I think I need to start over and re-frame my question

[Joe Koppel]

I am at the end of a divorce and had to sell everything. My home is on the market for sale right now and when it sell I expect to have $100,000+ free cash and I want to but some rental properties to get cash flow going.

I live in San Diego CA, and will retire in 2-4 years so I have to stay here for now. I was planning on buying property in Texas because move in ready homes go for $125,000 so I figure I could buy 2-3 rentals there. But I am told by some here that this is a bad idea.

Homes are way too expensive to buy here in California.

So where does the smart money buy rental properties at?

How is California going to nail me on tax?

[Lee Ripma]

@Joe Koppel

Hi Joe,

I'm also in SD and I know that many folks on BP will say buy where you live or within 2 hours and that SD is great market for appreciation. However, SD is not a great area for cash flow in the short term and you need a TON of capital to invest here. My goal is cash flow so I've done a lot of research over the last year and decided to buy a vacation rental in mammoth lakes to use for short-term rentals and for myself and some small multi-families for cash flow in Kansas City. I went to Kansas City last weekend and checked out all the potential areas, drove around, thought about areas that I would want to buy and crunched numbers. You can buy through a turnkey operator (USREEB or Pinnacle Investment Properties, among others) or you purchase the homes yourself and get a local property management company. In Kansas City there are SFH turnkey properties in "war zones" for 50k that rent for 850 a month. For 70k you'll be in a B area and still get a similar rent. So with your 100k you could easily pick up 5 KC B area rental properties at 20% down. You could also get a MF up 400k. You could also think about getting into a few other markets to diversify. There are always "top 10 locations for cash-flow" on this site but I'll tell you that Kansas City and Indianapolis always come up.

If I were you and had 100k I would buy a small multifamily in KC with a value-add opportunity, do the value-add to increase the value, refinance to get my money out of the deal but keep the cash flow and then do it again and again (BRRR method). I would have my local partners do the actual work on renovations and management. I don't have quite that much capital so I'll start with a smaller 3 or 4-plex but do the same thing. I have identified 7 zip codes that I like, so it makes it easier to narrow down deals that could work for me.

I personally have decided to stay away from CA since my goal is cash-flow and low capital requirements. Many on this site who say to invest locally don't really realize just how much capital it takes to invest in CA. I know others will disagree with me but that is what I personally have decided to do. I'm no expert, I just know what I've learned from my research in the last year and I'm springing into action to pick up my units. Now that I'm in the action phase I've had trouble actually finding deals but I guess it just takes a while so I'm trying to both work hard at in at be patient in waiting for the right thing. 

Best of luck to you!