San Diego, Buy and hold, Rental, First Time, little to no money

[Kevin Godinho]

I am new to investing in general, but have been doing a lot of research and am eager to get started in real estate. I live in San Diego. I am mostly interested in buy and hold rental properties and learning that business. Right now I am looking at little or no money down if I were to act soon. I wouldn't mind waiting a few years and saving up a 20% down payment. (I had originally filled this section out asking for a mentor, but then got a pop up explaining how they do not allow that). Any knowledge of getting started with little to no money. If anyone has any tips for the San Diego area, they would be much appreciated.

[Aaron Mazzrillo]

Buying a house with little to no down in San Diego is a pipe dream. I'm sure it happens, but unlikely for someone doing less than a few dozen deals a year. By that I mean, if you're looking at lots of opportunities, you might discover a situation where you could put together a transaction with little to no money down. You're unlikely to do it on your first deal. I look at a few hundred opportunities a year and from those I buy around 25 houses a year. I have a house in escrow now that I am paying $201,000 for and my private lender is funding $200,000. After escrow and fees, I'll be out of pocket $4-5K. That is as close to little to no down on any deal I've done this year. 

BUT, now I have a house to deal with. So, while my deal might not have taken much capital to close, it will require quite a bit to get it up and running. It has a 9 year tenant paying $750 in a $1,250/month market. Do you think he's going to stay on once I bump his rent $500? Nope. Not likely. So, I will have to rehab the house and there will be a few month's vacancy. That might be $10K. Might be $15K. Might be $20K. I have no idea. But I do know it won't be free! 

Rental houses are not for those living pay check to pay check. When things break and you have non-related people living there, you need to have money available to fix those things today. Unlike uncle Joe or cousin Sally, your tenants are not going to enjoy getting in the car and coming to your house to take a hot shower until you save up enough money to replace the hot water heater. Build up reserves, then shop for a rental. Otherwise, in a year or two when something does go wrong, you'll be on the phone talking to a guy like me and you won't like the offer I make you, but it will be your only option and I won't feel bad at all about sniping your rental house from you.