Aspiring investors with 200k+ income looking for guidance

[Savannah Walbert]

Hello! My fiancée and I will be beginning our real estate investment journey in 2024 and are looking for any suggestions or pointers as we make some of our initial decisions.

We live in Los Angeles, so it’s probably not surprising that we are leaning toward out-of-state investing. Combined we are making about 250-300k annually pre-tax. However, we aren’t W2 employees, all that income is from 1099 independent contractor work, which of course will limit what financing we can qualify for.

We have 100k+ saved in the bank, but don’t want to plow all of it into our first deal. Ideally we will find a (relatively) low priced market to be able to get into without putting up huge amounts of capital.

If it were possible to invest within driving distance we would love that, since we are a little nervous about dealing with any renovations or even just unexpected maintenance from out-of-state. However, I think the prices in California will cause us to invest out of state and we will just have to learn how to set up the right systems and processes to deal with issues as they come up.

Any pointers on decently priced markets that we could get into in 2024 for a solid first investment property would be much appreciated. We are open to single and multi family, although we’d prefer multi of course. We also aren’t set on doing long, medium, or short term, and would be open to advice about which way will probably be best for our given situation.

Thank you and look forward to starting our investment career!

[Account Closed]

Welcome to the game @Savannah Walbert, 

I would strongly advise you to start looking into what sort of real estate strategies are tax-efficient such as short term rentals with the "short term rental loophole" or multifamily / commercial with "real estate professional status". If any of these make sense for your family, then you should link up with a real estate focused tax professional, to ensure when you do buy a deal we can wipe out that tax burden and make your wealth accumulation journey go faster. 

Best of luck in your journey! 

[Travis Biziorek]

Hey Savannah, I'm a bit north of you in the Central Coast but am down in the valley often (in-laws). It's hard to invest in CA.

I actually invest in Detroit and spent ~5 years on the ground there. I highly recommend checking out the market there. The city has been going through a ton of revitalization and investment over the last ~10 years and folks are starting to catch on.

[Jon Schwartz]

@Savannah Walbert, as an LA local, I can't help but jump in to defend our home town!

Have you considered house hacking a duplex in LA? Again, I'm partial, but I think it's the best investment that a young professional (or young couple) in LA can make.

Since you're clearly doing well outside of real estate, I'd think of your real-estate investments as opportunities to build wealth over a longer timeframe -- as opposed to opportunities to score some cashflow. I was in a similar position and looking out-of-state some seven years ago, and I ultimately decided that sitting on a big, appreciation asset in LA was more valuable than a few hundred dollars a month of Midwest cashflow.

What's your cost of living in LA? If you're living for free with parents, that's a different story, but if you're saddled with an expensive rental, converting that cost of living from a liability to an asset is a great move. Especially since you're both young and, I assume, childless. I house hacked a duplex until my daughter was four; at that point, we really wanted a "house" house.

Good luck!

Best,

Jon

[Savannah Walbert]

Quote from @Travis Biziorek:

Hey Savannah, I'm a bit north of you in the Central Coast but am down in the valley often (in-laws). It's hard to invest in CA.

I actually invest in Detroit and spent ~5 years on the ground there. I highly recommend checking out the market there. The city has been going through a ton of revitalization and investment over the last ~10 years and folks are starting to catch on.

I see you’re from AG! My fiancé and I were both born and raised in SLO and often visit family there.

Appreciate the recommendation of Detroit. Just spent a bit of time looking into their market and definitely see the potential! Are long term rentals generally what’s working best for you out there? And how has managing your properties long distance been for you?

[Travis Biziorek]

Quote from @Savannah Walbert:

Quote from @Travis Biziorek:

Hey Savannah, I'm a bit north of you in the Central Coast but am down in the valley often (in-laws). It's hard to invest in CA.

I actually invest in Detroit and spent ~5 years on the ground there. I highly recommend checking out the market there. The city has been going through a ton of revitalization and investment over the last ~10 years and folks are starting to catch on.

I see you’re from AG! My fiancé and I were both born and raised in SLO and often visit family there.

Appreciate the recommendation of Detroit. Just spent a bit of time looking into their market and definitely see the potential! Are long term rentals generally what’s working best for you out there? And how has managing your properties long distance been for you?

 Nice, we love it here! 

Yes, LTR's are generally best in Detroit. I do have a STR there that kills it but I don't recommend it for first time folks.

Managing properties for me is easy. But I have a strong network on the ground.

[Brad S.]

Hey @Savannah Walbert,

First of all, you both seem to do very well, even for LA. 1099's do not necessarily limit your financing potential. I have not had a W2 in decades and am able to get financing just fine.

Next there are reasonable opportunities everywhere, including LA. I recently got 2 lots for under your combined annual income (each), that I am planning on turning into good money making potential. And they are walking distance from me (In the general LA area). Those deals do take more knowledge, experience and other resources, but it is possible to find deals even relatively close to you.

The most important point is to get clearer on what your goals are. To just want to get into a "solid first investment property," is too general. Same with being open to single ... multi-family, long term, medium term, or short term deals. All of those have their own unique characteristics and potential outcomes, and some totally different than the others. One example is that short-term rentals are more of a hospitality business then a property investment.

I'm guessing there is more to your comment, but just investing in markets because they are "decently priced," may not get you closer to where you want to go. 2 of my first investment properties were very "decently priced," and had great annual % returns, only to cost me money to sell 18 years after purchasing them (no appreciation on values of rents and required fix-up to sell,, etc).  ....Although, they contributed to my education, they did not directly assist in moving me toward my goals.

There are many previous posts in BP (do a search) with good blueprints of how to get clear on your goals. But, generally, assess where you are now and where you want to be in the future (i.e. how much time you want to put into managing your investments, wanting $10k monthly passive rental income with little hands-on work, running a short term rental business in a vacation community, etc.). Imagine yourself 5-10-15+ years in the future and "where "do you want to be, etc, then go in reverse to today and decide what steps to take to set you in the right direction. And that probably would mean you guys doing more research and education to help clarify which path to start on.

Otherwise, you may be a dingy drifting on the RE ocean looking for your elusive perfect island to discover.

[Gary Mascitis]

Hi @Savannah Walbert

Congrats on making the decision to start! In the current state of the market, it is very hard to find great investment opportunities in most areas in California. California also has more favorable laws towards the tenant rather than the landlord bringing up even more headaches. Have you looked into commercial DSCR or Fix and Flip loans? These loans are focused on your credit score, lease vs principal interest, taxes, and insurance, and liquidity position for qualification and do not require tax returns or W2's. This may be the best option for your situation as it would not limit the leverage or terms you would qualify for with your 1099 income. In regards to areas to invest, everyone above me gave great recommendations for markets to invest in. Another point I would add is to look at areas where you have interest in visiting and do your due diligence on the market. If the market checks all your boxes, it could be the best case scenario. Lastly, I am a direct lender on the products I mentioned above and would be more than happy to discuss further over DM if you're interested!

Best of luck,

[AJ Wong]

Quote from @Savannah Walbert:

Hello! My fiancée and I will be beginning our real estate investment journey in 2024 and are looking for any suggestions or pointers as we make some of our initial decisions.

We live in Los Angeles, so it’s probably not surprising that we are leaning toward out-of-state investing. Combined we are making about 250-300k annually pre-tax. However, we aren’t W2 employees, all that income is from 1099 independent contractor work, which of course will limit what financing we can qualify for.

We have 100k+ saved in the bank, but don’t want to plow all of it into our first deal. Ideally we will find a (relatively) low priced market to be able to get into without putting up huge amounts of capital.

If it were possible to invest within driving distance we would love that, since we are a little nervous about dealing with any renovations or even just unexpected maintenance from out-of-state. However, I think the prices in California will cause us to invest out of state and we will just have to learn how to set up the right systems and processes to deal with issues as they come up.

Any pointers on decently priced markets that we could get into in 2024 for a solid first investment property would be much appreciated. We are open to single and multi family, although we’d prefer multi of course. We also aren’t set on doing long, medium, or short term, and would be open to advice about which way will probably be best for our given situation.

Thank you and look forward to starting our investment career!

Hi Savannah, 

I'm originally from LA and work with a lot of out of state investors along the Oregon Coast. With that initial investment capital and qualifications we've had success finding luxury coastal STR's that can produce very consistent strong six figures in gross revenue. Alternatively there are a few hot spots in Ventura County that are STR eligible. Feel free to DM me for a link to our daily updated STR Spreadsheet :) 

[Jake Baker]

@Savannah Walbert

If you plan to invest out of state, go where you have a competitive advantage.

I invest in Jacksonville FL because my old job would fly me there multiple times a year so I learned the city over time.

[Nicholas Pasowicz]

Join a local reputable community and lend!

Ask a wholesaler what you should do and they will say wholesale

Ask a fix n flipper what to do and they'll tell you to do F&F's

Ask a PML/HML what to do and ........

[Savannah Walbert]

Quote from @Gary Mascitis:

Hi @Savannah Walbert

Congrats on making the decision to start! In the current state of the market, it is very hard to find great investment opportunities in most areas in California. California also has more favorable laws towards the tenant rather than the landlord bringing up even more headaches. Have you looked into commercial DSCR or Fix and Flip loans? These loans are focused on your credit score, lease vs principal interest, taxes, and insurance, and liquidity position for qualification and do not require tax returns or W2's. This may be the best option for your situation as it would not limit the leverage or terms you would qualify for with your 1099 income. In regards to areas to invest, everyone above me gave great recommendations for markets to invest in. Another point I would add is to look at areas where you have interest in visiting and do your due diligence on the market. If the market checks all your boxes, it could be the best case scenario. Lastly, I am a direct lender on the products I mentioned above and would be more than happy to discuss further over DM if you're interested!

Best of luck,

Hello @Gary Mascitis! Thanks so much for the thoughtful response. We have spoken with a couple mortgage brokers briefly about some of our different options for financing, but haven’t yet fully dived into it. These recommendations are great.

As for choosing a market we have interest in visiting that is also something we are hoping to be able to accomplish, we have a work opportunity that would put us in Tampa Florida about 7-10 days per month, so we are looking there and at the surrounding area to see if there’s anything that could work. Hoping to find a market with solid appreciation over the next 10-20 years!

[Brad S.]

Quote from @Savannah Walbert:

Quote from @Gary Mascitis:

Hi @Savannah Walbert

Congrats on making the decision to start! In the current state of the market, it is very hard to find great investment opportunities in most areas in California. California also has more favorable laws towards the tenant rather than the landlord bringing up even more headaches. Have you looked into commercial DSCR or Fix and Flip loans? These loans are focused on your credit score, lease vs principal interest, taxes, and insurance, and liquidity position for qualification and do not require tax returns or W2's. This may be the best option for your situation as it would not limit the leverage or terms you would qualify for with your 1099 income. In regards to areas to invest, everyone above me gave great recommendations for markets to invest in. Another point I would add is to look at areas where you have interest in visiting and do your due diligence on the market. If the market checks all your boxes, it could be the best case scenario. Lastly, I am a direct lender on the products I mentioned above and would be more than happy to discuss further over DM if you're interested!

Best of luck,

Hello @Gary Mascitis! Thanks so much for the thoughtful response. We have spoken with a couple mortgage brokers briefly about some of our different options for financing, but haven’t yet fully dived into it. These recommendations are great.

As for choosing a market we have interest in visiting that is also something we are hoping to be able to accomplish, we have a work opportunity that would put us in Tampa Florida about 7-10 days per month, so we are looking there and at the surrounding area to see if there’s anything that could work. Hoping to find a market with solid appreciation over the next 10-20 years!

Hi @Savannah Walbert,

I really like FL as a growth market. There's a lot of reasons to. Some of those reasons are: Continued consistent population growth, which translates into a large amount of wealth moving in, the still relatively affordable median home price, high job migration, no state income tax, relatively reasonable property taxes, business friendly.

There are also some reasons to be cautious, like increasing insurance costs, threat of weather incidences, the cash flow returns have decreased due to the significant increase in prices over the past few years. 

But, still long term prospects are good. I bought a new built rental in Cape Coral a few years ago as a result of an exchange I did. I wish I would've bought more. Anyway, I would buy a newly built property, due to the more updated building codes, which help keep it safer against the hurricanes, etc. Mine had very minimal issues after that recent hurricane hit, since it is newer built and the updated building codes and higher elevations required, etc.

Anyway, I would make sure to go with a reputable and trustworthy operator/builder and focus on turn-key deals, especially for your first step in your RE journey. I am happy to refer you to the investment company and builder I went through, just sent me a DM if interested. They used to be local to LA, but they have been investing out in SW FL for decades, and moved out there permanently a few years ago, due to the CA investing landscape. I have been following them and doing business with them for over 2 decades and trust them implicitly. That is one of the most important points of working with anyone.

Anyway, good luck and let us know what direction you go in.

[Matthew Morrow]

Congratulations on embarking on your real estate investment journey! Since you're based in Los Angeles and looking for more budget-friendly markets, you might want to consider states like Arizona, Nevada, Texas, or the Midwest, which generally boast lower property values. These regions are known for their strong rental markets and potential for property value appreciation. 

Given that you are both 1099 independent contractors, your loan options might differ slightly. It would be beneficial to consult with lenders who have experience with self-employed borrowers or to work with a mortgage broker who can offer various financing options. In terms of the type of investment, multi-family properties often provide more income potential and risk diversification compared to single-family homes, although they might require more management. 

You'll also need to decide on your investment strategy, whether opting for long-term rentals for steady income or venturing into short-term or vacation rentals for potentially higher returns, albeit with increased management demands. If you choose to invest out of state, having a reliable property management company is essential, as they can handle daily operations, tenant issues, and maintenance tasks. It's also beneficial to join real estate investment groups and online forums, or attend local meetups to gain insights and recommendations from experienced investors.

Finally, thorough research on any market you consider is crucial, including looking at economic indicators, rental demand, and future development plans in the area. Best wishes for your real estate ventures!

[Savannah Walbert]

Quote from @Brad S.:

Quote from @Savannah Walbert:

Quote from @Gary Mascitis:

Hi @Savannah Walbert

Congrats on making the decision to start! In the current state of the market, it is very hard to find great investment opportunities in most areas in California. California also has more favorable laws towards the tenant rather than the landlord bringing up even more headaches. Have you looked into commercial DSCR or Fix and Flip loans? These loans are focused on your credit score, lease vs principal interest, taxes, and insurance, and liquidity position for qualification and do not require tax returns or W2's. This may be the best option for your situation as it would not limit the leverage or terms you would qualify for with your 1099 income. In regards to areas to invest, everyone above me gave great recommendations for markets to invest in. Another point I would add is to look at areas where you have interest in visiting and do your due diligence on the market. If the market checks all your boxes, it could be the best case scenario. Lastly, I am a direct lender on the products I mentioned above and would be more than happy to discuss further over DM if you're interested!

Best of luck,

Hello @Gary Mascitis! Thanks so much for the thoughtful response. We have spoken with a couple mortgage brokers briefly about some of our different options for financing, but haven’t yet fully dived into it. These recommendations are great.

As for choosing a market we have interest in visiting that is also something we are hoping to be able to accomplish, we have a work opportunity that would put us in Tampa Florida about 7-10 days per month, so we are looking there and at the surrounding area to see if there’s anything that could work. Hoping to find a market with solid appreciation over the next 10-20 years!

Hi @Savannah Walbert,

I really like FL as a growth market. There's a lot of reasons to. Some of those reasons are: Continued consistent population growth, which translates into a large amount of wealth moving in, the still relatively affordable median home price, high job migration, no state income tax, relatively reasonable property taxes, business friendly.

There are also some reasons to be cautious, like increasing insurance costs, threat of weather incidences, the cash flow returns have decreased due to the significant increase in prices over the past few years. 

But, still long term prospects are good. I bought a new built rental in Cape Coral a few years ago as a result of an exchange I did. I wish I would've bought more. Anyway, I would buy a newly built property, due to the more updated building codes, which help keep it safer against the hurricanes, etc. Mine had very minimal issues after that recent hurricane hit, since it is newer built and the updated building codes and higher elevations required, etc.

Anyway, I would make sure to go with a reputable and trustworthy operator/builder and focus on turn-key deals, especially for your first step in your RE journey. I am happy to refer you to the investment company and builder I went through, just sent me a DM if interested. They used to be local to LA, but they have been investing out in SW FL for decades, and moved out there permanently a few years ago, due to the CA investing landscape. I have been following them and doing business with them for over 2 decades and trust them implicitly. That is one of the most important points of working with anyone.

Anyway, good luck and let us know what direction you go in.

This is VERY helpful and so appreciated! We will absolutely DM you to pick your brain more on the market there, excited to learn more!

[Sam McCormack]

Quote from @Savannah Walbert:

Hello! My fiancée and I will be beginning our real estate investment journey in 2024 and are looking for any suggestions or pointers as we make some of our initial decisions.

We live in Los Angeles, so it’s probably not surprising that we are leaning toward out-of-state investing. Combined we are making about 250-300k annually pre-tax. However, we aren’t W2 employees, all that income is from 1099 independent contractor work, which of course will limit what financing we can qualify for.

We have 100k+ saved in the bank, but don’t want to plow all of it into our first deal. Ideally we will find a (relatively) low priced market to be able to get into without putting up huge amounts of capital.

If it were possible to invest within driving distance we would love that, since we are a little nervous about dealing with any renovations or even just unexpected maintenance from out-of-state. However, I think the prices in California will cause us to invest out of state and we will just have to learn how to set up the right systems and processes to deal with issues as they come up.

Any pointers on decently priced markets that we could get into in 2024 for a solid first investment property would be much appreciated. We are open to single and multi family, although we’d prefer multi of course. We also aren’t set on doing long, medium, or short term, and would be open to advice about which way will probably be best for our given situation.

Thank you and look forward to starting our investment career!

In Cincinnati, 60k will be more than enough to for a down payment and closing costs, and have funds for any "surprise repairs" that will inevitably come. Getting a small multifamily under 250k is more than possible (with cash flow). let me know if you have any questions!

[Michael Dumler]

@Savannah Walbert, more likely than not, you'll want to explore DSCR loan options. Moreover, it is certainly not the best strategy for first-time investors; however, I'd be happy to discuss if you're ever interested in learning about rent-by-the-room properties in Atlanta, GA.

[Kimberly Gilbert]

Hi Savannah,

I just message you.

[Jake Andronico]

Quote from @Savannah Walbert:

Hello! My fiancée and I will be beginning our real estate investment journey in 2024 and are looking for any suggestions or pointers as we make some of our initial decisions.

We live in Los Angeles, so it’s probably not surprising that we are leaning toward out-of-state investing. Combined we are making about 250-300k annually pre-tax. However, we aren’t W2 employees, all that income is from 1099 independent contractor work, which of course will limit what financing we can qualify for.

We have 100k+ saved in the bank, but don’t want to plow all of it into our first deal. Ideally we will find a (relatively) low priced market to be able to get into without putting up huge amounts of capital.

If it were possible to invest within driving distance we would love that, since we are a little nervous about dealing with any renovations or even just unexpected maintenance from out-of-state. However, I think the prices in California will cause us to invest out of state and we will just have to learn how to set up the right systems and processes to deal with issues as they come up.

Any pointers on decently priced markets that we could get into in 2024 for a solid first investment property would be much appreciated. We are open to single and multi family, although we’d prefer multi of course. We also aren’t set on doing long, medium, or short term, and would be open to advice about which way will probably be best for our given situation.

Thank you and look forward to starting our investment career!

Welcome!! You guys are in a great spot and make a great income. 

I'm definitely bias, but a lot of investors from LA invest in Reno, NV (especially those who enjoy visiting Lake Tahoe). 

No state income tax, consistent job growth, low property taxes (that DON'T reassess on the sale), land constraints (driving appreciation), higher rents, diversified job growth, landlord friendly, etc...

It may not make sense at all for you both, but wanted to throw it out there as something to consider. 

Happy to provide any insights that I can. My family and I have been investing here for many years. 

[Jessie Dillon]

congrats on being ready to take the first step! so many thoughts for you:

- there is always a mortgage option even if you're independent contractors. if one bank says no, go to another bank. this will not limit you, i promise. look into DSCR and commercial loans.

- i'd encourage you to consider doing as big a deal you comfortably can with the amount of capital you have, vs trying to start off unnecessarily small. make sure you account for a personal reserve, a reserve for the future property, and closing costs, THEN see what's left over for a down payment. also note that while there are creative ways to buy tons of RE with little $, they demand A LOT of time and energy, which it sounds like you guys may not be looking to invest right now. 

- driving distance vs long distance: try to map out exactly what situations this would benefit you in. could either of you guys logistically drop everything to drive multiple hours away? and would either of you actually be the right person to handle the issue when one comes up? investing driving distance is usually just a false sense of comfort. there's really not much of a difference between buying 2h away and 1000 miles away, especially if you're not a property manager or contractor by trade. investing somewhere that's truly a great market to invest in, is more important than convenience.

- regarding LTR MTR STR, owning each type of rental comes with a different workload/lifestyle. LTRs are most hands-off and stable, but cashflow less. STRs are more volatile and require the most work (you really have to self manage to make money with just one), but cashflow more. MTRs are somewhere in the middle. what's more in line with your goals and resources? you'll have to figure this out before selecting a market, because markets are usually better for just one or the other.

i do value-add multifamily projects long distance in chicago; this could be a great option for you guys! feel free to dm me to talk shop

[Zach Lemaster]

@Savannah Walbert

I personally like the SE with new construction below $300K that still cash flows well AND appreciates in both rents and market value.  

We are very active in Huntsville, AL (and surrounding areas), SWFL, San Antonio, along with other locations in the SE with BTR properties.  Definitely worth a look!

Hope this helps!

[Carrie Matuga]

@Savannah Walbert Congrats on your first steps! First, I'd like to say that not having a w2 will not prohibit you from moving forward. DSCR loans are a great option and while they look at your credit, it is the property and its ability to pay the mortgage that qualifies the loan. I've used these to fund my whole portfolio.

I wouldn't be scared to invest our of state - but don't do it without building a solid core that starts (IMO) with your agent (ideally an investor friendly agent). Prices in CA are tough, and so are the rules about rent and being a landlord. Anywhere you decide to look, I'd recommend checking out whether it sways tenant friendly or landlord friendly. I also live in CA and invest exclusively out of state, so if you ever want to chat about that, reach out!

As far a picking a market, I love to look at data from moving van companies about where people are moving and the On the Market Podcast with Dave Meyers is a true gem.

[Account Closed]

Hey @Savannah Walbert, 

congrats on the great income! Given you are in LA, your tax liability is likely the biggest expense you incur every year. I would strongly recommend looking into either short term rentals (since we can use the short-term rental loophole to reduce your tax liability) or multifamily out of state and find a way to qualify for REPS. Since you are 1099s I would suggest the short term rentals. 

[Robert Ellis]

Quote from @Zach Lemaster:

@Savannah Walbert

I personally like the SE with new construction below $300K that still cash flows well AND appreciates in both rents and market value.  

We are very active in Huntsville, AL (and surrounding areas), SWFL, San Antonio, along with other locations in the SE with BTR properties.  Definitely worth a look!

Hope this helps!

 huntsville was on a list I saw where it's been overdeveloped compared to net absorption which lowers rent prices that you put in underwriting. I second florida or columbus. those are the two markets we are in. You can also increase density with more apartments there are 60+ duplexes new construction in florida right now listed and the majority are in Lehigh Acres, Fort Myers, Cape Coral. that area is depressed in my opinion by rental values, lack of infrastructure, lack of commercial development, etc so we personally stay away from It and focus on urban infill like tampa, Orlando, Jacksonville, etc. 

[Tam Lapp]

Feel free to connect if interested in the PA market. I've been a investor here since 2008 and work with many out of state investors. I have many great contacts as I'm a builder and landlord/investor.

[Michael Margarella]

Hi Savannah, welcome to BP! Investing in a syndication or fund could be a good fit given your situation.

Pick solid operators and solid asset classes. We syndicate self-storage projects. Even if there is a crash, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions.

And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases.

These syndication can provide an 8%+ cash-on-cash return - providing you monthly cash flow - and a 15-20% IRR over the length of the project. Feel free to reach out