Newbie question: how to start out if area is too expensive?

Question

Hi BP!

I want to start out in RE investing but the area that I am in (Bay Area) is expensive. I find the risk to be higher for me as a newbie for getting into a loan to finance an expensive deal. I am thinking about investing out of state although my risk over there is that I will not be available to supervise the property and to not have control/supervision over my investment is a scary situation for me. Any thoughts on which route would you take if you were in my position and possible next steps advice on this?

Thanks

Nico

Nico De Guzman · Answer

@Alexander Gutierrez @Rachel H. thank you for the nuggets of wisdom over there! Appreciate a lot the people in this community!

Nico De Guzman · Answer

@Lee Ripma Great thanks for the advice! I might head back to educating myself on this and will listen to the podcast!

Lee Ripma · Answer

@Jenico Alexis De Guzman

BP is a wealth of information for folks wondering this.

I was in your shoes in 2016 and I started investing out of state in Kansas City in 2017.

I’m a fan of both in state and out of state investing, it can be hard to learn when you don’t have the capital to learn in your backyard. That’s a reason to start out of state.

Regardless, buy something, in state or out of state. You’ll learn the most by doing.

Terri Haley · Answer

@Jenico Alexis De Guzman

Hi there!  I owned 15 properties around 2003-2009.  11 of those properties were out of state and yeah, I managed them all myself, so it is possible! I just had to jump out of the comfort zone and figure it out. I was part of a good REIA at the time, so that helped, but the club was quite small. Now we have BP, which is amazing!  For maintenance,  I had a home warranty on every property. When something broke, I had it written into the lease that the tenant had to call the company and schedule repairs.  They also had to cover the $75 deductible.  For turn-overs, I rarely traveled to the properties.  I hired handyman to check the places out, then do any work needed. I'd put a mechanical lockbox on, and gave prospective tenants call me when they got to the house, and then when they were locking up. Sounds nuts doesn't it?  Well, it worked. For most evictions, I hired pros for that. Here in Nevada, I did the paperwork and served it.  If you're not already working with a Realtor, I can help you search for properties in Vegas. It is possible with a good system in place. Feel free to ask me anything.  I enjoy sharing stories and the process that I used.

Karla Barbacena · Answer

Hi Nico,

I think the best strategy to start in your situation is house hacking. As they said there are tons of info here on Bigger pockets. Start analyzing deals already to see what properties are there and also do your research about the prices of repairs, insurance, RE taxes etc. As they said, you won't get a perfect deal in your first deal but what's important is that it won't give you negative returns, and that you will learn many things. If the problem is the property is too expensive but the property is a great deal, you have to shift your mindset to "How can I afford it?"If you want to invest out of state, I highly suggest reading "Long Distance Real Estate Investing" by David Greene. It's one of my favorite RE books as it gives so many insights how to find your core FOUR people in your team, how to build your credit score, how to add value to the property.

All the best,

Karla

Cal Dunagan · Answer

@Nico De GuzmanThere's a ton of excellent advice here in this thread. What it looks like to me is you just need more education resources. Have you ever looked into the Small Business Administration? It is an excellent resource for real estate investors. This article does a good job summarizing how you can use the SBA to your advantage. I think it could be a big help for you in your current situation.

Mike D'Arrigo · Answer

@Nico De Guzman what exactly do you mean by control/supervision over your investment? If you're talking about dealing with all of the day to day issues associated with owning rental property than you are being a landlord and not an investor. You have to change your mindset and put the day to day management and problem solving in the hands of a highly qualified property manager. You should be focusing on maximizing your returns rather than dealing with tenants and leaky faucets. How much control do you have over your 401K or any other asset account? Not much. It always surprises me that most people blindly trust their entire 401K or other retirement accounts to an asset manager that they have never spoken with but are reluctant to trust their property to a property manager.

Nico De Guzman · Answer

@Terri Haley thanks for the advice! Let me go back to the drawing board again on this -- probably need to educate myself better on long distancing. Love the insight on how you managed out of state properties--that was really amazing!

Rachel H. · Answer

@Jenico Alexis De Guzman You may want to look into niches that are less competitive and see if there are opportunities in your area for them. Most investors start off with single-family homes which can be pretty competitive. Another area many investors look into are multi-family properties. So, you may want to look into asset class with less competition if you're not sure if you want to invest out of state. Hope that helps!

Alexander Gutierrez · Answer

@Jenico Alexis De Guzman

Hello,

If you qualify and the numbers make sense in your area why wouldn’t you go for it? Investing out of state is always a possibility, but please use a realtor you trust.

Reach out if I can help in the Nevada area.

-Alex

Newbie question: how to start out if area is too expensive?

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