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What are So Cal investors up to?
Hi Ryan,
There are winners and losers in every type of market, including a down market. Buying the deal right is more important than the timing is what I am trying to say.
I'm from Los Angeles and I just found a good deal in San Diego that I am going to buy to fix, but not flip (Keeping it for my brother to live in). I found this deal off of the MLS, which is pretty rare, but it can be done. In this case, there was a tenant in the property stalling the sale of the deal. The agent couldn't show the property to any potential buyers. Because I was consistent, as soon as the tenant left, the agent reached out to me first. No one else realizes that this property is available again and most have quit trying to make an offer on it.
If you aren't finding deals, you need to increase your network (More wholesalers and more real estate agents) and you need to be consistent. People like to work with other people that are consistent. They'll give you first shot at a deal because you follow through on what you say.
I live in LA and I am buying in Kansas City MO like @Jason Graves . Closing on one this week (value add 4plex), another next month (value add 8 plex), and finishing up a rehab which I will refi (complete rehab 4plex). I am also investing in syndicated deals here in LA with great upside and IRR.
@Ryan Alacon . I certainly understand your hesitation, I've got some horror stories! The thing that I figured out was to take on local partners on all my deals. Sure, I only get half the deal BUT I know that someone is watching over the rehab and there to deal with problems. I put a lot of detail about what I do in this post. You can structure however you like, I just like to do things 50/50, but not everyone is like me in that regard.
https://www.biggerpockets.com/forums/48/topics/601...
I'm not a full-time investor, I have a day job. So my on the ground partners do a lot of the work, but I do a decent amount too. In my view investing out of state is an investment in getting to know the market, the people there, the properties that meet your goals, etc. I enjoy my trips to KC but not everyone would. Not everyone wants to spend their free time doing what I do! Now that I know KC I'm not that interested in learning a different out of state market, for example. It's a big time investment.
I think it's best to focus on your goals and see what kind of activities will get you to your goals. Passive investing is a great route for a lot of folks and one that isn't much talked about as a viable option. So that would be my question to you, what are your goals and how does RE fit into that? What are you really looking for?
@Ryan Alacon I find my local partners through networking. Introductions from my realtor, people I met through BP, and others in the KC market I have met.
Lots of good things about Cincinnati from what I hear. I had Cleveland and Cinicinitii on my list BUT like I said I don't want to learn another market! So once I picked KC I just went for it there. There is a direct flight daily from LA and it's only 3 hours away and the time zone is only 2 hours different. I'm sure Cincinnati is a perfectly good choice. I would suggest you pick and market and learn it well. Rather than looking at different markets. Focus on submarkets within the market you picked and then really learn them. In KC I won't buy any rental that has a rent of 750/mo post-renovation. I have trouble making the numbers work with low rents. I'm sure there is a magic number like that in Cincinnati but I have no idea what it is and I'm sure it is different for different people.
In my opinion, you don't have to wait for a correction if you buy right. But as the market heats up it can be hard to buy right, so you have to search harder.
One thing you could look into in SoCal is Yucca Valley and Twentynine Palms. Midwest prices there. People are also successful in LA with rentals but it IS hard to buy right. You could pick up a small MF in somewhere like Lincoln Heights and clean up on appreciation. Lots of these markets on the east side are poised for a lot of appreciation. I live in Echo Park which was a complete war zone 20 years ago (so I hear). I walk to blue bottle from my house, so I'm pretty sure gentrification is complete with 800 sf prices to go with it. There are markets where you can buy in LA that are similarly poised for appreciation. I'm buying with a MF investor in Koreatown. So I think can you buy in LA but it's going to take a lot of searching and a decent amount of capital.
Hopefully you got some value out of that. Good luck!
Just realized you are in SD not LA. But I think the same applies to certain areas of SD, buy where appreciation is coming. I was looking in Logan Heights in 2016, I'm sure I would have cleaned up on appreciation if I bought. I lived in SD for 10 years before moving to LA so I do think the same principle of appreciation moving east applies.
@Lee Ripma Great insights! I'll definitely keep all that in mind. The distance is concerning and you make a good point about KC being a close flight out. Thanks again!
Originally posted by @Lee Ripma:
Just realized you are in SD not LA. But I think the same applies to certain areas of SD, buy where appreciation is coming. I was looking in Logan Heights in 2016, I'm sure I would have cleaned up on appreciation if I bought. I lived in SD for 10 years before moving to LA so I do think the same principle of appreciation moving east applies.
Just curious, why go all the way to the midwest when there are better opportunities in AZ. Keep in mind that Phoenix is the fifth largest city in the country with a growing high tech influence among other things. CA is a stones throw away from you guys and has a great market. Here is a sample:
Average Cash Flow Per Door In Phoenix Metro Area
@Account Closed
Well I personally really like KC so I enjoy going there. I don't like Phoenix but I do a agree that its an obvious out of state market for CA investors!
@Ryan Alacon If you're looking in the Midwest, you should consider Metro Detroit. I'm seeing massive expansion downtown through the Automotive industry. Ford is building, GM is building, Chrysler is building, and Cadillac just moved their HQ back here.
I'm not talking about downtown, either. I focus on areas near their tech center and plants in the suburbs. There is a solid, growing, working class market here with a great 5 year outlook.
Plenty of opportunity here in that 50k - 100k range that rent for $1000/month or more.
I see many California investors get smoked trying to buy, rehab, and manage property without doing the research. They buy houses on the wrong street and have constant issues. You really need boots on the ground in the Midwest if you're going to invest, but the rewards are certainly worth it!
Managing rentals, sold off one property, couple of wholesales, in escrow on a flip and surfing. Lots of surfing
Same with Tim.
Try to surf once a week. Hike every Wednesday with my wife. Go to my downtown gym (“Fit”) 4 days a week. Take calls on my patio while overlooking the bay.
San Diego is paradise. I love everything about it (except buying multifamily obviously :).
Oh well that’s what Houston is for.
Buy where it’s great to buy. Live where it’s great to live. Those might not be the same place.
@Ryan Alacon I'm in the same boat as you except in the LA/Ventura area so I am looking out of state as well
@Lee Ripma That is some great advice, I thank you as well. The one good thing about being here is that it forces you to look elsewhere which suddenly makes endless market options available...though now comes the trouble of which market to choose. I'll have to take a look at Yucca Valley and Twentynine Palms though.
Any other advice on choosing a specific market out of state? What brought you to KS to begin with? I do hear AZ is supposed to be good as well like @Account Closed said, though I do not currently have any resources elsewhere so its a bit challenging deciding on even just a state, let alone a city or a specific neighborhood. I'd imagine there are more efficient ways to initially choosing a general starting location rather than it being completely random as to not end up going down too many rabbit holes are lead to nowhere. Once chosen, I have a good idea what to look for though I'd rather have a decent general idea before I start investing too much time and effort in the research. Or it that's just part of the fun of this, then that's fine too, just want to make sure I'm doing it right!
Thanks!
Hey Ryan,
I work at Marcus and Millichap in El Segundo; many of our clients are exchanging their California multifamily for out of state deals (Florida, Texas, Gulf Coast, etc) or going into another asset class altogether.
With rent control and possible Prop 10 passing, investors are feeling nervous about long term.