How To Get Started | Bay Area

Question

My name is Brandon Ortiz, and I’m a real estate agent here in the Bay Area. I’ve owned a home in Gilroy, CA, for 12 years, and it has built up a significant amount of equity. I’m now looking to invest that equity to create financial security for my family in the future.

For those experienced in real estate investing, what would you recommend as the best way to get started? Should I focus on rental properties, fix-and-flip projects, or explore other strategies? I’d love to hear your thoughts and insights.

Thank you in advance for your advice!

Mike Paolucci · Answer

Welcome to the investment side of RE. Best way to get started on an investment would be to house hack / invest locally. Easier for you to monitor & manage you property while building your portfolio. Might not be ideal to go from a personal home to a duplex/triplex/quad but it's a great way to buy with as minimal % down as possible.

If that isn't feasible like it wasn't for me (personally being born and raised in San Francisco), you may want to look out of state. Look for markets with good population/economic growth. You should be able to find a PM in your target market to help manage everything for you (I don't recommend managing from a distance...it can be a nightmare and your time is more valuable focusing on your sales business).

I'm a bigger fan of buy & hold for the long term and goin the LTR / MTR route.

Happy to connect and share some of my OOS investing experiences. Good luck on your investing journey!

Tim Ryan · Answer

My advice for you is to buy rentals for longer term holds. Flipping is a no. Development no. Fix and Flip is taking on a new job when you already have one.

Owning rentals is wealth building.

Drew Sygit · Answer

@Brandon Ortiz I would focus on finding deals locally, I mean really fnding DEALS!

This will help you in the long run, as you'll find your agent experience will be a blessing & a curse:- Blessing due to your understanding of MLS, searches & contracts.- Curse because MUST change your agent mindset. Example, you probably think winning a bidding war or getting a property 5% under "market value" is a great deal. That is RARELY the case!

So, once you start finding actual deals and can easily present them as deals to others, you can decide whether to:1) Wholesale for quick cash. Just be sure to brush up on your agent fiduciary requirements to avoid a lawsuit.2) Flip to various degrees of rehab. Maybe at first you judt do cosmetic rehabs. Then, as you buld knowledge & experience you can do bigger projects.3) The two above strategies can build funds to invest in rentals. Just don't think of rentals as passive investment because they are NOT.

Here's some other info you might find useful for all of the above, even though it is focused on rentals.

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Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

Property Class will typically dictate the Class of tenant you get, which greatly IMPACTS rental income stability and property maintenance/damage by tenants.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

If you buy/renovate a property in Class D area to Class A standards, what quality of tenant will you get?

Similarly, if you put several Class D tenants in a Class A 4-plex, what do you think will happen to the property?

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

The City of Detroit has 183 Neighborhoods we’ve analyzed.

PM us if you’d like to discuss this logical approach in greater detail!

Ko Kashiwagi · Answer

Hi Brandon,

Personally I think it all depends on what kind of "avatar" you are.

If you have high risk tolerance and have time to spend, active strategies like flips and BRRRRs will yield better returns and more opportunities.

If you don't want to spend time or risk losing money, LTR and multi-family is rather safe.

Wale Lawal · Answer

@Brandon Ortiz

From my experience, choosing the right investment strategy means aligning it with your financial goals, resources, and time commitment. I’ve explored options like using a HELOC, cash-out refinance, or leveraging my home as collateral. Rental properties are great for passive income, and I’ve weighed the benefits of local investments versus out-of-state opportunities. Fix-and-flip projects can yield quick returns but require experience, while house hacking with FHA or conventional loans is a great way to get started. Partnerships or syndications can help scale into larger deals. My advice is to analyze your equity, focus on high-growth areas, educate yourself, and start small. It’s all about taking that first step!

Good luck!

Evan Polaski · Answer

@Brandon Ortiz: each strategy has its own risks and potential rewards.

Owning rentals, you have the constant maintenance and tenant risk associated with owning property.  While I don't have any horror stories, per se, I have heard of people having a tenant for a year then causing $20k in damages upon move out, while skipping town to not be found again (this was a CA buyer buying from a turnkey operator in AL).

Flipping has the potential for far higher annualized returns, but comes with all of the construction risk and reinvestment risk to get the next one. But when done well, you can easily hit 30-40-50% annualized returns, or more.  I have had some very successful rentals that I bought in the financial crisis, and they were NOT kicking off 40% annualized returns.

Both are a business. They both involve sourcing deals.  Flipping is probably a little more intense, but can still be done with a day job, but again, my average flip versus my average rental: flip has made much better returns.

And as for generational wealth and handing down something to your kids... well, I guess I view it as: if I can hand my kids a $10mm trust fund held in public securities, or $10mm real estate portfolio, they are going to be pretty set either way, but a real estate portfolio will continually have costs and work, a brokerage account is a bit more set and forget, with some periodic rebalancing.

Aristotle Kumpis · Answer

Hi Brandon. The more conservative way to build wealth through real estate is buy and hold. Simply buy a property every year or two if you can. You will get some cash flow, appreciation, and tax benefits along the way. Then when it makes sense, pull money out or 1031 into something new. But if hold on them for awhile and pay them off, then your family and kids and enjoy the income they produce.

If you flip properties, then you never really own anything. You are just earning some income. There is nothing to pass down to your kids. The power of real estate investing is owning the asset. Hope that makes sense.

Julia Lyrberg · Answer

Hi Brandon,

It’s great to hear you’re looking to leverage your home equity for real estate investing! The best strategy depends on your goals, risk tolerance, and how hands-on you want to be.

Have you decided on the specific market you want to invest in? If you’re considering out-of-state investing, starting with long-term rentals might be a smart move. They’re generally easier to manage and can help you gain valuable experience in property management.

When you’re ready to scale up and try strategies like the BRRRR method out of state, it’s crucial to have a strong local network. Make sure you’re connected with reliable contractors and property managers who can act as your boots on the ground to keep everything running smoothly.

Greg Kurzner · Answer

@Brandon Ortiz

Hey Brandon, I saw your post and love that you are focused on investing.  I have been an agent for 35 years and started my investing career many years ago and am amazed that so few agents take advantage of the leverage and opportunities we have over others to build wealth and passive income.  I would be happy to jump on a call or virtual meeting and see if I can help you with how and where to get started.  If you like let me know.

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