Picking a RE Investing Strategy from the very beginning (CA)

[Kevin Thomas]

Hey BiggerPockets community!

My girlfriend and I are looking to purchase our first property together. We know that turning a profit in California is near impossible, but we want to live in California AND we want to be strategic with our first home by thinking of it as an investment strategy.

I was told that a duplex would be the best way to go. But, I’m not sure what cities to be looking in. We qualify for up to $875,000. We are currently looking in Elk Grove but I would prefer to be in SoCal if possible. Even if that means moving to somewhere further inland like Rancho Cucamonga/Fontana/Riverside.

But, I’m completely stuck. I don’t know how to determine which market would be the smartest move. And I’m struggling to see what options going with this strategy would provide us in the future.

I'd love to connect with anyone who is investing in California and focusing on MFU and even SFH. At this point, I'm wondering if buying a fixer upper SFH and treating it as a "long term" flip (1-2 years, would be the best option. Open to learning.

For more context, we'd be using an FHAloan and putting down 3.5%.

Cheers,

Kevin

[Erik Browning]

Quote from @Kevin Thomas:

Hey BiggerPockets community!

My girlfriend and I are looking to purchase our first property together. We know that turning a profit in California is near impossible, but we want to live in California AND we want to be strategic with our first home by thinking of it as an investment strategy.

I was told that a duplex would be the best way to go. But, I’m not sure what cities to be looking in. We qualify for up to $875,000. We are currently looking in Elk Grove but I would prefer to be in SoCal if possible. Even if that means moving to somewhere further inland like Rancho Cucamonga/Fontana/Riverside.

But, I’m completely stuck. I don’t know how to determine which market would be the smartest move. And I’m struggling to see what options going with this strategy would provide us in the future.

I'd love to connect with anyone who is investing in California and focusing on MFU and even SFH. At this point, I'm wondering if buying a fixer upper SFH and treating it as a "long term" flip (1-2 years, would be the best option. Open to learning.

For more context, we'd be using an FHAloan and putting down 3.5%.

Cheers,

Kevin

TLDR: YouTube, Jobs, Down Payment Assistance

Investing is not a sure thing, that's why there is always risk associated with it. But you can educate yourself on those risks, and do your best to mitigate them.

But sincerely, I just typed "How to Analyze Real Estate Markets" into google and multiple videos and blogs are written on the subject.

But in a nutshell, I'd recommend finding a place that has access to good, middle class jobs nearby. Maybe it's a factory, maybe it's a university, or maybe it's a government location like a military base or some other gov't department. Ensure those jobs are stable and have a future. There will be other supplementary businesses around that major job creator (restaurants, raw material providers, etc) that prop up that industry.

From there, see what you can afford with your FHA loan. However, instead of using your cash for the 3.5% down payment, I recommend you save that money and use a down payment assistance program instead where all you have to pay is closing costs. Save your cash, buy a place that needs some updating, and put your cash toward that.

Down payment assistance programs don't come without strings though. Some have slightly higher rates, some have a "shared equity" plan where you pay back what they lent you + some more, and some have either income or DTI limits that are strict.

I like the forgivable down payment assistance programs where you have a higher rate, but you don't have to pay the down payment back ever. The thing is: you can just refinance OUT of that after you've made 6 payments on the house, which will put you into a more palatable interest rate and a lower monthly payment.