First Time Home Buyer Looking to Start Investing

[Sam Michaels]

Hi BP Community, 

I’m a first time home buyer and looking to start my real estate journey! I’d also like to take advantage of what seems like a good time to buy considering whats been going on with COVID and the economy. I live in Los Angeles and need to continue living somewhere in between Encino and Paso Robles and Visalia due to my occupation. I’ve been considering buying something in this region and living in it for at least a year to take advantage of the loan advantages and renting out my extra bedrooms to help cover the mortgage. However, real estate in California is expensive as I’m sure you all know and my understanding is that California is generally not the ideal location for income properties. 

This then makes me explore options in other states like Tennessee, Alabama, Texas, Alaska etc. where the prices are much lower and more likely to cash flow positive and the owner tenant laws are better for owners. Ive also heard of some great turn key operators in some of these areas that could make things streamline which sounds nice. In this scenario I wouldn’t live in the property obviously.

Should I buy in California and live in it and build equity until I can move that equity into purchasing another property possibly out of state, or should I just buy out of state off the bat? 

Any advice is appreciated. Thanks!

-Sam

[Denise Evans]

@Sam Michaels, I agree with @Twana Rasoul. There is WAAAYYY too much risk for a newbie investor to start out of town.  Buy something locally, fix it up and live in it for two years, and then sell tax free under current federal income tax laws. Do that several times to build up capital, and then start buying modest rental houses within a one hour commute.  It is enticing to take your available cash and make down payments on 4 or 5 rental houses in Alabama (as opposed to one in SoCal) in order to spread your risk, but that is illusory. You magnify your risks by relying on out of town people for acquisition and management.  Buy locally with some deferred maintenance, supervise rehab personally, and manage personally. You'll be a lot happier.  If you insist on investing immediately, invest in one of the REITs.