Wanting to start investing now. Any starting tips?

[Joseph Goods]

My wife and I are looking to sell our home in Seattle to move to SD to start investing. We’ll have a bit of cash to start (nothing crazy).

Just curious of what has been good first steps in buying, getting financing with a small income, and tips for finding multi family homes or single family homes that need a little love. Any thoughts, ideas or connections to the San Diego area would be so appreciated!

[Dan H.]

Originally posted by @Joseph Goods:

My wife and I are looking to sell our home in Seattle to move to SD to start investing. We’ll have a bit of cash to start (nothing crazy).

Just curious of what has been good first steps in buying, getting financing with a small income, and tips for finding multi family homes or single family homes that need a little love. Any thoughts, ideas or connections to the San Diego area would be so appreciated!

The San Diego market is similar to the Seattle market in that it is an appreciation market but the San Diego market has a much longer track record as such a market and therefore higher prices.

SFR/condos purchased at retail in San Diego have negative cash flow at purchase. They rely on rent appreciation for future positive cash flow.

The same can be stated about duplex to quad in the nicer areas (B and above areas).

That leaves duplex to quad in the working class areas (B- to C areas).  it is possible to obtain small initial cash flow on this class of purchase but it would not be the nice, rehabbed RE.  It would be the RE that is in need of TLC or full rehab and the competition for these is significant.

Historically, no matter which of the San Diego RE you purchase for buy n hold, including the cash flow negative RE, the return has been outstanding. How? property and rent appreciation. About half a year I did an analysis of San Diego recent ROI (previous 5 years). It was outstanding but a lot of locales had good return for those 5 years. One item that my research showed was the average SFR rent increase for the previous 3 years was $500/month (so over $100/month rent increase each year). You can see how this could easily turn a cash flow negative SFR into a cash positive investment. In addition to the outstanding appreciation, prop 13 property tax control benefits long term buy n hold investors. We have an RE that is worth ~$620K that is taxed at ~$200K value and another that is worth ~$1.3M that is taxed at ~$400k value due to prop 13.

So questions to ask:  What can you afford?  Can you afford negative cash flow and how much negative cash flow?  Do you want to be a property manager?  How confident are you of continued rent and property appreciation?  What do you think of owning C class RE?  Is the larger negative cash flow of B class and above worth it to you?

Good luck