Is Southern California really that bad?

[Trevor Lohman]

Hi everyone,

I'm a new BP member living in southern California. I haven't quite found my niche yet, but I find myself being really drawn to the buy and hold type of investing.

It seems like buy and hold investing is a bit tougher out here in this area, and that getting a 1% monthly rent to value is not so easy. I'm basing this on what I hear from various podcasts and blogs since I don't have any real experience in the area (other than a purchase I negotiated for my Dad in 2010). Most of what I've seen talked about in Southern California is flipping, rehabs, spec home building, and commercial real estate.

Now I know that someone must own all of these houses people are renting in my area, so how are people finding success? and is it possible for someone like me, who makes a good income but hasn't had time to save large sums of money, to purchase and rent property in an expensive market like this one? I don't mind saving and being patient if I know it will make sense to be a landlord here.

Sure there are cheaper areas around, but still, I would find myself paying upwards of a 150,000 dollars for a small house in a run down, less appealing area. Is out of state investing a legitimate alternative? That seems like it would be a very difficult endeavor.

I'm sure the answer to succeeding in So Cal has something to do with lots of hard work, patience, and experience, as it is with most things. But I would love to hear what some BP members think about succeeding in my area, or perhaps some alternatives to investing locally.

I'm all ears! Thanks guys.

Trevor

[Rick H.]

If you are afraid of missing out on the real estate investment opportunity boom, which is what you've described, beginning by purchasing out of state properties is not, in my opinion, a very sound strategy.

There's nothing like discovering what you don't know but should have known, only to complicate a problem or mistake by hundreds of miles of distance between you and the investment. I've met a ton of people in CA still waiting for their Memphis/St.Louis/Detroit/Texas rentals to finally pan out. They won't; it's a sucker bet for newbies.

Learn the business first by studying, observing, attending and participating. During the last property cycle, the gal who cuts my hair would quiz me about real estate investing. When I suggested that she ought to begin by reading up on the subject first, she scoffed "Oh no, I'm too busy for that!"

The best investment that you'll ever make is in yourself. That is, learn everything you can now. Set a budget and invest X dollars in books, audio files, attend real estate investment club events and maybe some home study courses. Even this course of action has its detractors and there are plenty of Dream Merchants willing to take your money and sell you BS.

And be careful of the naked man who offers you his shirt.