Starting out in an expensive market

Starting Out
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Starting out in an expensive market

Nicholas Doyon
New to Real Estate · San Luis Obispo CA / Tampa Area, FL · Member since 2018 · 7 posts · 1 vote

Hi all,

I currently live in San Luis Obispo, California which is a pretty expensive market. I moved here from Canada two years ago and left most of my cash invested in the market back in Canada since the CAD-USD conversion didn't make sense at the time since I will most likely end up back in Canada eventually. I started building up capital in the USA two years ago to potentially be able to buy a house hack or a live-in flip in the area. Although, with the median house price in SLO being around $730k, I'm realizing that, even with a savings rate of 45%, it is going to take a while before I can accumulate the capital for the down payment + renovations (if needed). I am looking at properties every day and am pretty familiar with the market. I recently started seeing some opportunities that could potentially make sense for live-in flips (may need more analyzing), but I always get stuck because of pricing. For example, latest deal is listed at $875,000. Comps in the area for similar houses sell for between 1.1M-1.5M depending on how remodeled they are. I feel like this could be a good opportunity, but I have not pursued anything further because I get stuck at the idea that I may need to put down 30k-35k down payment (3.5% FHA) (which I probably could), but then the renos would certainly be an additional 100k-150k.

My question is: what options should I look at to help me close on a deal like this when I have limited capital at the moment? Partnerships, hard money lenders, other?

I am tired of paying $2,500 in rent every month... (I'm currently saving $2,400/month)


Excited to hear ideas and/or connect with other investors in the area!

Thank you

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Patrick McCandless
Residential Real Estate Broker · Paso Robles, CA · Member since 2015 · 196 posts · 58 votes
5y

Hi there Nicholas! I feel your pain brother! I'm up in Paso which isn't quite as bad as SLO, but pretty damn close. My suggestion would be to either bring in a partner who has funds or ask about seller financing. I am literally waiting on signatures on purchase in Paso as we speak (hope to have back this afternoon) for an off-market 3BR/1.5BA main house with a studio/1br guest house in the back. I inquired with the previous listing agent about the possibility of seller financing and he said "Well I'm not sure, but I can ask." And sure enough they're open to it and we are putting a deal together. 10% down and only 4% interest and zero closing costs/points. Hard money will be upwards of 8-10% and a point or two, BUT if it's a fixer upper then they will typically pay for 100% of the rehab costs as well. If you're looking at a fixer you won't be able to use an FHA loan as they are super strict about the condition of the property at closing. Shoot me a message and I'd be happy to set up a phone call to discuss things further if you want.

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  • Patrick McCandless
    Residential Real Estate Broker · Paso Robles, CA · Member since 2015 · 196 posts · 58 votes
    5y

    Hi there Nicholas! I feel your pain brother! I'm up in Paso which isn't quite as bad as SLO, but pretty damn close. My suggestion would be to either bring in a partner who has funds or ask about seller financing. I am literally waiting on signatures on purchase in Paso as we speak (hope to have back this afternoon) for an off-market 3BR/1.5BA main house with a studio/1br guest house in the back. I inquired with the previous listing agent about the possibility of seller financing and he said "Well I'm not sure, but I can ask." And sure enough they're open to it and we are putting a deal together. 10% down and only 4% interest and zero closing costs/points. Hard money will be upwards of 8-10% and a point or two, BUT if it's a fixer upper then they will typically pay for 100% of the rehab costs as well. If you're looking at a fixer you won't be able to use an FHA loan as they are super strict about the condition of the property at closing. Shoot me a message and I'd be happy to set up a phone call to discuss things further if you want.

    2Reply
  • Owen SchwaegerlePro Member
    Real Estate Broker · San Luis Obispo, CA · Member since 2016 · 181 posts · 69 votes
    5y

    Hi @Nicholas, @Patrick raises a good point about owner financing. That is a great option if you have the capital to do it. If you don't you could look at the FHA, 203k home renovation loan. It takes a lot longer to get one of these approved because you need to have contractors come out and give bids for the work and submit that paperwork to the underwriter, but you can essentially roll your rehab costs into a loan. If you want to do a live in flip, you could buy a property outside the city limits of SLO and be at a better price/sf. You can get multiunit as well that can almost pencil out or pay for themselves.

    Happy to connect sometime and chat more about your next investment property!

    1Reply
  • Janelle K. Eagle
    Real Estate Agent · Central Coast, CA · Member since 2022 · 110 posts · 58 votes
    4y

    @Nicholas Doyon - curious what you've learned or decided to do in the last six months since this original post! Where did you net out? Still renting or did you find an investment opportunity? 

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