How to start with $70k in Los Angeles while living with in laws?

[Julio Mendoza]

Hello,

I'm currently married and my partner and I currently have $70k saved. We live in the Los Angeles area and not sure how to get started. In this area I won't even be able to put a 20% down with that. We are blessed with living with my in laws and only pay $500/ month in rent so that can help us save up and have the ability to pay some of our first rental if needed due to vacancy or unforeseen events. If you know this area, I'm thinking of maybe getting a single family home or maybe a duplex (if available) around the Palmdale area since you can still find properties under $300k there and put a 20% down. All our savings will pretty much be gone but it's an investment right? How do run the numbers so you have a proper renting price and still make cashflow?

Does this sound like a good idea? Any other suggestions?

[Damian Ramirez]

Hello @Julio Mendoza,

We're actually practically neighbors, I reside in the LA area as well and work from Newport Beach. I personally don't invest in LA or in California, only in rare exceptions where there happens to be a good flip that comes our way. Since the California market is so expensive and over priced with very little opportunities to obtain a cash flowing rental, we focus on the midwest states such as Cleveland, and at times Columbus. 

I recommend that you start looking into out of state investing and begin vetting possible markets to jump into. For example, properties in the midwest markets are priced lower than those here on the coast, we usually find a distressed property in a C+ and above neighborhood for about 70-120k, sometimes more, depending on whether its in a C,B or A neighborhood. Rehab can vary on how distressed the property is, we've had rehabs for flips around 40-80k and at times even lower or higher and rehabs for rentals ranging from nothing needed or 10k to up to 50k due to the amount of work needed or if there was an issue with the contractor. You can even find way cheaper properties in these markets if you decide to venture in to D grade neighborhoods.

Your best bet as a California investor would be to look into out of state honestly. It takes a lot less money to be put upfront, and you have a higher chance of obtaining a cash flowing property out there than here in California. If you use a hard money lender, you can possibly spread your 70k between 2-3 properties and possibly even more if you aim for D grade neighborhood properties. 

If you're anxious and a bit afraid of investing out of state, look for a partner that has experience in a market you're interested in. If you have capital and no experience, find a partner with experience, a track record, boots on the ground and who might need extra capital (such as your 70k). Although make sure to ask as many questions, vet them properly, get it in writing/contract and to verify the info they tell you with other experienced investors.

If you have any other questions feel free to reach out at anytime. Hope this helped!