Part Time CA Investor - Looking to Buy 3 Properties - Class A

[Varun Parkash]

Hello, I am an IT Entrepreneur, IT Consultant and a part-time real estate investor, just signed up with BP, bought a brand-new condo property in Irvine CA 2 years ago in zip 92618 (educated myself on everything by talking to folks - google - some forums) as an investment, but the numbers aren't working in my favor and I have negative cash flow (2 mo initial vacancy and high HOA + special city taxes) = Negative 11k (1st year) to Negative 3k (2nd year). I may start breaking even in my 5th year and still not have ++ cash flow. So, the only thing I am backing on is appreciation.

The property has appreciated 8% over 2 years and I can break-even if I sell it now. It is tenant occupied (who are excellent - have a great credit score - good jobs etc. & want to renew their lease for the 3rd time). Rent goes up 3.5% every year. 

Currently, I am getting close to buying a second rental investment property in North Atlanta region. Once I am done with the closing on the 2nd investment rental property - I will be seeking out to do a 1031 exchange with a budget of $550-$650K.

I am looking for Class A properties (preferably SFR) that are in good school districts, with zero to minimum HOA & in developing neighborhoods with considerable chances of appreciation. I am open to diversifying my portfolio across different states or follow the traditional approach of buying 2-3 units in one state/city (this is where expert analysis from seniors/experienced members will help).

I do plan to get my CA real estate license sometime in future but for now, my next 6-9-month focus is to grab this second investment property and then work on selling the Irvine property by doing a 1031 exchange to generate ++ cash flow. 

Long-term (5 years) focus is to establish a portfolio of 5 condos, 5 SFR's = a total of 10 Class A properties in prime areas.

I look forward to learning in this great community about rental investments, foreclosures, networking, getting the best loans etc. 

Thanks ALL !

[Andrew Johnson]

@Varun Parkash This isn't a "bad thing" but it appears that you're probably focused a little too much on the past.  If someone bought in 2013 Austin, TX or 2012 Irvine, CA.  If you want to buy in the next 12 months it doesn't really matter what's happened in the last 5 years.  If you go back to 2012 you end up with even more skewed numbers because interest rates dropped so buyers got properties a.) cheaper, b.) were able to refinance to lower rates and c.) it never hurts to have Prop 13.  

That said, if you believe that "Austin is the next San Francisco!" then it's still probably a great time to get in that market.  I don't but maybe people do believe that.  All that really matters is what your opinion(s) are of the different area.  Austin could just be 5 years into a 20 year growth cycle.  Who knows.  Certainly not me.  You just have to make your educated bet.

And, not for nothing, but some of these does come down to priorities around cash-flow vs. appreciation and timelines.  If you have a 5 year timeframe it's different than a 50 year timeframe.  And someone buying a property to support them in retirement has different priorities that someone looking to replace their W2.  

I know this is all general "stuff" but that's why it's hard to give people advice.  Well meaningful advice anyway...