LA newbie - what market to invest in?

Question

Hey everyone! Happy lunar new year!I am based in Los Angeles (San Fernando Valley), and looking to start investing this year, aiming for cashflow. I am curious to learn what markets investors based in LA are investing in and what strategies they are using. It would be nice to invest in my area, but with expensive prices, I doubt cashflow is viable (unless someone has figured out a way to cashflow in LA).I'd love to connect with LA investors and hear about your experiences.

Jeff Wallenius · Answer

I will add that while looking to invest outside of LA it's very important to spend just as much time vetting the team along with the area. The right ground team will be paramount to your success and unfortunately there are a fair amount of bad operators out there. I have a first hand experience with a bad ground partner while investing out of state. I'd be happy to share my experience if you want some insight on pitfalls to avoid.

Steve Rozenberg · Answer

I would say that it is best to figure out what your strategy is based on your goals. First thing I would do as others in here have stated is figure out "WHY" you are doing this. Once you know that and you know your end goal then you work backwards. The goal has to have a finite destination and time limit on it.For example you may say your goal is 20 houses in 20 years (paid off) earning $20,000 per month.. (20,20,20 goal).Now you know where you're going and the timeframe for this to happen. From here you can build out your strategy, for example here you would want to have the 20 properties purchased the first 10 years so that they can use the final 10 years to pay themselves off. This means that you have to buy 2 properties per year which means you have to close on a property every 6 months which means that you have to find a property in 3 months to have it on the market and rented the following 3 months.And the properties need to have a final cashflow of $1,000 per month after all expenses are paid. This will dictate where you purchase and look for properties based on that number alone.My point is that you always start with the end in mind and work it backwards, this creates the strategy (Buy and hold, flip, Wholesale, Notes) which will be driven by the tactic (SFR, MFR, Mobile homes, Short term rental etc) I always coach people and explain that the property is actually the last piece of the puzzle not the first.Hope this helps

Kevin Tsai · Answer

Hey @Mike Berina I'm in the same boat as you in SGV and new to REI. There's some great advice here from previous replies. I'd be happy to connect and share info / bounce ideas!

Ali Boone · Answer

"Better deal" depends on what you're looking for and what your goal is. Out-of-state can offer cash flow, but maybe you want the appreciation play. You also can't really decide where you 'should' invest if you don't know a) what you're aiming for and b) what each location offers. If you want monthly cash flow, you can't stay in CA at all, for example. Pretty much all of SoCal is going to offer the same problem as LA, so just getting out of LA doesn't do much. Central CA, maybe, depends. Learn what you can get in various locations, and go from there.

Brandon Sturgill · Answer

@Mike Berina you can find a very high level of customer service in any market you chose from agents that specialize in working with investors...it's really a matter of defining your goals, finding your market, and building your core team. You can be successful anywhere in the country.And it's always a good idea to learn how to source your own deals and structure a purchase money mortgage...

Mike Berina · Answer

@Chris De Celle thanks for the advice. I do have access to invest in an oos syndication with 18% return over 6 months, so I might invest in that while I continue to learn and look out for a good deal. @Steve Rozenberg I watched your Dream Investment Adventure series and found it very insightful and inspiring! It's an honor to get your advice, and yes, it definitely helps! My goals are very ambitious for the time frame so I'm wondering if they are unrealistic and I should push the time frame out a bit. @Jeff Wallenius Thanks for the wisdom, Jeff. I definitely plan on doing a thorough team vetting before I even consider purchasing a property. I'm down to hear about your experience and what pitfalls to avoid. @Ali Boone I would be open to either out-of-state or out of LA. If out of LA, probably somewhere still in SoCal or central coast within 2-3 hours driving distance. But if I can get a better deal out-of-state than I would in CA, I'd def be open to that. Where are you investing? @Kevin Tsai Agreed! Def some gems of wisdom in the replies. Happy to connect! @Jason Hsiao I am not too familiar with ADU laws. It sounds a bit intimidating. I'll have to do a bit more research on that. Thanks for the suggestion!

Jason Hsiao · Answer

It's hard but not impossible @Mike Berina and @Kevin Tsai. Utilizing ADU laws, have some flexibility in the area you're targeting will go a long way. Happy to brainstorm or bounce ideas around.

Ali Boone · Answer

Are you interested in out-of-state from California or are you just talking about branching further outside of LA in hopes of cash flow?

Chris De Celle · Answer

@Mike Berina Welcome! It’s really hard to get a good cash flow deal here in LA. But there are some out there, but what’s really tough are the pro tenants rights put all the odds on their side of the table. What I did is read, then read some more, really understand the ins/outs of REI. Then brought into an OOS syndication as it really mitigated my risks, put the book knowledge to work and allowed me to learn, while earning. I’d recommend the same, so you don’t lose any money, learn along the way, while getting paid.