Starting out in Multi

[Account Closed]

1st post here, thanks in advance for advice. 

I have been a reluctant landlord in the past when we moved from San Diego in 2008. Held the condo for another 6 years before we sold. Made some money on appreciation but didn't realize at the time how good depreciation was as well. In retro never should have sold it. But I was focused on growing my business and didn't really want to deal with it for the limited benefit at the time.

Anyway, fast forward, we have about $400k ready to invest in our first property (or multiple properties) and we are trying to decide between multifamily or SFH. We could put another $200k per year towards properties.

With this type of investment is it possible to cash flow, or get close, in Southern California?  Preferably a beach community from San Diego up to Santa Monica, Orange County most preferred I think just because I could at least drive by it when the anxiety demands it. Not interested really in paying cash for the properties, we want to lever up while we are in a position to. 

I don't want to get ahead of myself, but the idea is to have about $1M cash invested over the next 5 years. Then sell company (day job) to try out being a full time passive real estate guy.

So…what would you do?

[Taylor L.]

I know someone who did exactly this, we met at a syndication event last year. He cashed out of condos in So Cal and invested in cash flowing multifamily in Kansas City. He found that it just made so much more sense to invest in other markets due to price points, so it was worth the hassle to invest remotely. 

Regarding your calculations, you may be missing depreciation recapture or overestimating the depreciation benefit. Best off to talk with a CPA and see how it applies to you. @Michael Plaks has written on this topic pretty extensively on BP.