Buying a rental property, but moving to LA

[Michael Avillion]

Never bought a home. Learned about real estate through a friend, and just started reading about it this past week! My wife and I are moving to LA (near south of Glendale) this July for a 2 year medical training program. I have access to VA loan through the military. I want to invest in real estate, but am nervous about LA prices. My wife has a close friend who is also real estate agent agent in Charlotte, NC, which seems to be a hot spot for buying real estate given the boom in population. Additionally, I am from NC, and have family in Fayetteville, NC, so I really like the state.

I want to make a wise investment. We are saving for adoption and finally have the funds, and will hopefully have a new baby by the time we move. It seems Charlotte is the smartest option (houses in the 150-250K) range with a close friend who can help, versus hedging on good appreciation in LA. An option is we could rent for a year, then buy a home in LA and rent that out while we stay in our rental (wife wants to stay in one spot with a newborn). 

Any advice? Also, any good additional books? I just rented Real Estate Investing for dummies (4th ed) from our library. I am listening to "How to Invest in Real Estate" By Brandon Turner and Joshua Dorkin, and really like it.I am in the medical field and don't have tons of time to put into home development flipping, mainly looking for passive income to diversify and capitalize on these low interest rates. 

Thanks so much. I just heard about bigger pockets and this is my first post. 

[Dan DiFilippo]

I don't mean to critical and I don't mean to get super into forecasting (even though that's a lie - I do), but what is "hedging on good appreciation in LA"?  Like an appreciation play?  I think that's old-paradigm thinking.  The last five years have definitely featured some explosive moves up in those real estate markets that were already high value.  Even though those markets have been slowly bleeding down their own value down to the lower value ones.  I don't necessarily see why appreciation is any sort of guarantee in LA or NY.  And I would argue that there's a tremendous solvency risk.  Which is to say, yes, you might buy for $500,000 in SoCal and hope for the I suppose somewhat decent chance (let's say 25%) that it will be worth $550,000+ three years from now.  So that's a 10%+ return.  But a 25% chance that the fake market that we know we're in experiences a rapid repricing.  In that case, you could find yourself down at $400,000 three years from now.  This would seem to be a much greater likelihood in higher value markets rather than lower.  So while the LA outcome distribution probably features higher tail risk (either tail), somewhere like NC probably has a smaller chance of outsized moves in either direction, but it does have significantly strong market fundamentals (intrinsic and macroeconomic), so I think NC offers much more stable and sustained appreciation.  And the fact that NC investments throw off cash is just a bonus.