25 year old looking to invest in my first property

[Alex Olson]

I have been looking to invest in Real Estate for a while now and I think I’m about ready to get my feet wet. I’m looking to buy a MFH, preferably a Duplex or Fourplex.

I'm from Seattle and currently living in San Diego, in which I think both markets may be a little out of my price range. I wanted to get some advice from other people who have started out buying a MFH for their first investment property, and what I should look for when purchasing my first deal.

- Is there any good market places that might be recommended to invest in remotely?

- Is it too complicated to invest in a market place that I don’t reside in?

- Should I use house-hacking as the best strategy to learn as I go?

- Is right now (due to the pandemic) not a good time to purchase property? 

[Dan H.]

Originally posted by @Ramon Flores:

@Alex Olson I live in Los Angeles and I would love to purchase MFH here but there is no cashflow. It pretty much all about appreciation here.

My advice is to house hack. Get a rental with lots of rooms and charge your roommates. Save all the cashflow and purchase your own SFH with lots of rooms and house hack there as well. Rinse and repeat. Hope this helps!

I see the claim that LA, San Diego, OC, or San Francisco do not have decent cash flow but historically this is incorrect.  It is incorrect because of the appreciation.  Examine the BP market spreadsheet that used for its long duration 2010 to 2018.  Look where it places the cash flow of these cities.  This is a relatively short period of time and it has a flaw in its calculation related to prop taxes.  what do you think it would have depicted if it used 15 years or 20 years?   Use Case Shiller to look at various durations to see what it shows.   a quick examination of Rent Jungle would enlighten why the cash flow is so great in these cities.  Examine the rent increase since 2000.

Cash flow is not defined by the initial cash flow.  Actual cash flow is the cash flow achieved over the entire hold period and is not finalized until the property is no longer owned.   

My guess is each of the 4 cities I listed would be top 5% for cash flow for holds of 20 years or longer.  In the BP spreadsheet, you can see the trend and project it out for a longer duration.  

I believe virtually all markets can have RE investment opportunities for smart investors.  I believe newbies should start local, where they have some advantages.  This includes newbies not from coastal Ca should not start in coastal Ca.  However, when a post indicates the cash flow is bad, when historically it has been outstanding with every resource showing this, I feel that the error should be pointed out.  

Every one of our San Diego properties currently has a rent to purchase ratio over 1%, many over 2%, one LTR over 3%, and one STR (prior to Corona) over 4%. Seems like they cash flow just fine.

Good luck