Breaking into the market: Failing at the numbers game!

[Alon Helman]

Hi BP community,

My friend and I have been looking to get into real estate investing for the past year and a half. We've hit a few roadblocks along the way and decided to reach out to the BP community for help. We've been looking at everything from Brrr to Duplexes-Triplex, long term rental, SFR, with ADU, etc. Currently, we're pre approved for 650k, and we are budgeting based on purchase price and rehab costs.

A little bit about our situation and what we’re looking for:

Who are we:

Longtime friends. Alon is an animator who works remotely. Charlotte is an RN working at a hospital. Both of us have zero debt, excellent credit, and about $120k in combined capital.

What are we looking for:

• Distressed SFR to rehab, inject equity and appreciation while living in it.
  • We can then sell as a 1031 exchange for another property.
  • Or we can rent out while cash flowing & refinancing to pull equity and buy another property.
• Distressed multi family properties to rehab, inject equity and appreciation while living in it and rent out the other unit.
  • Once we have rehabbed, we would move out, rent out the second unit and cash flow.
• Investment properties that can yield positive cash flow while property appreciates over several years.

Where we’re looking

• We live in California but are willing to move out of state. We have been looking in and around Oakland, Pasadena, Joshua Tree/ Twentynine Palms. We know the market in California is very competitive, esp for us “newbies”, so we also started looking out of state at places like Phoenix, Denver, Vermont, and Salt Lake City.
• General criteria are class A and B neighborhoods with reasonable commute to work.

Current challenges

• Competitive market. Homes sell for higher than asking price/bidding wars.
• Rent to value ratio doesn’t seem to work on any property.
• Capital limit of 120k.
• No access to off market listings.
• When we run the numbers, cash flow is either negative or barely breaks even.

Resources

• We have an excel sheet we plug our numbers into, but it seems that no matter what scenario we look into, it just never adds up so we can cash flow or hardly break even.
• We have also been listening to a lot of podcasts, reading forums, and talking to lenders, realtors, and property management companies .

We understand that delving into real estate is a complicated and nuanced endeavor, but we’ve been researching so much and still cannot figure out how other people make it work. We decided it was time to reach out to the BP community! Is there something we are missing? Perhaps a kind soul would be willing to provide guidance?

Your advice is very much appreciated!

[Tyler Kivland]

Originally posted by @Damaso Bautista:

@Alon Helman

I think your planning is great.  My personal opinion is that you need to rethink your location. 

I would first find a market where your budget ($650) would go the farthest. 

Make sure the nurse can find adequate work in that area and since the other works from home that shouldn't be a problem.  

I think a nice town like Bloomington Indiana would work well for you.  They have a large University Hospital for the Nurse. 4 Seasons the town is beautiful and your budget will work well there.  

There are many places in the United States that will fit your criteria.  You just have to explore a little more.  Just my opinion. 

Let me know if you're thinking about running with this Bloomington, IN suggestion. I'd be happy to connect and talk about the new hospital, the university, and the Bloomington area. For me, I've been watching and learning about the Btown market for about 5 years now but recently purchased my fist duplex (finally) this last December. 

Besides, there's likely some local IU Basketball fans that are looking to sell now (half kidding).