Newbie investor who is looking into investing out of state

[Gurmanpreet Singh]

Hey BP family!

I am a newbie from Sacramento, California and have been trying to educate myself through podcasts and books. I am currently 21 years old and have been trying to save up money so I can invest into a rental property.

I have learned that California is a state where rental properties that cash flow are tough to find. So I have been looking into out of state markets that I can invest in since properties in California are expensive.

I have been also looking for multi family properties in Sacramento so I can house hack and get my feet wet with real estate investing. I don’t know if I should find a multi family and house hack first or if I should look into something that is out of state. Let me know what you guys think is a smarter thing to do to start of with.

I also want to connect with more real estate investors in my area and out of state that will give me pointers and advice that will help me get started.

Thank you,

Gurman Singh

[Lane Kawaoka]

@Gurmanpreet Singh San Francisco, Hawaii, Los Angeles, Seattle, Boston are examples of primary markets which are NOT ideal for cashflow investing.

It could appreciate but I consider that gambling. Sophisticated investors invest on cashflow where the rents exceed the mortgage plus expenses (and enough money to pay for professional property manage to do our dirty work).

Sophisticated investors look at the Rent-to-Value Ratio and look for at least 1% or more to be able to cashflow after expenses. You find the Rent-to-Value Ratio by taking the monthly rent dividing by the purchase price. For example a $100,000 home that rents for 1,000 a month would have a Rent-to-Value Ratio of 1%. Most people I work with live in primary markets (as opposed to Birmingham, Atlanta, Indianapolis, Kansas City, Memphis, Little Rock, Jacksonville, Ohio, or other secondary or tertiary markets) where the Rent-to-Value Ratios are under 1%.