Multifamily in Los Angeles - Bad timing? Should I look elsewhere?

[Aimen Shawki]

Hello All,

I've been lurking here for a few months now, mostly saving, reading, and absorbing. I finally have some cash to start investing, but the problem is every property I analyze in the area does not cash flow at all. How do these sellers expect to sell a negative cash flowing property to an investor? Are these signs we're in a bubble here?

The original game plan was to purchase the MFR, live in 1 of the units for a few years and rent out the remaining units. I don't necessarily expect to cash flow while I'm IN the property. But if i were to move out in the next 2-3 years, I expect it to cash flow then. So I've been analyzing each deal as if I'm not going to live in it.

Should i give up my MFR idea here in Los Angeles (Preferably Culver City, Marina Del Rey, Van Nuys) really any decent area of LA north of the 105 and west of the 110 and look out of state instead?

How does one pick a market when investing out of state? I'd like to be relatively close by, How does one pick between WA (Washington), OR (Oregon) , AZ (Arizona), NV (Nevada)?

Thanks in advance!

[David Faulkner]

Agree with many on here that Los Angeles is great for price and rent increases, but you need to play the long game to make the returns. That means that whatever you buy, make sure that you are willing and able to hold it long term, no matter what happens in the economy or your personal life. My favorite way to do this is to have a really good equity position, and this comes from putting some money down (instant equity, but you pay for it), buying a great deal (instant equity from buying below market), and doing some value add to force appreciation (fairly quick equity, you work for it). With these 3 sources of short term equity in place, you can hold long term from a position of financial strength, or worse case sell at a profit if you need or choose to. Once you get to a cash flow positive position, then you can turn it to a pure rental and buy your next place. I also actually agree that we are likely closer to the top than the bottom for this cycle, which means that it will be harder to find a deal as mentioned above ... doesn't mean you stop looking, but it does mean it will be difficult and I would not recommend laxing on these investment standards just to get into your 1st place. I was actually in a similar position as you looking for property at the height of the last cycle (2006ish) ... fortunately I did NOT relax my investment standards and as result did NOT buy at that time ... when the market crashed, though, I was already educated on both REI and the local market from my search, and I happened to be sitting on a pile of cash that I'd been saving to invest. The acts of saving for investment and searching in 2006 was NOT wasted effort and my patience was rewarded. Now, after holding for a bit, my properties cash flow like crazy even after several cash out refis. It can work out great, you just need to keep your eye on the long game.