What to Start On in L.A.

Question

I'm new to real estate investing. I live in Los Angeles where prices are still kinda high. I have some money saved and very good credit. I own my home with about 20% equity. I have a fare amount of time to invest in this venture, but am unsure if I should be looking to flip REO's? Buy a rental, possibly a mobile home? I would like to do some deals in Las Vegas eventually, but I don't want to spend too much time away from the family. What have others done to get the $ started in the Los Angeles market?

Will Barnard · Answer

Definately a larger problem than the savvy investor problem mentioned by Joe. Bingo!! That is how I do it! Cashing in on another real soon and move to the next! (By the way, all of which were acquired before any competition from the MLS)

Joe Strickley · Answer

Many of the un-savvy cash buyer investors may be savers who are earning near zero on MM, CDs, USTs and savings accounts. If supply improves, as some still believe it may ( http://www.istockanalyst.com/article/viewiStockNews/articleid/3768117# ), then perhaps competition won't be so fierce. My view is that the 'political pressure' argument carries little water. Banks have been playing their cards close to their chests, are in control, and we will maintain equilibrium. Many gave up holding their breath, as the government handed out free snorkles.

Eddie Ziv · Answer

If you're thinking about flipping in L.A. Area, Will Barnard from Mationwidepi is your man. If you are thinking about small amount of investment where no financing is required for good cash flow, I can hook you up with some good rental properties in Birmingham, AL. I'm flying there next week to look for properties for some of my investors, so I can find something for you if you are interested. Prices of properties range from $7,000 - $30,000 depend on the area, size and condition.

Steve L. · Answer

I have more of an issue with un-savvy investors here. They have a lot of money, and we are willing to pay 90-100% cents on the dollar for properties right now. I hope they run out of funds soon... but I am not holding my breath.

Loc R. · Answer

Steve, I completely agree with your comments. We found a house that was listed for $110,000 that needed $15,000 in rehab. We felt the ARV about $160,000 - $165,000. When we called the listing agent, she told us that they had 4 ALL-CASH offers for $130,000 and up! (Sigh!) The thing I am trying to work on for 2010 and above is to get these listings, REO or not, before they hit the market. That's the key.

Joe Strickley · Answer

I also looked at investing in LA when I was living there. I just gave up because there is so much competition, with some very savvy investors, and as you say prices are high, and probably always will be. Rents, especially now with high vacancy rates and lowering rents, are not very attractive in terms of cap rates. You'd need another bubble to make me look again. Managing properties from afar is not impossible, even if you do it yourself.

Don Levy · Answer

If I were to invest in the Southern California area right now I would only do it with options or lease options. They have always been my favorite way to invest, especially in markets like these. Its a great way to start investing if you have little money or credit. I have a free report on the subject if you are interested. Let me know.

Will Barnard · Answer

I disagree with this 100%. First of all, approvals are for short sales, not REO's. Secondly, most investors "do it wrong" or "go at it wrong" in my opinion. The way to be successful is not to compete with everyonje else on the MLS. I have persoanlly proven that my method works and works very profitably. I can flip an REO inside of 3 months in many cases. My offers are made on REO properties not yet on the market. Plus I also go after them before they ever get to the bank. There are MANY ways to make money here. If you have the time, the determination, and the skillsets to play in this game, you CAN and WILL be successfull. That said, I am also a big believer in investing abroad as well. I invest in AZ, Vegas, TX, and many other locations. Invest with the right strategy for the specific market. that is key!

Loc R. · Answer

Sam, I have not done an LA deal completely on my own in almost a year now. I have been investing heavily in other parts of the country. There is a lot more money (cash) out there than there is property. I am not trying to discourage you, but I think there are more opportunities outside of California. I know that Eddie Ziv is a big Birmingham, AL, guy. And Will Barnard has expanded his business model so that he is involved in deals outside of California as well. Best of luck to you. There is plenty of $ to be made. Just figure out what you like and get really good at it.

Sam Teachenor · Answer

Thanks for the input. Is it worth it to travel to other cities if I'm just starting out. I've been a spectator of the So. Cal. market for years and am familiar with quite a few neighborhoods. If I went to Ohio or almost any other state to avoid competition I'd have very little clue what I was be looking at. I know how to check comps and look at what local rents are but I'm a little wary being new to this.