a total of three units: the owned one in which you live and two rentals.

My friend’s kids are single and rent out their main house while living in an ADU so that the tenants pay down their mortgage.

Stay tuned, because in the coming video messages I will break down the mechanics of how to do this and share more specific numbers. Until then, feel free to reach out to me by phone or email if you have any further questions. I always love hearing from you.

How Has the COVID-19 Lockdown Affected Real Estate?

reoagent@shawnluong.com (Shawn Luong) — Fri, 24 Apr 2020 07:21:00 -0700

Our market has slowed since the COVID-19 lockdown began, but not substantially so.

What do the latest numbers say about our Southern California market?

First a quick reminder: I sent out a slew of emails before the CARES Act was passed about the SBA’s Economic Injury Disaster Loan. If you’ve applied for this loan and received it, I welcome your feedback. Also, for those I referred to a small community bank that processes this loan faster than big banks, I estimate that 50% of them have been approved, and some already have funding in their account.

Now, for this market report, I’ll share the latest stats from the area bordered by the 710 Freeway to the west, 15 Freeway to the east, 210 Freeway to the north, and 60 Freeway to the south.

In this marketplace, there were 1,499 closings between March 1 and March 31. During March of 2019, there were 1,466 closings. Between March 20 and April 15 (the “lockdown period”), there were 722 new listings taken and 709 escrows opened. These numbers are lower than usual, but not substantially lower. There were also 1,065 closings that took place during this period, compared to 1,348 last year.

Since there are more buyers than sellers on the market, demand is at an all-time high.

I’ve fielded a lot of phone calls from sellers preparing to list their homes once this lockdown ends. I’ve also gotten calls from buyers who are getting pre-approved in anticipation of the market opening back up. In the meantime, video communication is the new normal, and I’m doing listing presentations via Zoom.

There are a lot of people filing for unemployment insurance, but there are many others who are looking to pick up where they left off after the lockdown ends. When that happens, interest rates should still be at all-time lows. FHA loans are as low as 3%, while conventional loans are between 3.5% and 3.75%. Since there are more buyers than sellers on the market, demand is at an all-time high.

Until my next video blog, stay safe and healthy! If you have any questions or would still like to buy or sell a home, don’t hesitate to reach out to me. I’m here to help no matter what.

COVID-19: How to Properly Respond to Tenants’ Inquiries About Their Rents for April

reoagent@shawnluong.com (Shawn Luong) — Wed, 1 Apr 2020 11:32:00 -0700

In my last email, I asked for all to sign a petition to Congress to provide tenant rent and landlord mortgage relief. What I will discuss now is strictly for residential properties.

There is a 60-day no eviction and no rent increase moratorium throughout the state of California, ending May 31, 2020. Courthouses handling unlawful detainer are closed and cases are suspended until April 16, 2020, so the tenant has 10 days to respond and the default date will be May 5, 2020.

For units with Section 8 contracts, subsidized rent portion should have already been received. For units with contracts with non-profit housing agencies such as Brilliant Corners, HOPICS, and other Rapid Rehousing, the payments should also have sent via ACH or mail.

For the tenant portion of the rent, late fees are waived to those who have a legitimate reason such as work hour reduction or layoff due to COVID-19. All tenants have to provide updated paycheck and contact info about their place of employment. In summary, tenants have to provide the landlord with documentation that they are affected or impacted by the coronavirus pandemic. For those who have been laid off or have their working hours reduced, urge them to file an Unemployment Insurance (UI) claim as soon as possible.

Phone lines are busy, so filing online is the best solution. Here are all the ways to file:

English: 1-800-300-5616

Spanish: 1-800-326-8937

UI online - English Youtube video- English

UI online - Spanish Youtube video -Espanol

Tenants should also be made aware that rents are expected to be in full once they received the federal aid of $1,200 per adult and $500 per child. They should receive this no later than the end of April along with the $600 per week of UI payments.

I welcome any comments you might have. Until next time, stay safe and healthy.

What I am doing for the upcoming COVID-19 (coronavirus) pandemic

reoagent@shawnluong.com (Shawn Luong) — Fri, 6 Mar 2020 10:10:00 -0800

James Robb, pathologist and molecular virologist, recently released this letter discussing the likelyhood that the coronavirus could be “widespread in the US” by late March and April.

Dear Colleagues, as some of you may recall, when I was a professor of pathology at the University of California San Diego, I was one of the first molecular virologists in the world to work on coronaviruses (the 1970s). I was the first to demonstrate the number of genes the virus contained. Since then, I have kept up with the coronavirus field and its multiple clinical transfers into the human population (e.g., SARS, MERS), from different animal sources.

The current projections for its expansion in the US are only probable, due to continued insufficient worldwide data, but it is most likely to be widespread in the US by mid to late March and April.

Here is what I have done and the precautions that I take and will take. These are the same precautions I currently use during our influenza seasons, except for the mask and gloves.:

1) NO HANDSHAKING! Use a fist bump, slight bow, elbow bump, etc.

2) Use ONLY your knuckle to touch light switches. elevator buttons, etc.. Lift the gasoline dispenser with a paper towel or use a disposable glove.

3) Open doors with your closed fist or hip - do not grasp the handle with your hand, unless there is no other way to open the door. Especially important on bathroom and post office/commercial doors.

4) Use disinfectant wipes at the stores when they are available, including wiping the handle and child seat in grocery carts.

5) Wash your hands with soap for 10-20 seconds and/or use a greater than 60% alcohol-based hand sanitizer whenever you return home from ANY activity that involves locations where other people have been.

6) Keep a bottle of sanitizer available at each of your home's entrances. AND in your car for use after getting gas or touching other contaminated objects when you can't immediately wash your hands.

7) If possible, cough or sneeze into a disposable tissue and discard. Use your elbow only if you have to. The clothing on your elbow will contain infectious virus that can be passed on for up to a week or more!

What I have stocked in preparation for the pandemic spread to the US:

1) Latex or nitrile latex disposable gloves for use when going shopping, using the gasoline pump, and all other outside activity when you come in contact with contaminated areas.

Note: This virus is spread in large droplets by coughing and sneezing. This means that the air will not infect you! BUT all the surfaces where these droplets land are infectious for about a week on average - everything that is associated with infected people will be contaminated and potentially infectious. The virus is on surfaces and you will not be infected unless your unprotected face is directly coughed or sneezed upon. This virus only has cell receptors for lung cells (it only infects your lungs) The only way for the virus to infect you is through your nose or mouth via your hands or an infected cough or sneeze onto or into your nose or mouth.

2) Stock up now with disposable surgical masks and use them to prevent you from touching your nose and/or mouth (We touch our nose/mouth 90X/day without knowing it!). This is the only way this virus can infect you - it is lung-specific. The mask will not prevent the virus in a direct sneeze from getting into your nose or mouth - it is only to keep you from touching your nose or mouth..

3) Stock up now with hand sanitizers and latex/nitrile gloves (get the appropriate sizes for your family). The hand sanitizers must be alcohol-based and greater than 60% alcohol to be effective..

4) Stock up now with zinc lozenges. These lozenges have been proven to be effective in blocking coronavirus (and most other viruses) from multiplying in your throat and nasopharynx. Use as directed several times each day when you begin to feel ANY "cold-like" symptoms beginning. It is best to lie down and let the lozenge dissolve in the back of your throat and nasopharynx. Cold-Eeze lozenges is one brand available, but there are other brands available.

I, as many others do, hope that this pandemic will be reasonably contained, BUT I personally do not think it will be. Humans have never seen this snake-associated virus before and have no internal defense against it. Tremendous worldwide efforts are being made to understand the molecular and clinical virology of this virus. Unbelievable molecular knowledge about the genomics, structure, and virulence of this virus has already been achieved. BUT, there will be NO drugs or vaccines available this year to protect us or limit the infection within us. Only symptomatic support is available.

I hope these personal thoughts will be helpful during this potentially catastrophic pandemic. You are welcome to share this email. Good luck to all of us! Jim

James Robb, MD FCAP

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Down Payment Assistance

reoagent@shawnluong.com (Shawn Luong) — Fri, 28 Feb 2020 08:49:00 -0800

First-time homebuyers don’t have to pay a 20% down payment. Down payment assistance programs can help you save.

Lately, I have received many questions from people about down payments. They say they want to buy a home but don’t have enough to pay for a 20% down payment. The good news is, 20% is rarely needed these days. There are down payment assistance programs for first-time homebuyers in California, but in some regions, there are income limits.

These programs range from 3% to 5% of the purchase price, with a FICO score minimum of 640. The income limit for these programs in Los Angeles is $144,000; for San Bernardino and Riverside Counties, it’s $138,000; and Orange County residents’ limit is $193,800. These programs make buying a home completely affordable in California. Right now, we have a 3.5% interest rate, so it may be the time to become a homeowner.

If you have any questions about down payment assistance or real estate in general, please reach out to me via phone or email. I would love to help you.

How to Properly Increase Rent Without Legal Troubles

reoagent@shawnluong.com (Shawn Luong) — Tue, 11 Feb 2020 13:54:00 -0800

I’m back to answer more of your questions surrounding the rent control measures here in the state of California.

There has been a lot of talk about rent control in California lately; many people don’t seem to fully understand how to navigate this tricky issue. Today I’ll answer three frequently asked questions to provide clarity on this issue and help you avoid legal issues down the road.

“Why is there rent control now when, in 2018, Prop 10 was defeated by 62%?”

Well, the state legislature has a supermajority of people who back rent control, so if you want it to be overturned, you have to vote for people who don’t back rent control measures.

“How do you do a rate increase based on AB-1482?”

The rent increase under AB-1482 has two components: an annual 5% base increase, as well as the added CPI. The verbiage is not very clear here, and you won’t get very far if you use the U.S Bureau of Labor Statistics’ published CPI.

For example, if you had a property that had an increase in December, you’d use the most recent published CPI from November to add on the 5%. For example, in Los Angeles, the November CPI is 3.2%, so you’d add 3.2% to the 5% base rent increase for a total of an 8.2% increase. If you stay within that range, you should be legally compliant with AB-1482.

If you want rent control to be overturned, you have to vote for people who don’t back rent control measures.

You can use the average CPI of the previous 12 months, too. In the case of the December rent increase, you’d add the 5% base increase to the average CPI of the 12 months between November 2018 and October of 2019.

The cap on the rent increase is 10%, so if the CPI is 5.5%, you’d still add that to the base 5% increase, though it would go no higher than 10%.

“How does this affect relocation?”

If you’re relocating somewhere outside of Los Angeles, West Hollywood, or Santa Monica, for example, and you have to substantially remodel the home, you can require the tenants to move as long as you pay them one month’s rent as compensation.

If you have any questions about this topic, don’t hesitate to reach out to me. I’d be glad to help you. Until then, stay safe and happy!

Answering Your Questions About California Rent Control

reoagent@shawnluong.com (Shawn Luong) — Mon, 27 Jan 2020 12:38:00 -0800

Today I want to provide some clarity about California’s Assembly Bill 1482, a rent control law that has some investors worried.

My last video regarding California’s Assembly Bill 1482 generated a lot of interest and questions, so today I’ll review the bill and provide some clarity on rent control and what it means for you.

First, single-family homes and condos are not subject to rent control unless they are owned by a corporation or a real estate investment trust (REIT). In the city of Los Angeles specifically, however, condos, duplexes, and triplexes are subject to the rent control bill.

Secondly, many wanted to know how owner occupied properties would be affected by the bill. Under the Californian rent control law, if you have a duplex where you live in one unit and the other unit is rented to a tenant, the second unit is not subject to rent control.

Single-family homes and condos are not subject to rent control unless they are owned by a corporation or a real estate investment trust (REIT).

The rent control bill has convinced some that maybe they should look elsewhere to invest in rental properties. Based on a survey between 2001 and 2018, the average rent increase in California was only 2.5%. Some people have not raised their rents in two or three years.

So what is the effect of the rent cap? I think that will motivate many investors to increase their rents before the end of the year to the maximum amount allowable by AB-1482.

Finally, the California Public Employee Retirement System (CalPERS) just averaged out with less than 6.5% on their return. For them to really cover all the benefits for retirees, they need to get a 7.5% annual return. If you can get 8.5%, you are ahead of CalPERS in that regard; this is a positive point for you to keep in mind.

If you have any questions or feedback about California rent control laws, don’t hesitate to reach out to me. I’d love to hear from you.

Setting Up a Self-Directed IRA

reoagent@shawnluong.com (Shawn Luong) — Fri, 10 Jan 2020 12:56:00 -0800

A great way to invest in ADUs is by using a self-directed IRA.
As you may know, my last blog post focused on how the new ADU laws impact you and why it makes sense to invest in ADUs. Since then, I’ve gotten a lot of questions about how to do this. The answer is something quite a few companies offer: self-directed IRAs. Your opportunity zone fund, which is an LLC, will be owned by your self-directed IRA. You, therefore, become the manager of the LLC. So, you simply sell your stock into a self-directed IRA, which then becomes your opportunity zone fund. After 10 years, you can have multiple properties within your LLC, and any gains from the investments are completely tax-free.

If you’d like to know more about using self-directed IRAs, don’t hesitate to reach out to me. I’d be happy to help you.

It’s Time to Move Your Unrealized Gains to an Opportunity Zone Fund

reoagent@shawnluong.com (Shawn Luong) — Fri, 27 Dec 2019 11:16:00 -0800

How can stock investors turn their unrealized gains into profit through real estate? Let’s discuss.

Many who invest in stocks have found themselves in a favorable position right now, thanks to the general health of our market. That said, if you’ve had a long run-up of gains over the recent months and years, now is the time to lock in that profit.

How?

Well, one way to do so is by selling your stock and investing in an Opportunity Zone fund. (If you need a refresher on what Opportunity Zones are and how they function, check out my previous video on the topic here.)

After 10 years, any capital gains earned from such an investment can be assumed 100% tax-free.

One key benefit of this kind of investment is that it’s tax-deferrable, carrying a 10% capital gains reduction after five years and a 15% reduction after seven. After 10 years, any capital gains earned from such an investment can be assumed 100% tax-free.

Single-family properties with non-owner occupied ADU units also qualify for these benefits, so long as they are within an Opportunity Zone. Again, remember that you can have up to two such units on a property per California law.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

How Do the New ADU Laws Impact You?

reoagent@shawnluong.com (Shawn Luong) — Mon, 18 Nov 2019 08:23:00 -0800

The state of California recently passed a series of laws regarding the construction of ADUs. Here are the changes you need to know about.

On October 9, three laws were passed by the state of California that intend to address the housing crisis by relaxing restrictions on accessory dwelling units (ADUs): Senate Bill 13, Assembly Bill 68, and Assembly Bill 881.

Within these three laws, three specific changes were enacted that you need to know.

The first is that ADUs don’t have to be owner-occupied. Previously, you had to occupy part of the property to build an ADU on it or convert a garage into an ADU—whether it was the main house or the ADU, itself. Now, you don’t have to. Also, you’ll no longer have to deal with size restrictions on the lot before you start building. The total floor area of an attached accessory dwelling unit shall not exceed 50% of the proposed or existing primary dwelling living area, or 1,200 square feet.

Second, you’re allowed to have two ADUs on a property. Now, for example, if you have a detached garage that you converted into an ADU, you can build another detached ADU, even if it’s in a single-family home zoning area. Also, if you already have a duplex and a separately built garage and you’re located in a multifamily resident zoning area, you can build on top of that garage—as long as it makes sense foundationally.

This is good news for anyone looking to invest in real estate

Lastly, the city can’t go against state law. Also, the city has to lower the impact development fee and the utility company has to lower the connection fee for the water and sewer lines. Additionally, the city has to respond to building permit applications within 60 days. If they don’t respond within 60 days, their approval is implied, and you’re free to start building.

In a nutshell, this is good news for anyone looking to invest in real estate or anyone who already has an ADU built within the zones mentioned above. My advice is to hang on to that property and sell it later on—tax-free!

If you have any questions about this or any other real estate topic, don’t hesitate to reach out to me. I’d love to help you.

What Does the Passing of the Tenant Protection Act Mean for Landlords?

reoagent@shawnluong.com (Shawn Luong) — Mon, 11 Nov 2019 08:30:00 -0800

What does AB-1482 (the Tenant Protection Act) mean for landlords in California? Let’s discuss.

The Tenant Protection Act (AB-1482) was just signed into California law, and this has many landlords wondering about the implications of this move. There are a couple of key changes to keep in mind.

The first is the new 5% annual rent increase cap. This cap does account for local inflation, which is about 3.8% in the Los Angeles area, so the “true” cap is actually closer to 8.8%. So long as your increases don’t exceed this limit (which is retroactively effective as of March 2019), you shouldn’t have any issues.

Landlords can still evict problematic tenants, but they will now need to present evidence to the court before doing so.

The second important change to keep in mind is the new “just-cause” eviction standards. This doesn’t mean that you will no longer be able to evict problematic tenants—just that you will need to present evidence to the court before doing so.

Another change to remember is that landlords now need to pay one month’s worth of a tenant’s rent to help them vacate the property whenever you’re doing remodeling projects.

Finally, landlords should realize that, under AB-1482, any Los Angeles properties that are more than 15 years old will be subject to rent control.

These points combined basically sum up what you need to know about the Tenant Protection Act, but if you have any other questions or would like more information, please feel free to give me a call or send me an email. I look forward to hearing from you soon.

How the Real Estate Industry Compared to the S&P in the Last Decade

reoagent@shawnluong.com (Shawn Luong) — Mon, 7 Oct 2019 14:29:00 -0700

How did the real estate industry compare to the S&P 500 between 2007 and 2016?

Last time, I discussed the last decade of the stock market with a focus on the S&P 500. After getting some great feedback on the topic, today I’ve decided to focus on another decade—the years between 2007 and 2016, aka the Great Recession, when about 5% of all homeowners had their homes foreclosed upon and many lost a fortune in real estate.

Here’s the data for Los Angeles County for that turbulent decade:

In 2007, the median home price was $525,000. By 2016, the median home price was $569,000. That’s roughly an 8.4% growth during that timeframe. The housing market was able to dig itself out from the crash, from 2011 to 2015, with the real gain happening between 2015 and 2016. This is especially true for those homeowners who purchased right before the crash of 2007. This amounts to an annual growth of 0.84%. In this paragraph: Overall, it looks like the real estate industry got ahead of the S&P 500 during that decade. This makes sense, since real estate is an industry that has a certain amount of control.

Unlike the stock market, the real estate industry has leverage on its side.

However, unlike the stock market, the real estate industry has leverage on its side. The basic down payment in real estate is 20%, so if you take that 0.84% growth and multiply it times five, you get roughly a 4.2% growth for that timeframe.

Now let’s take a look at how the S&P 500 fared between 2007 and 2016.

In 2007, the S&P 500 index was 1,424. By 2016, the index was 1,918. That’s a cumulative growth of 34.8%, or an annual growth of 3.4%, without taking into account the 1% annual fees.

Overall, it looks like the real estate industry got ahead of the S&P 500 during that decade. This makes sense, since real estate is an industry that gives you a certain amount of control.

If you have any questions or feedback about this topic, I’d love to hear from you. Feel free to reach out to me anytime.