New Investor, live in CA - Ready to invest out of state

[Zachary Dorff]

Hello all! I wanted to introduce myself and see if anyone had any insight if you were in my shoes what you might do.

My name is Zach Dorff and I live in North County San Diego.  I've been listening to BP pods for a few years but finally decided to get off the sidelines and take control of my future.  I read Brandon's Rental Property Investing and David's Long Distance Real Estate Investing and feel more confident and ready to start investing.

I've had a good, steady job for 7 years here now and I don't own my residence and have a company car which helps keep the bills down.  I've always tried living below my means (despite CA cost of living) and have saved around $100,000 between brokerage and personal savings.  I also could take a $50,000 loan from my 401k if I was in a pinch.  Although it would have been great if I'd gotten started years ago, I figure there's an advantage to having this much money liquid when starting.  I'm guessing ability to scale/buy a 2nd or 3rd rental quicker perhaps?

I got pre-approved for $200,000 in AZ and spoke to a realtor in Phoenix who started sending me SFR but nothing was close to meeting the 1% rule and when I ran them through the Rental Calculator most of them barely broke even.  So I started looking at cash-flow markets like Indiana and I'm liking what I'm seeing from that perspective.

In terms of my goals, I would really like to increase my cash flow. My W2 handles my bills with some leftover for savings, any cash flow I can create from RE Investing I'd plan on reinvesting in the next property. I am a little intimidated with the idea of forcing appreciation - Obviously the benefits sound great but as a new and out of state investor, my initial inclination is to buy something at market value with limited problems and somewhat rent ready and start cash flowing asap. I am single with no kids, so house hacking sounds great but not so much in San Diego. I have put in for an out of state transfer, but my family is near and I don't know if the job will be as flexible and able to commit time to RE in another area with another boss.

Think that about it sums up!  I thought that some people with experience would look at my situation maybe as a unique opportunity because of the job and financial position and maybe I'd get some good input or advice.  Any advice or input is appreciated!

[Twana Rasoul]

@Zachary Dorff Nice job with the savings! You have worked very hard at that much savings so it would be worth taking a second look at the local market in San Diego before deciding to go out of state. San Diego real estate is a much safer asset than random Midwest markets that you are not familiar with. Your dollar will go much further investing here because you can house hack an 800k duplex with just 28k down payment vs having to put down 40k on an investment house that cost you 200k. I helped someone recently purchase a duplex using an fha loan and he put down less than 30k and is getting more than 95% of his mortgage (PITI) covered, WHILE HE IS LIVING THERE.

You will become a lot more wealthy through appreciation than through cashflow and in the long term, San Diego is pretty amazing on both. Remember, when you are young and investing in stocks personally and in your 401k, you are likely investing in growth stocks to gain the most amount of wealth overtime.  When you get to retirement you might invest in something with high dividends so you can pay your expenses.  Real estate is a similar asset in that the appreciation (growth) will make you a lot wealthier than the cashflow (dividends).

Make sure you do your homework quite a bit on a market before investing.  Properties in Midwest might look good on paper especially coming from a market like ours but what you calculate in BP calculator vs reality may be very different.  Do your due diligence and network with other investors in that market before buying.  

Good luck on your endeavors!