Where to buy $150-$180k SFR within driving distance to LA?

[Shane W.]

So we're still trying to find the right area to buy our first investment property and time after time we decide we want a place that we can drive to.

Obviously LA is out of the race, so where in about a 6 hour drive radius can we look for properties in our price range? 

Inland Empire, Palm Desert and maybe Vegas are on our list so far...

We're going to buy and hold the property.

[Michael Evans]

I've lived in the Antelope Valley (Palmdale) since 1994, so I know this market like the back of my hand.  I wouldn't recommend it for buy and hold cashflow, but it is prime (again) for appreciation.

Go to the Midwest for buy and hold. Use an Excel buy and hold investment model analysis file to calculate your costs (mortgage, taxes, maintenance, etc.) versus your rental income and your calculated ROI based on your cash investment. You should run this analysis for every single property you are looking to buy. Once you set your criteria (maximum cash investment, buy and hold period in years, and minimum ROI) the rest is easy. Follow these steps:

• Find markets where the monthly rent to market value of the property is greater than X%.  This is where the 2% rule comes into play.  This is actually a great rule of thumb, but I use a minimum of 1% because I also look at appreciation (I don't look to buy and hold forever).  This is where you will spend most of your time; doing research to find your markets.
• Once you find your markets, get with a local real estate agent and ask them to search for properties that meet your criteria: X bedrooms, Y bathrooms, Z,ZZZ square feet with a maximum price of AAA,AAA in areas that have an average monthly rental rate of BBB.
• As your agent feeds you properties, you feed them into your analysis file to see which ones meet all of your investment criteria.
• Start making offers on those that meet your investment criteria.

Remember to constantly tweak your model based on your experience. I can tell you that when it comes to buy and hold investment, you minimize your monthly costs by going with interest only loans. You need to seek those from private money lenders who are interested in getting monthly interest payments. Think of them as equity partners who share in the monthly cashflow of your property. You can finance 100% of your property purchases with a 100% interest private money loan at 70% LTV and bring in an equity partner to put up the remaining 30% (second mortgage). There's nothing like get cash each month without putting any of your money in the deal (or at risk).

Hope this helps you think outside the box.  Bottom line, I wouldn't purchase buy and hold properties in CA.  You would be amazed at the cost of homes and rents in the Midwest areas, such as Detroit or Memphis.  Do some research and don't be afraid (and you don't need to personally see each property.  That's what a good real estate agent is for).

God Bless You!