Is NOW The Right Time?

Question

Hey guys,

Before I ask the real question, I want to give you guys a better idea about who I am. I'm currently 21 years old and run eCommerce businesses. I have roughly $100k - $150k tucked away and ready to put into real estate investing but there are several issues I'm facing. First, I live in southern California where I really have not been able to find any good properties that cash flow. I am willing to invest in further away areas (20 - 50 miles) but not sure how to begin as I'm not familiar with those areas. Second, due to the whole situation with the virus, I'm not sure if it's the right time to even invest and if it'd be better if I saved money now. I would really appreciate advice as I'm unable to go out due to quarantine to meet with likeminded folks and get ideas.

Aaron K. · Answer

@Shri Kanase well it depends on where you are as to what is 20-50 miles away from you.  In general CA isn't great for cash flow immediately but is good because rents tend to rise over time, insurance costs are relatively low, and property taxes remain low even as the property and rent increase in value.

Stone Saathoff · Answer

@Hannah Rubin

As far as areas with best cash flow are concerned in San Antonio, for me these are ideal.

The North East, along the corridor from Kirby out to Converse, and most neighborhoods in between. Some people like to say this is a higher crime area, the rental investors I work with and transactions I've been a part of have not had an issue with that. Sunrise, Woodlake, The Glen, are all neighborhoods with cash flow potential. They are also section-8 friendly, which has some restrictions but also provides above-market rent rates.

Also worth mentioning are the neighborhoods surrounding Lackland Air Force Base. Lackland City, Valley Hi, Rainbow Hills, Westwood Park, just to name a few. There are many others.

Some people discuss areas by zip code, I'm much more in tune with the names of subdivisions. To me these areas have the best bang for buck, and a relatively low cost of entry. Of all the neighborhoods mentioned above, you can generally buy a property in need of some updating or repairs for well under 100K, and most rent rates are going to be 1100+.

Stone Saathoff · Answer

California seems to have much harsher restrictions due to Covid than a lot of other states, mine included. Tough to say if it's the right time or not. That being said, you have put yourself in a great position. Having that amount of money saved up at your age is no joke. Start some serious conversations with investor friendly realtors and wholesalers in your area to learn the market better. Provide some value to them, show you're serious about getting into it, and they will help you out.

If you ever consider doing long distance investing, San Antonio, TX can be great for cash flow if you find the right types of deals.

Craig Anderson · Answer

Have been thinking for several days, on which sector of the U.S. economy will be going OKAY, as the U.S. enters the expected Recession, as a result of COVID-19 effects on the economy. And although have not found any source, saying that computer tech sector will continue in a Recession, I expect it will, due to the U.S. is progressively being run by this. So if computer tech jobs are what is most likely to provide renters, in the soon to be Recession; then in what state to look for as much? And the answer is Calif. Oregon, Wash. state, Texas, N.Y. & in or near Wash. D.C. (Amazon choose N.Y. & Wash. D.C. to put its 2nd base of operations, as Seattle is now too small for Amazon.) And of these 6 states in the U.S., (Wash.D.C. is a kind of state, but not really), which are the most conducive to landlording? (I don't know the answer to this question, but Calif. has a strong tenant-rights movement, which tends to make the Rental business more difficult, & on Calif. I know for sure, on this point.)And in this viewpoint, it might be better to follow Annie Dickerson's comment, which she has posted to your thread; of her say to consider syndication (group investments) in OOS, so that you are not invested in California's difficult laws and rules for Rentals. (For a Video to watch, which says that the world economy is contracting at least 10% in 2020, due to COVID-19; on U-Tube, there's "COVID-19: Why The Economy Could Fare Worse Than You Think/ The Economist", & released by the Economist mag, on May 27th, 2020.) And yes, do think of investing in Rentals, even as a Recession is predicted to take hole in the U.S. as 2020 ends. However think about which sectors of the U.S. economy will still be going in this Recession, for providing paying tenants for Rentals.

Hannah Rubin · Answer

Understandable for sure. I often hear people who say they wish they'd kept some of the deals they were finding for themselves over the years so definitely a good idea :)

Stone Saathoff · Answer

@Hannah Rubin At the moment I'm too busy with my wholesaling career to do my own investments. I am planning on applying my knowledge to some investments of my own within the next year or two though.

Hannah Rubin · Answer

@Stone Saathoff thanks so much for the insight! You've definitely given me some specifics to research and I am very appreciative. I look forward to learning more about this market. Do you do wholesaling only or are you investing as well?

Hannah Rubin · Answer

Hey there! I was curious about what areas you are seeing good cash flow in throughout San Antonio. I am from South Florida but have been looking into that market as a potential first investment. I am looking to buy and hold with the intention of a long term flip. I am not looking to house hack for now, however, moving there in the future is not out of the picture and would likely be more desirable if my portfolio in that area evolves. I have heard that southwest is up and coming as there has been less development that way however the need to spread outwards due to increasing housing costs is making it a preferred location. What has your experience been with this?

Annie Dickerson · Answer

@Shri Kanase Wow, I wish I’d had that much saved up in my early 20s - nice work!

In addition to understanding your goals on projected returns (cash flow and/or appreciation), another thing to consider is how involved you want to be with the investment.

If you have time and want to be hands-on, you should look into long-distance rental properties or local house hacking opportunities. House hacking can be a great way to get into real estate investing and dip your toes in the water as to whether you enjoy being a landlord.

On the other hand, if you want to be more passive and have someone else handle the heavy lifting while you collect the cash flow, you might consider investing in syndications (group investments). Through passive investing, you get all the same benefits of active investing (cash flow, equity, and tax advantages), and sometimes those can be comparable to even better than active investing, without having to do the work yourself.

Passive investing also allows you to easily diversify into different markets while leveraging others, without having to build your own team from scratch.

As for timing, real estate is hyperlocal, and it’s extremely difficult to time the market. I would start by figuring out what you’re looking for regarding cash flow and appreciation potential, as well as your risk tolerance, and if you find a deal that fits those criteria, go for it! Best of luck!

Aaron K. · Answer

@Shri Kanase what for you is "cash flow properly"? $100 per month? $200? $500? a percentage?

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