LA/OC/IE SFR strategies seem to be very limited

[Curtis Chen]

Hi Everyone, 

Just wondering what people are doing with SFR property here in the hot spots. Los Angeles and Orange Counties, and the IE West of the 15 freeway. I'm targeting off market vacant homes in the established areas, first one was in Garden Grove that I was actually able to get close to 70% ARV that I wholesaled off to a flipper. I'm currently working on one in the IE west of the 15 freeway which I want to try something on my own. I feel like I have sufficient funds @100k and a network of private money lenders ready but since nothing can cash flow around these areas, is the only strategy flipping? I'm more attracted to rental property for cash flow.

I might move my growing family in to this next one and just work on paying down a conventional loan until it can cash flow in to a rental prop but that is going to take time. I'm trying to work out the numbers but it seems like without a substantial down payment, cash flow is impossible thus eliminating any type of rental/brrrr strategy. I'd be happy if it can break even and I just sit on the appreciation since these are in highly desirable areas but would like to hear if people are doing things differently?

I understand cash flow properties are better found outside of CA and I will be digging in to those in the future, even possibly outside of the country in expat communities (one of my partners is a digital nomad that lives abroad is familiar with areas in Thailand, Colombia, Indonesia etc). My sources will only help me dig up off market vacants in the hot spots so that's why my finds will always be in these established areas, but again, looks like I would be stuck with wholesaling them off or doing the flip myself?

[Mike Flora]

I have been putting together seller finance deals with off market free and clear owners. Run all your numbers with the seller to make these work for you. You can usually offer more to get the deal done compared to flip/rehab prices and the benefits/cash flow comes on the terms. The sellers usually want to cash out so make your note short and sweet for them. Lots to take into consideration on these though with your goals, what your looking for, how much money you have etc etc etc. I have been playing the pay down as fast as possible so I have been putting together high principal deals but my refinance in 4-5 years is really nice and I have a ton of equity once I pay off the note. Looking for 20% discount on the purchase with minimal repairs or tenant problems and then adjust that number accordingly for a bigger discount as needed. The big hurdle is talking someone who wants to cash out into carrying paper for 4-5 years, but your purchase price will almost always be higher than your competition! So it can get the deal done sometimes. Example of one deal I did below....

Purchase price $292,000.00

ARV 2 years ago $355,000.00

Current ARV $400,000.00

$25,000.00 down payment

$14,000.00 total put into property so far since purchase

1 year 8 months left on note, deal is a 4 year note

Rents for $1950 a month right now

Payment breakdown: $1,100.00 comes off principal every month with 1% interest on the remaining balance due. Loan is not amortized. Current payment due is $1,298.16 to seller which drops almost a dollar every payment.

Loan balance at the end of 4 years will be $214,700.00

Property could be worth $424,000.00 at the end of 4 years

LOTS OF OPTIONS AT THE END OF THIS!

This was my first one so I could have asked for more principal and I do ask for more principal now especially since market is sketchy in California right now. I like the safety of being able to exit at the end of 4-5 years and the refinance option to cash out of just refinance for cash flow. Just an idea for you guys.

@Matthew Tavormina @Curtis Chen @Guillaume D.