Starting out, finding a strategy

[Esha Chennubhotla]

Hi there,

I am a complete newbie to real estate investing but really want to rip the band aid off this year and get my first property. I currently live in Los Angeles, CA so purchasing a property with good cash flow does not seem possible for me here. I am looking for something that can give me good cash flow as well as decent appreciation. I have been looking at OOS investing in areas such as Indianapolis, Columbus, and Cleveland. I also work remote so have the opportunity to live anywhere so have been thinking of moving to another urban city like Chicago that is more affordable and house hack for my first property, though I am not sure if the cash flow would be very high since I would want to live in the more metropolitan area of Chicago if I choose to do something like that. I have also thought of investing in Arizona since it is not too far from Los Angeles and I would be able to drive there to manage any issues that arise.

I am curious how LA investors chose a strategy for their first investment property. How did you determine the best OOS area to invest in or choose the best strategy. I have around $50k saved up so ideally I am looking to put down only 3-5% which is why I was looking at house hacking or looking at other areas where the housing market is not as expensive as California. 

Any guidance and advice is greatly appreciated, thank you!

[Andrew Postell]

@Esha Chennubhotla yeah, with that much saved then house hacking will be your method to acquire a property.  Keep in mind that house hacking REDUCES my cost of home ownership. You will NOT cash flow on any property that you purchase. I'm not sure if anybody has said anything different to you but I need this to be your expectation. Remember, you are occupying one of the units...it would be impossible to cashflow in that scenario. Ok, maybe if you rented out each room and maybe did everything Short Term or something like that. But if it's long term renting, then you won't cashflow. But it will still allow you to afford a SIGNIFICANTLY higher price point than if you did not house hack.

So, if real estate appreciates 5% per year, then a $500,000 will have $138,000 in value after 5 years and a $1million home will have $276,000 in value increase after 5 years. That's higher our value, the higher the equity gain is - even if the % of gain is flat...the dollar amount is higher because the property is worth more. That's how house hacking helps us gain wealth. We certainly aren't gaining $276,000 with $200 of cashflow. So, don't sweat the "no cashflow" thing.  Just focus on purchasing a good home that you feel comfortable with living in.  Your commitment is to live in it for 12 months...and then you can do it again and again!  

Hope all of that makes sense.