California Out? Out of State in?

Question

Hello! I joined about 3 days ago and have been having a great time reading all sorts of blogs and podcasts. When I read one article, I end up clicking 5 more thinking to others. 28 year old and have my own fitness company . I want to start investing sooner than later Here is my introduction page Breaking into the Market from Irvine, Ca on the BiggerPockets forums http://www.biggerpockets.com/forums/55/topics/170924-breaking-into-the-market-from-irvine-ca I am enjoy learning all the terminology and have started the beginners guide to investments. I plan on doing buy and Hold properties. Would love to do multi family but obviously if you are having a high Cash on Cash ROI and Cash flow.. Then it's the same thing 10% on 1 properties of 100k is the same as 10% on 10x 10k properties right? I would love to buy in California due to being close to my first property and not having to hire someone to manage my properties but I guess when growth happens that is inevitable.. So being in or out of state shouldn't matter... Besides when it comes to taxes. I still have a bunch to read and still want to do the math behind investments. Still don't understand how people get numbers on expenses since seller can fib with the numbers, taxes etc and how you calculate the rehab on properties without visiting each one. 50% rule? How to choose an out of state market? I was looking maybe even in California in like riverside county. Anyways... I will try and be active on these forums and learn as much as I can. Brandyn

Peggy Liu · Answer

Hi @Brandyn Duff Welcome to BP! I'm an out-of-state investor. As with what Dawn has stated, what is really important in investing out-of-state or even in state, (if you're not managing it yourself) you really need a good team that you can rely on. I can't stress this enough. There is nothing wrong with investing in or out of state. It's just a matter of what you're comfortable with and what your goals are. Good luck!

Dawn Anastasi · Answer

@Brandyn Duff welcome to the site! You can read around the forums; there are many CA investors on the site. Some have posted questions about investing out of state just like you have. Others are out there doing it. You asked about due diligence -- you can get that done by have a TRUSTED team on the ground to help you evaluate properties and tell you which ones are good to buy.

Isral Konopa · Answer

@Matt RosasAwesome points on Cali investing. I am also new and am weighing the pros and cons of in-state vs. out-of-state. Your line, what location would my kids hoped I picked, is awesome, and really emphasizes the value of California investing. I don't know why I have to keep being reminded of the three most important rules of real estate investing.

Matt R. · Answer

Welcome to bp! This is the best site to get all your REI questions answered. In Cali or out, I think this depends on your goals and expectations. There is not one absolute answer and many do both. Here is my two pesos and food for thought after researching this exact subject for about a year. Location is primary. Management will be the key factor to making it workout long haul. The best investments will marry these two.Typically when you check the location factor Cali is a leader in that regard. 15% of the US lives in Cali. Being that you are already here, to leave that behind would require one hell of an out of area property based on historical data. Management in Cali would be you initially as noted.....who is going to care more than you? So now we have a general top location married with top tier management...not too shabby.A couple factors I see many overlook are property taxes long term. This normally favors Cali as well. For example, I recently looked at a property in Cali in the 400k range and the owners property taxes were $500. This was a result of holding for decades. That same valued asset property in Texas could be paying over 10k annually. So $9500 per year difference adds up year after year to the point this becomes a 6 figure matter of concern. To be fair the Cali property would pay 5kish if purchased today. It is the future tax cost I am considering.Now as we compare that with out of state it becomes a challenge to surpass. Of course short term cash numbers will be easily surpassed these days. It is the longer run that requires some savvy location selections. They do exist though...just not so common lets say. If your goal is straight cash flow that will be easy to find. Having top management in place will be the most critical part then.In some respects with out of state you might look at this in reverse. Find management first then as a team locate the property. There are top tier bp folks who commented on this post...that could be a good start. I personally know Cali peeps who are working with them and report great things.One final thought - When your kids ask where you invested in real estate..what location do you think they hoped you picked? I know I did not answer your direct questions precisely but hopefully two pesos worth:) The fact that you found bp beforehand is the awesome part. Good luck with your search!

James Wise · Answer

@Brandyn Duff welcome to the site.I see you are torn between in California & out of state.When choosing an out of state market you should do your research online first. Google, social media (bp)etc.Then when you have a couple narrowed down plan on making some trips out there and checking out the neighborhoods and companies that work in them. Get the feel for them.

Matt R. · Answer

Thanks Isral. Investing is a hassle with paperwork, financing, tenants, liabilities, managing...For the long haul one might consider to go for the gold vs silver time wise is my thinking.

Brandon Duff · Answer

My biggest concerns are the first few steps of researching a property before you buy it.When you have been investing/real estate for awhile you don't go on the MLS but have more innovative strategies to inquire about properties like ie: searching for vacant homes, looking up home address of the owner in public records and contacting to make cash deal, or a network of teams doing the footwork for you Someone starting out like myself will have to go on sites like realtor.comzillow.com or trulia.com. ( I'm not a realtor so no MLS access) Click various properties and use the 50% rule to make quick assumptions if the property is worth looking at. Ie:(Gross income * 0.5 ) - morgage = cash flow How do I know the gross income.. I know sites like realtor.com lists them but obviously they can fib with the numbers to make it look more appealing. So then it comes down to knowing my market.. How do I do that and while being out of state which market is for me? There are thousands of cities: Census data? Google? Dart board? What type of numbers should I be looking for to determine its a good market. Now going back to my 50% rule, I know my market and all that... ( I don't yet, just moving onto the next step)Say I found 3 properties that have passed the 50% rule... Is this when I start using better analysis spreadsheets to determine if it's something worthwhile? How do I estimate the rehab cost if I or "my team" haven't looked at it? Wouldn't i need to know that to start calculating CoC ROI, etc? I mean an inspector could be like $300 a property to look at.. If 3 are no good on ROI, I'm already. $1000 out of pocket.Thank you!Brandyn

Brandon Duff · Answer

Yes.. It all about building relationships and establishing credibility Dawn Anastasi Peggy Liu