New and ready to make some moves; stuck in CA.

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New and ready to make some moves; stuck in CA.

Lou F.
Long Beach, CA · Member since 2017 · 6 posts · 2 votes

Hello everyone I'm new here and from Southern California (Long Beach area). 

I'll get right to it: I've got some funds sitting in a savings account and I'm looking to get into something more worthwhile. The problem is that 40-45K doesn't go too far in Southern California, unless I'm partnered up or looking to buy undeveloped land. Of course, I'm gravitating towards partnering up and have met some people with interesting proposals but I wanted to reach out to a bigger community for some input. 

I will outline a few of my options that I have considered and am open for any feedback: 

1. Take my money out-of-state. I'm aware that some opportunities may still exist in TN, OH, FL, IN and that there are emerging opportunities in some expanding cities. I'd be interested in multi-family so if anyone has some input, I'd love to hear it.

2. Stay local, partner up, and do a flip/rehab. I've been involved in a few flips doing demo, but not as an investor. I would be open to this but lack partners with funds. With the right partnership, I'd consider HML loans and being an active participant in the process. I like risk, so this appeals to me.

3. Buy myself a "starter-home" in an ok area with an FHA and do a house hack. I would be looking for something sub-400k so the pickings are very slim in So Cal.

Anyone with experience in these areas willing to illustrate/explain the pros and cons? All feedback is greatly appreciated. 

Thank you, 

Lou

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Rod StanbackBusiness Member
Lender · Philadelphia, PA · Member since 2014 · 92 posts · 45 votes
9y

@Lou F. look into University city, francisville, temple university area, Drexel university area, south philly, northern liberties, art museum. I'm missing a couple, but that's a great start. 

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  • Lou F.
    OP
    Long Beach, CA · Member since 2017 · 6 posts · 2 votes
    9y

    @Rod Stanback 

    Thanks for the reply! I will add Philly to my search list. Any specific areas or neighborhoods that you recommend looking into? 

    0Reply
  • Lou F.
    OP
    Long Beach, CA · Member since 2017 · 6 posts · 2 votes
    9y

    @Rod Stanback

    Not sure why my previous reply didn't properly mention you. Anyway, thanks for the reply and do you have any specific  areas that you recommend researching and looking into? 

    0Reply
  • Rod StanbackBusiness Member
    Lender · Philadelphia, PA · Member since 2014 · 92 posts · 45 votes
    9y

    @Lou F. look into University city, francisville, temple university area, Drexel university area, south philly, northern liberties, art museum. I'm missing a couple, but that's a great start. 

    1Reply
  • Troy Williams
    Contractor · Glenside, PA · Member since 2017 · 10 posts · 3 votes
    9y
    Yes Philly is a great start if you're looking for something worthwhile. A few colleges with development land nearby so there's plenty of opportunity
    1Reply
  • Trevor Deeter
    Real Estate Agent · Bensalem, PA · Member since 2015 · 28 posts · 4 votes
    9y

    Point Breeze, Brewerytown, Old Kensington and Port Richmond all areas worth investigating as well

    0Reply
  • Sean McKenna
    Investor · Philadelphia, PA · Member since 2015 · 11 posts · 6 votes
    9y

    Philly is great and if you have questions about areas/price points/construction costs/ARV/etc I'm happy to help. That said, my thought would be stick with what you know/can control easily especially starting out. That would be the "Starter home" house hack your way into some equity and you'll always have something to fall back on. If you do have to go out of state I'd pick an area you have friends/relatives who will have relationships with trustworthy realtors/property managers/contractors.
    Best of Luck!

    1Reply
  • Ashley Benning
    Woodland Hills, CA · Member since 2016 · 98 posts · 40 votes
    9y
    Lou F. I'm in the same boat. I live in the San Fernando Valley and have been working with hard money lenders to figure out what I can get funded. Generally they want you to be able to put in 15-20% down, and I really only have access to about 5-10% down in liquid assets. So, I'm also considering finding partners to fund the down payment, and then using an HML to fund the rehab and purchase. The issue I'm having--and it seems like maybe you are too--with the above scenario is: what do I offer and to whom should I go to find interested partners? I know the obvious answer is family and friends, but I'm just not sure I want to mix business with family just yet. Where were you considering finding partners, and how were you thinking of enticing them to invest with you? My initial thought is to offer a good interest rate (maybe comparable with the HML loan) and maybe a point or two as a carrot to get involved. But ideally they'd invest the money, and then leave the management to me, as that's what I'm good at. Is that something you think people would respond to? Have you had any success with any of your methods yet?
    0Reply
  • Lou F.
    OP
    Long Beach, CA · Member since 2017 · 6 posts · 2 votes
    9y

    @Ashley Benning I have found potential partners through local real-estate seminars and on meetup.com. Unfortunately, not everyone has the capital and credit needed to fund a downpayment or secure a HML loan.

    From what it sounds like, you want to put together an investment group and handle the management. This is enticing to a lot of passive investors who want to put their money to work but not be directly involved. The main obstacle is finding qualified individuals who are ready to act, like you've already touched on. 

    Admittedly, I haven't had much success in finding investors (not at the level I'm aiming for), which is why I'm willing to pool resources and form a partnership. If this is something that interests you, we should definitely discuss it via PM. Feel free to message me whenever!

    1Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    You poor thing ... stuck near the Pacific ocean, in 75 degree weather, in one of the most profitable real estate markets in the nation. Yes, you should definitely hop on a plane immediately to go invest in a cheaper, lower demand, less profitable market and give up control to a property manager ... I'm sure the out of state PM has got your back, takes care of your financial interests, and will make it happen for you, so why not put your financial future into the hands of a stranger? There are absolutely no opportunities to make money here in CA real estate anyhow, and if you do it is only because you got really lucky.

    0Reply
  • Anthony Nguyen
    Los Angeles, CA · Member since 2016 · 147 posts · 27 votes
    9y
    Originally posted by @Ashley Benning:

    Lou F. I'm in the same boat. I live in the San Fernando Valley and have been working with hard money lenders to figure out what I can get funded. Generally they want you to be able to put in 15-20% down, and I really only have access to about 5-10% down in liquid assets. So, I'm also considering finding partners to fund the down payment, and then using an HML to fund the rehab and purchase.

    You won't make much here in the SoCal market going this route IMO.

    1Reply
  • Nick G.
    Investor · Moorpark, CA · Member since 2016 · 248 posts · 191 votes
    9y
    Originally posted by @Lou F.:

    Hello everyone I'm new here and from Southern California (Long Beach area). 

    I'll get right to it: I've got some funds sitting in a savings account and I'm looking to get into something more worthwhile. The problem is that 40-45K doesn't go too far in Southern California, unless I'm partnered up or looking to buy undeveloped land. Of course, I'm gravitating towards partnering up and have met some people with interesting proposals but I wanted to reach out to a bigger community for some input. 

    I will outline a few of my options that I have considered and am open for any feedback: 

    1. Take my money out-of-state. I'm aware that some opportunities may still exist in TN, OH, FL, IN and that there are emerging opportunities in some expanding cities. I'd be interested in multi-family so if anyone has some input, I'd love to hear it.

    2. Stay local, partner up, and do a flip/rehab. I've been involved in a few flips doing demo, but not as an investor. I would be open to this but lack partners with funds. With the right partnership, I'd consider HML loans and being an active participant in the process. I like risk, so this appeals to me.

    3. Buy myself a "starter-home" in an ok area with an FHA and do a house hack. I would be looking for something sub-400k so the pickings are very slim in So Cal.

    Anyone with experience in these areas willing to illustrate/explain the pros and cons? All feedback is greatly appreciated. 

    Thank you, 

    Lou

    Hey Lou, I'm a big fan of #3 buddy, and not just because it's what my buddies and I do. It's the affordable SoCal version of the "house-hacking" Josh and Brandon always recommend doing with 2-4plexes. You can also use FHA's 203k rehab loan for greater effect and keep some money in your pocket - your monthly will be higher, but 1. I bet your room rents will cover most of it and 2. It's still going to be wayyy better than whatever you'd be paying in rent, plus you retain money you could invest elsewhere. When you eventually move out and turn it into a rental, you've have a ridiculously low interest rate for the next 30 years on one of your first buy-and-holds that your roomies mostly paid for for the first few critical years. Very minimal risk and, with some patience, a very healthy payoff that requires less than $20,000 to do. Just my quick thoughts!

    1Reply
  • Jerome MorelosPro Member
    Redlands, CA · Member since 2017 · 205 posts · 88 votes
    9y
    I like option #3. I also live in California and considering doing a "house hack" for my first investment property. IMO it's the best way to start as a beginner investor. Requires a low down payment (FHA/203K), easier to manage your property, your living for free + gaining experience as a landlord at the same time!
    0Reply
  • Darsh PatelPro Member
    Boston, MA · Member since 2016 · 60 posts · 15 votes
    9y

    Hey @Lou F. I'm in a similar situation except at the opposite end of the country in Boston, MA. The real estate here has been too expensive for me so I actually started investing with option 1 that you had listed and it has worked well for me so far! I think it is really important to establish a strong and dedicated team in the area that you end up investing. Which area you go to, doesn't matter too much because there is a lot of opportunity across the country to jump into RE investing with 45K. I researched a few different markets and talked to property managers, RE agents etc. in different areas until I was able to find a place where I had a team I was happy with and started investing there. 

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    9y

    Hey Lou! I love Long Beach- how are you liking it? The best Indian food I've ever had in my life is on 2nd in Belmont Shores...if you like Indian food. Can't remember the name off hand but can find out! (random, I know but I've been craving it lately)

    As far as your ideas:

    1. Doable. It's all I've ever done. Those markets are around but there's other good ones too (ones I like better than the ones you mention). Happy to chat markets or how-to's anytime.

    2. Can't speak to flipping as I haven't done it but I can say that it's just a completely different animal than buy rentals. It's very active, versus passive income, and risks are much higher especially if you haven't done it before. If you go this route, I strongly recommend connecting with more professional flippers and some with familiarity in those areas so you can get some education and help along the way. Without that, your risk is pretty high (especially with the level of loans you'll need for it). 

    3. You can definitely do this but you still aren't likely to cash flow, and you'll definitely have to live somewhere you may not be a super huge fan of, and it's still going to cost quite a bit. Just be sure you run the numbers on it so you know a more definitely level of cash flow (or negative cash flow) to expect. 

    Happy to chat anytime if you want to message! Can bounce ideas more.

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