Newbie from Santa Clarita, CA looking into buy and hold rentals

[Brett D.]

Hi everybody.  I'm in Santa Clarita, CA... northern Los Angeles County.  My wife and I are in our forties, have established careers with steady incomes, and in our second purchased home.  We're currently in the process of refinancing our house with a $150,000 cash out.  Our goal is to use around 2/3 of that for a rental down payment, and a third for repairs and improvements.  It would be amazing to find something within half an hour of here, for convenience and to hopefully self-manage the property.  Though it sure seems nearly impossible to find deals where the numbers work within our budget.  To be fair, we haven't gotten the pre-approval yet (hopefully within the next week), so our realtor and we haven't gone too hard.  We have a realtor and mortgage broker, but will still need connections with inspectors and contractors.  At the same time, we also consider long-distance investing, where we can get more for our money.  There's so much to sift through and consider!

Thanks Bigger Pockets and community!

Brett Durfee

[Will Barnard]

Welcome to Biggerpockets, I too live in Santa Clarita, always nice to see locals on here. I have been a RE investor for over 15 years now and am also a GC, plus HVAC and electrical. Finding a cash flow property in the SCV or the SFV is not easy and you will have to hunt for a very motivated seller where you can buy at a good enough discount, fix it up, and have it in an area that would support getting close to cash flow which is no easy task as prices have skyrocketed here (although not as much in SCV). Most homes in lower end areas of these locations I mentioned where you could potentially acquire in the $400k range would not rent for more than $3500 so you would certainly be cash flow negative. It will take a bit more creativity or focus on different areas. the Antelope valley could hold potential but then you deal with other potential problems and less chance of grand appreciation.

One great new method is utilizing an existing property and building an ADU to rent out. Since you already own the dirt, you only have the construction costs to generate the additional income and my experience shows the return of principle back in 5-9 years with about 7 being average which equates to a double digit return on your investment and all along with additional future equity as gravy.

As an example, I have a client who owns a rental unit in Sherman Oaks where I am building a 2+1 ADU for him for just under $150k which will rent for $2200+. In 7 years, he will collect $185k-$210k in gross rents (excluding any increase in rental rents over that 7 year term). It should be a very nice rental income for him over the long haul.

You could also invest in syndicated apartment deals or mobile home parks, which could also deliver nice returns (so long as the operator knows what they are doing).

Study up and get advice from as many experienced parties in the respected fields before making your run at it. Good luck.