New member from Bay area CA

[Raghuveer M.]

Hello All,

I am Raghu and currently in bay area. Sorry about the long introduction but I just wanted to get my thoughts out there. I have been reading the beginner guide and lots of articles and decided to join and ask some questions along the way.

I am renting now as home prices are so crazy here. I want to invest in some rental properties and my goal is to get a cash flow of $1k per month via real estate by buying either 1 property for $100k or 2 properties for $50k each or a multi family property for $100k. I would like rent to be $2k total from the $100k invested to satisfy the 2% and 50% rule so that I get to have a cash flow of $1k. I have saved up $20k for a downpayment and I have another $10k which I hope to use for either rehab + other closing costs. I can raise another $5k with a little difficulty if needed.

I guess I will need to look out of state and that is what scares me as I do not know how I would be able to figure out a good deal from here. Most of the deals seem to be by buying at auction or foreclosure and rehab it and then rent it out.

If there are suggestions on areas I should focus on that would be great? I saw Memphis, Atlanta, few cities in Texas, Altamonte spring near Orlando have very good cap rates and lots of options for all budgets. I looked at Zillow and redfin and the property prices are all over the place from $10k to $300k.

My biggest concern is that if I find a good place to buy by looking at all the listings, how do I go about purchasing it without looking at the property? I could fly out but most good deals might be done by the time I get to fly as I work 5 days and can only fly on weekends. Even after seeing some properties there may be no way to know if I would win the bids. So I would need to do so many offers and there is no way to look at each of the property, the rentability and other aspects remotely and would be fully dependent on a real estate agent. I am not sure if the agent can look at the property and give me a proper judgement on whether to buy it or not. So any suggestions on how to do this would be very welcome!

[Amit M.]

it's interesting reading some of the new Bay Area investors perspective here, and the comments by @J. Martin , both whom I know. I think the biggest barrier to investing locally is the old adage- it takes money to make money, especially in the Bay Area. I hate saying that, because when I first started here, 20 years ago as a young guy, all I had was the $16k my grandmother left me. I literally brought my first place in SF with that. Today you need more like $100-200k to start investing locally (prime Bay Area) IMO.

What I'd recommend is for a young single person to buy 2-4 units, live in the smallest one and rent the others out. Or buy your first condo/home in the best location you can afford. Then wait 2-3 years for appreciation. Refi or take out a second on that equity, and get your second place. It's just that it's much harder to jump start that process now, then it was before...and will probably be even harder 5 years from now than today!

Investing in the Bay Area is heavily predicated on appreciation. I disagree, however, with the common notion that appreciation is purely speculative. That's BS! If so, I've been speculating and making serious bank for going on 20 years. And not just me, for everything in SF is selling like crazy- SFH, multi, good or bad areas, etc. And also in San Mateo and Santa Clara- someone is buying all those expensive, poor cash flow properties. And most likely they are wealthy investors who have made money in these markets before- by appreciation and leveraged.

Once you get familiar and comfortable with an area, the scenario goes something like this: you were driven and brought a starter condo/home in 2010 when things were down. Now you have some appreciation. You take out a second, say $200k and put it down on 2-3 units. It's not the cash flow you are after, it's being able to buy and sustain a decent property in a decent market for the next few years. Rents go up, cashflow improves, and you gain equity. When the time is right you leverage and do that again. The key is when to leverage (beyond the obvious data point of when you can; i.e. Like at the start of a boom cycle.)

That's the only way I know for a young person to get in the RE investment market here. Or if you come from a wealthy family, and come to think of it a lot of people here now do. Probably in so small part from having RE assets here. It's a vicious cycle, but you gotta break in somehow and get on the train.