New member from Orange county, California

[Vincent Van]

I'm Vincent, from Orange county, California. I'm here to learn about about REI.

I have set some extra cash for investing in buy-n-hold SFRs, and would like it to be as passive as possible. I have done extensive reading on BP in the past 2 weeks, and seem like turnkey route would be a great fit for time being.

My next step would be to identify some out of state markets that fit my criteria, and find a trust worthy and honest turnkey providers to do business with.

Happy to connect with other experts and not-so-expert in RE here :-)

[David Faulkner]

Originally posted by @Vincent Van:

@David Dye , @Sydney Hall , @Carlos Altamirano , and @David Faulkner

Thanks for your advises. The main reason I try to avoid California (especially my local) is the price just too high, I tried to plug in numbers many times, and it just seems not right. There just barely any cash-flow. If I was to bet on appreciation alone, it would seem a bit risky here, yah I may hit a jackpot, but rely on luck is a bad strategy (in my opinion) - since I don't have experience in RE, I would like to minimize my risk, and do investment instead of speculation.

Maybe I didn't look at enough in California, or just don't really know where and how to look for area that cash-flow (Fresno, Bakerfield?), and meet my requirements. It would be wonderful if you guys can provide me some pointers.

No luck needed. Here's a hint: I flipped every property I've ever purchased, I just flip them to the rental market instead of the sales market. So, I've already made my profits on forced appreciation, which also helps the cash flow, and don't depend on luck but am able to put myself in luck's path. In this way, I pick up the quick nickel (forced appreciation), the slow dime (cash flow), and the really slow dollar (market appreciation) all along the way, all with leveraged compounding nearly (or totally) tax free. If I buy right, at any point in time, from the day after I close escrow, to the day after I finish rehab, to the 10+ years after holding, I can sell at a profit if I need or choose to and am not solely dependent on cash flow or the market going up to make my money; no speculation needed. If there is cash flow or the market does go up, though, I still get to keep those profits too.

While we're at it, let's talk a bit about cash flow, appreciation, and speculation. Coastal SoCal has appreciation rates of around 6% depending ... that is not last year, that is not in a hot market only, that is the long term historic average, going back 40+ years. Do you think assuming the average 40 year historic appreciation rate is speculation? Sure, there is volatility there, which is why buying right is important to insulate you from short term market fluctuations, but if you hold for the longterm I believe it is perfectly reasonable to assume the long term average. You are doing this anyway when you buy in "high cash flow" areas and assume zero appreciation, which is the appropriate assumption in most cases but may be aggressive and speculative in itself for markets like Detroit that have been in decline for decades. If you put 20% down you have financial leverage of 5-to-1 on 6% average appreciation, which is 30% return, and that is before considering cash flow which is the "icing on the cake". That adds up to hundreds of thousands, then millions, real quick and you don't even need many units to get there ... how many units and how many years at $200/mo would it take to get to the same place on cash flow?

And what about cash flow? All my stuff in CA, whether inland or coastal, cash flows very well. How? Rent increases ... they go hand-and-hand with price appreciation and usually increase at a similar clip. This makes sense, since they are both driven by the same forces of persistently limited supply of housing and high demand for it. So, understand that when you say you are looking for cash flow, please understand that short term cash flow and long term cash flow are NOT necessarily the same thing.

See what I mean when I say it takes a shift of mind set? Hopefully see what I mean by no speculation needed? It is simple, but not easy. Once you crack the code, you'll never go back or consider investing anywhere else.

Good luck, whichever path you choose.