Investing in Southern CA or Long Distance

[Madison Martindale]

Hi everyone! My husband and I are looking at buying our first investment property. We are trying to decide on trying to find a property in Southern CA/surrounding areas like Phoenix or Nevada or if we should look to invest long distance in Texas where our family lives. We don't have much cash, but we feel ready to jump into the game. Any advice would be greatly appreciated! 

[Lee Ripma]

@Madison Guess

A good deal is not determined by if it’s on the market or off the market. Often “off market” deals are not as good because the seller isn’t subjected to market forces and forced to realize their property isn’t as valuable as they think it is. Sometimes they are good because the seller doesn’t know their value. There are good deals on the market all the time. All of my deals have been on the market in one way or another. The skill is not finding off market deals, it’s finding good deals that work for you. So the skill is knowing the good from the bad. Or what you can make give you your desired returns. The exact same deal done by two different people can have widely different outcomes.

Everyone has their own definition of a good deal. To me a good deal is in a decent neighborhood. I look at demographic data including median household income and school ratings. I personally like rents that are over 750 per unit so that income is high enough to cover all my expenses, save for cap ex, and provide cash flow. Every investor has what works for them. I also like some upside in rents. Upside in rents can’t usually be realized without doing rehab and getting new tenants. So you need some cash set aside for that. When you increase your rents, you increase the value of your building and increase your cash flow.

Really focus on educating yourself. It’s going to take time to do so and that is okay. Once you’d educated enough jump in. You’ll learn way more by doing. That first deal won’t make you rich or financially free, it’ll just get you started on a path that will make you both of those things.