How to Start Out in Real Estate Investing in a High Cost of Living Area

[Edward Suess-Hassman]

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

[Aristotle Kumpis]

Hi Edward. I also live in California. And if you are considering a long term rental, I suggest you consider out of state investing. I also invest cross country and love it. There are many options available, and the numbers pan out much better. 

[Julia Lyrberg]

Since house hacking isn’t an option and the Bay Area can be tough for cash-flowing deals, you might explore out-of-state investing in markets with lower entry costs and better returns. Networking with local investors or joining a real estate meetup group can also help you gain insights and connections. Keep learning and start analyzing deals—it’s a great way to get comfortable before making your first move!

[Bradley Buxton]

@Edward Suess-Hassman

Contact a lender and a CPA to see what you can afford today, next year, and develop a plan to guide where you can invest. Then you can eliminate markets to invest either in CA or out of state to narrow your choices to do research. Next consider your lifestyle and time you can dedicate to investing. Even with property managers there is management you have to do with them. Going to meet-ups is a good way to develop a network and bounce ideas off other investors. Keep in mind you'll never have all the information and there will always be unknowns and assumptions. Lastly, take action, no one ever built wealth by planning to do something. 

[Nathan Gesner]

Read "Long-Distance Real Estate Investing" by David Greene and follow him on the David Greene podcast. Smart guy with the most practical advice, some great books, and he started in California.

[Samuel Diouf]

Welcome to Bigger Pockets Edward!

Bigger Pockets is a great place to learn and connect with fellow investors.

If you’re looking to invest long distance, I definitely recommend building your core-4 team. This team consists of an Investor Focused Agent, Lender, Contractor, and PM.

Read this article on the "core 4". It explains the team that you should develop to have a strong foundation under you while investing remotely.

https://www.biggerpockets.com/blog/core-four-real-estate-team

A lot of investors based in markets like California and New York are choosing to purchase their investments OOS in the Midwest because of the affordability and numbers making more sense.

Prices in Columbus are still low enough to find 1% rule deals and there's a ton of appreciation happening in this market as well. I actually moved from Florida to Columbus for the real estate. I saw how fast the city was growing and decided to make the jump.

[Robin Smith]

Quote from @Samuel Diouf:

If you’re looking to invest long distance, I definitely recommend building your core-4 team. This team consists of an Investor Focused Agent, Lender, Contractor, and PM.

Read this article on the "core 4". It explains the team that you should develop to have a strong foundation under you while investing remotely. 

Great advice, Samuel.  I have requested to connect with you. Are you an investor friendly agent? 

[Michael Diossa]

Quote from @Julia Lyrberg:

Since house hacking isn’t an option and the Bay Area can be tough for cash-flowing deals, you might explore out-of-state investing in markets with lower entry costs and better returns. Networking with local investors or joining a real estate meetup group can also help you gain insights and connections. Keep learning and start analyzing deals—it’s a great way to get comfortable before making your first move!

 This is spot on!

[Min Zhang]

@Edward Suess-Hassman You might want to explore other options and do some research. If you're open to considering other markets, I recommend starting in the Midwest. If you're focused on cash flow, Cleveland is worth considering, with cash flow around 10-18%

[Nicholas L.]

@Edward Suess-Hassman

hello.  i know this is not exactly the answer you want to hear, but it's just a really tough time to get started.  that doesn't mean RE isn't a good investment... but it is the case.

what i would NOT recommend is buying a random, "cheap' property in a market thousands of miles away that you don't know well and haven't seen in person, and turning it over to a team you don't know.  this will just set you back.

i don't know what time you have available to dedicate to RE - if you are able, you could try to build a team and explore a market within a couple hours of you with a lower price point.  if not, you might be restricted to more passive options.  or waiting and saving.

[Jimmy Lieu]

Quote from @Edward Suess-Hassman:

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

Hi Edward! There's a ton of resources here on BiggerPockets, you're on the right track! If house hacking is not an option, you can try out-of-state investing and check markets you are comfortable exploring. There's a lot of conversations about markets in the forums as well. Totally get where you're coming from, I was priced out of Portland OR before I moved to Columbus OH. Now we're seeing incredible population and job growth and major companies moving and developing here like Intel and Amazon - great macroeconomics and strong rental demand. Best of luck on your REI journey! Happy to connect and answer any questions you may have.

[Stevan Stojakovic]

Starting out in a high-cost-of-living area can be challenging, but it also presents unique opportunities if approached strategically. Focus on value-add properties where improvements like renovations or better management can increase returns. Consider creative approaches like short-term rentals, ADUs, or co-living spaces that maximize income in limited spaces. Partnering with experienced investors can also lower your risk while allowing you to learn and contribute.

If affordability is an issue, co-buying, rent-to-own agreements, or leveraging sweat equity in fixer-uppers can help you get started. Don’t overlook the power of networking—off-market deals often come from local connections, landlords, or investor meetups. Finally, remember that real estate in HCOL areas is often about long-term appreciation rather than immediate cash flow. Strategic patience pays off.

Good luck, and keep building your knowledge and network—you’ll find your way forward!

[Tanarat Bunchom]

Starting in real estate while living in a pricey area like San Jose can feel tricky, but exploring out-of-state markets with better cash flow is a great idea. Since house hacking is off the table, focus on building a network in those areas—agents, property managers, and contractors are key.

The books you mentioned are solid picks! Pair that with clear financial goals (cash flow vs. appreciation) and creative financing strategies. You're off to a great start—keep learning and connecting!

[Bryan Stengel]

Hi Edward, I agree that investing in the out of state market may be a better idea in terms benefiting from potential cash flow at a more reasonable price.  I live on Long Island in New York where tenant laws are not favorable for owners and often could encourage squatting.  On top of that, the prices of single family and multi-family homes could be very expensive as well.  I decided to purchase property in Pennsylvania where properties are more affordable in certain parts, demand is relatively good (less vacancy), healthy cash flow, and tenant laws are more favorable to the owner side in case your tenant stops paying their fair share.  I would suggest research the out of state market around you.  I picked an area that was driving distance from where I live (within fours hours or less), but you could pick something further.  I do have a property manager on-site to address any concerns my tenants have.  It may be worth the investment if you decide to do out of state to eliminate any potential mishaps when it comes to timely repairs if needed.  Feel free to reach out!  You definitely learn as you go. 

[Annie Schrock]

Hi @Edward Suess-Hassman Another option not mentioned yet is do a flip and hold. Find a hard money lender in your area that will lend you 100% of purchase + construction. If you find the right deal, you can flip it, rent it out, and refinance it and use the equity you've built for the downpayment. It's essentially the brrrr strategy but you can use hard money on the front end to get into the deal. I've seen it done many times in my area! 

[Alfath Ahmed]

Quote from @Edward Suess-Hassman:

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

The easiest way is to do a BRRRR on light-value add properties. House-hacking would have been my go-to option but I understand since you are already comfortable where you are living. You would need to invest out of state since Sj does not have the properties to do a successful BRRRR.

I would chose a good market in the midwest that meets your criteria for cashflow and appreciation with $100k barrier of entry. I would find a good realtor, use Kiavi or wild-cat for lending, and good contractors through your realtor, and a local PM.

Then you can re-fi using a DSCR loan and leave very little money in the deal and have it cashflow. Hope this helps!

[Austin Wolff]

Quote from @Edward Suess-Hassman:

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

I lived in Los Angeles, so I get your pain. After literally years of looking (since 2022) I bought my first property a few months ago, so I feel extremely qualified to give advice (many people earned lots of equity during the pandemic appreciation-boom if they bought before 2022, but out-of-state investors getting started AFTER the 2022 interest rate hikes are few and far between). 

Owning REITs is a good way to start. And everyone here has offered great advice. Now this might be controversial and some people may disagree with me (even some of my coworkers here at BiggerPockets may have a different opinion which I completely welcome), but I really don't think you should invest OOS in this current macro environment with less than $100k (down payment + reserves). If you don't have $100k to invest, you'll spin your wheels for a long time, looking for deals in not-so-great markets. (Ask me how I know this.)

You'll be priced out of virtually any quality market as you'll need to put anywhere from 25-40% down if you'd like to cash flow in a deal you don't have to significantly rehab (or found off-market) with interest rates where they're at (and don't expect them to go down to 4% anytime this decade either--a 3-4% interest rate is historically low and investors in the 2010s were lucky and spoiled). 

If you're investing out-of-state, you're really going to want the buying power and reserve cushion that 100K gives you. If you don't have that, keep earning, saving, and managing the risk you take by investing in REITs (which is small but risk still exists).

If you already have at least $100k to invest, and you're wondering where to start as an OOS investor, I recommend this dataset that we at BiggerPockets put together specifically for people like you and me.

https://www.biggerpockets.com/resources/housing-market-data/...

It contains information like job growth, population growth, and rent-price ratio for all markets to compare and contrast. It's certainly enough data to point you in the right direction.

Otherwise, here's an article I published on the fastest growing economies in the nation, and many of these places are quite affordable and good places to start (Cincinnati, Columbus, Oklahoma City, etc).

13 Real Estate Hot Spots You Won’t Want to Miss Next Year

I hope my perspective helped.

[Wale Lawal]

@Edward Suess-Hassman

To make sustainable investments, set clear goals, research markets outside the Bay Area, consider creative financing, learn from others, build a strong team, and use educational resources. Determine investment strategies like buy-and-hold, short-term rentals, BRRRR, or partnerships, analyze numbers, consider creative financing options, build a strong team, and start small and pivot as needed.

Good luck!

[Becca F.]

@Edward Suess-Hassman

I invest locally and out of state (Indianapolis metro area). I used to live in the Indy area so I didn't pick a random far away market and I have had mixed results in Indiana. If you read some of my previous posts, you'll get a sense of what I'm talking about. Know the difference between Class A, B, C and D properties and areas. 

I would recommend attending local meet ups so you can talk to investors who buy in California as well as OOS. We all have different financial situations, lifestyles, risk tolerances and goals so what would be a good investment for one person might not work for someone else. If you're looking at OOS talk to local investors (someone who isn't trying to sell you something) and property management companies, who could potentially be your long term business partner. The PMCs know what median rents are in different areas and tenant base. Talk to contractors and experienced investors to know what you should look for before making any offers. And fly out to the locations you're considering investing in. 

Have you considered looking in Sacramento or the Central Valley? Manteca, Fresno and Turlock were mentioned to me. Tracy is technically Central Valley but unofficially included as the Bay Area. These are within a 2 to 3 hour drive and you could start networking and looking at properties. 

Feel free to DM me if you have any questions :) 

[Henry Lazerow]

Most of return comes from appreciation so even if your market pricey see if can find anything that is neutral cashflow wise. I always recomend clients against low class out of state deals as it often just doesn't work well. I have sold many CA buyers our more expensive out of state deals though which run great, for example north side chicago 4 units 800k+ that cashflow with great tenants 700+ scores. The rents go up consistently every year which is very important for appreciation and increasing cashflow over time. Never invest in areas that are depressed prices, you just don't get the growth needed for wealth. 

[Drew Sygit]

@Edward Suess-Hassman you won't be able to cashflow if you buy Class A or B property - unless it is a:

1) Desperate seller and you get well below market price
2) A major fixer-upper that you can invest your sweat-equity in

Your other options are:
1) Invest in Class C - but only do if you undertand 20-25% chance of tenant nonperformance and a lot of maintenance issues.
2) You invest in another part of the country.

DM us if you have more questions.

[Sam McCormack]

Quote from @Edward Suess-Hassman:

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

Just like 20 others have said. OOS investing seems to be your best bet. Have you thought about what your goal is for REI? Maybe you already have an idea of what markets you are wanting to look in?

[Robert Ellis]

Quote from @Edward Suess-Hassman:

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

 columbus is the market and new construction is the way to go 

[Tanarat Bunchom]

Quote from @Nicholas L.:

@Edward Suess-Hassman

hello.  i know this is not exactly the answer you want to hear, but it's just a really tough time to get started.  that doesn't mean RE isn't a good investment... but it is the case.

what i would NOT recommend is buying a random, "cheap' property in a market thousands of miles away that you don't know well and haven't seen in person, and turning it over to a team you don't know.  this will just set you back.

i don't know what time you have available to dedicate to RE - if you are able, you could try to build a team and explore a market within a couple hours of you with a lower price point.  if not, you might be restricted to more passive options.  or waiting and saving.

I agree with Nicholas. It’s a challenging time to start, but real estate can still be a solid investment if approached wisely. Avoid rushing into a distant market without proper research or a trusted team—it’s a recipe for setbacks. If you can, focus on building a team and exploring nearby markets with better affordability. Otherwise, more passive options or waiting to save could be the better route for now.

[Chris Mullinax]

Hi Edward, I have many OOS investors like yourself that are from California that have invested in properties in Indiana, mainly Indianapolis and Kokomo, plus surrounding areas. You are on the right track being here on BiggerPockets and networking! I own a complete real estate management company and am very familiar with the market. If Indiana is a market that you have some interest in, feel free to connect with me and shoot me a message! 

[James Wise]

Quote from @Edward Suess-Hassman:

Looking to get into Real Estate. I've been reading a few books on Bigger Pockets. Looking at possibly picking up "Small and Mighty Real Estate Investor" and " Wealth Without Cash". However, it seems my local area (San Jose / Bay Area) might not be the best as I know most of the win is in the buy. However, there is still so much I don't know. 

Wife won't let us house hack (we have a house, and a daughter). We have some REITs. 

Looking for guidance, networking and a path forward. Thanks!

 Holla!