Newbie Investor Looking to Learn and Make Connections

[Jenna Harris]

Hi everyone,

I am new to Bigger Pockets - thanks for having me! My husband and I live in San Diego and have been interested in investing for many years, and I have spent the last several months learning all I can about buy-and-hold real estate and we are ready to dive in. Currently we are considering single or multi family properties in the Indianapolis or Cincinnati areas but would love any and all information you have on other markets we should take a closer look at. We are also very interested in anything near a military base.

My main concerns are:

- Managing a renovation remotely

- Incorrectly evaluating a deal

- Finding contractors and property managers I can trust

Would love to connect with any of you who are either in the same boat or have experience/guidance/advice in these areas.

Thanks so much, looking forward to learning all I can!

Jenna

[Dan H.]

Originally posted by @Jenna Harris:

Originally posted by @Dan H.:

I recommend all new RE investor invest local in part because of this issues you list.

You live in a market that historically has produced one of the best ROI in the nation but you are considering investing in the Midwest where there is minimal appreciation, is remote (need to build and manage a trusted team), has cash flow that typically reduce with time compared to inflation.

Compare to San Diego market that has a long history of both property and rent appreciation, that is local for you to have more control/oversight, has historically increasing cash flow.

We invested out of state (still have a single OOS SFR) and it did not produce the ROI like our local RE investments. There was some bad luck involved otherwise we may still own the other 2 units but the OOS units we sold took more of our time, even though we used a PM (again some of it was the bad luck but ...), then any of our local units.

Good luck

 Thanks for the insight, Dan. My concerns with the local market are:

- That I believe there is not much more room to climb and buying at the top of the market is never a good thing.

- Rent control is being strongly considered in the City and the State.

- Initial costs are very high, even in places like Oceanside or La Mesa. 

- Labor costs are significantly higher here for renos.

Would love to hear your thoughts on these concerns.

Top of market: No one knows what the top of market is or when a depreciation cycle will hit. For property prices I do not have a strong feeling in either direction but for rent prices I am convinced of continuing appreciation because 1) rents lag property prices and the rents are lagging the property appreciation 2) supply and demand: The vacancy rate is low, the population is growing (one stat had San Diego with the 13 largest population growth last year) 3) minimum wage increases already approved. 4) Minimal places to put new units. We are constrained on the West by ocean, South by Mexico, North by Camp Pendleton, and East quickly gets harsh 5) cost of construction: currently it is ~$100K to break ground on a new SFR. Then there is the cost of the land (not cheap) and the cost of the build. 6) There are very few places nicer to live. Great climate, lots to do, good employers, good schools. As for were we are in the property price cycle I have purchased twice near market highs. In 1993 I purchased a 3/2 SFR for $167K that fell to ~$140K. Today it is worth ~$580K. In 2003 I purchased a 4/2.5 for $741K. It fell to ~$620K. Today it is approach $1M. My point is that if you plan on holding long term the decline historically has always been temporary. Almost all San Diego RE recoveries took <5 years.

Rent Control: It does not have enough backing at the state level.  Local level San Diego is not the type to over regulate.  Very small odds of rent control in San Diego in the near term.

High prices: yes prices are high. The prices reflect a long period of historical appreciation that has produced outstanding ROI. The expected future ROI is also built into the price. If San Diego did not have the historical appreciation the prices would be low like the Midwest but the ROI would be historically low.

Reno costs: Labor does cost more here than the Midwest but the material cost is similar.  The value gain of the rehab or repurpose is great.  I typically do not take on an effort if the value add is not at least double the cost.  Note in the Midwest where value are so low how much value can you add by renovating a kitchen.  Can you expect the value add to be double the cost?

I am considering making an offer this week that would be my largest repurpose project yet (and most risky).  It is in San Diego county.  I do not look for RE out of San Diego county any longer.  So I practice what I preach.

Good luck