Investing in High Cost Areas

[Jake Ratner]

Hi all. I'm at the very beginning of my real estate journey here and seeking some advice and opinions from the network. I've just finished "How To Invest In Real Estate" from BiggerPockets and have been diving into research, learning, etc. 

Recently, my brother is very interested in buying a house in California and living in it for a few years with roommates. We'd partner up 50-50 and handle the costs together. It wouldn't produce much cashflow, but the location of the area is going to be more desirable based on the proximity to new developments in LA. Although it is an expensive area and a fully rehabbed house, I am cautious to jump into an expensive market at the moment with the way the economy looks overall. 

All thoughts are appreciated!

1. Does anyone have thoughts on investing in expensive areas?
2. If so, how would your feelings change based on the current crisis and potential threat to the economy?
3. Is it worth having some patience here?

[Aaron K.]

1. In expensive areas finishes are at a premium that is disproportionate to their cost, for example a granite or quartz countertop and new kitchen cabinets cost maybe $10k to put in but in an $800k house they may command a $30k-$40k premium over a home with a 1970s kitchen, I'd go for dated but functional and do the upgrades yourself, much more value that way.

2. Rentals are pretty recession resistant, and if you try to time the market to get the best value you'll probably miss.

3. Patience is good, don't jump at the first thing you see but if you've decided you want to do this don't get caught in analysis paralysis either.