Newbie from Los Angeles looking to Invest locally or Out of State

[Malia Miyashiro-Harmon]

Hi BP Community! I have just joined and been listening to the podcasts and diving into the idea of REI the past few months. Both my husband and I work in the film industry so we are pretty tied to this location for living, but I know neither of us can handle the film industry grind forever, hence wanting to invest in real estate with the hopes of creating passive income in the long term. While we have some cash on hand, it doesn't really make a dent in the Los Angeles market, so I would love to hear from other investors from LA or big cities, and if they did stay in their more expensive markets, what did they do? Or did they stretch their dollars and invest in out of state / growing markets? Also those investors that have very busy work schedules.. what strategies worked best for you guys?

While I know house hacking sounds like the best option, I'm just going to say it, my husband and I have lived without housemates for a very very long time so I that really isn't in the cards for us.  We also have a beautiful rental in a prime location at a very very good rate, so are more interested in options that keep us were we are but help us work to build income.

Thank you in advance for any advice and feedback!   

[Lane Kawaoka]

I started with turnkey rentals because I was a working professional engineer.

But as I became a more Accredited investor I went to syndications.

I would do househacking as the numbers don't really work in comparison to long term rentals in remote markets that make sense.

[Krissy Mussenden]

Hi Malia,

I used to work in the television industry so I know what the busy lifestyle is like. Investing in real estate for passive income is a great pairing for those that work in the entertainment industry. You're making a great choice to dive into it as well. I'm an investment property realtor in LA now, and I'm helping my friends working in tv and film production find there investment properties. They like the idea of a steady flow of passive income if they are in-between projects. Also the idea of a property manager really puts their minds at ease because of their busy schedules. The property manager handles collecting rent, filling vacancies, and managing any repairs. My friends just receive a report once a month to look at and that's it. The property manager makes it simple, they can even pay your taxes and mortgage for you too. 

Investing in most parts of LA is a bit too expensive to cash flow positive, but there are some areas where the numbers do make sense to invest here. Right now we're looking in Long Beach and there's plenty of great investment properties there. The area is really up and coming and they are putting 3.5 billion dollars into developing the city and it's already looking great. I have a client that just closed on a 4 unit only a mile away from the beach at $1.1M. There are duplexes in the area for $700-800K as well. Prices would be double that in Santa Monica. There are other areas like the valley and west adams that can have some great numbers as well.

Also house hacking doesn't need to be a one unit property with roommates. You can also house hack a multi-unit property. I just put in an offer for a duplex for myself to house hack in the south bay. I'll live in the 2bedroom unit and then have renters in the 3bedroom unit. And the units are two completely separate houses on the same lot so the renters are more like neighbors than roommates. I'm also using an FHA loan with only 3.5% down which is helpful to get started.

There's plenty of tips and strategies to for investing in big cities like LA, especially for those just getting started. 

[Jon Schwartz]

Originally posted by @Malia Miyashiro-Harmon:

Hi BP Community! I have just joined and been listening to the podcasts and diving into the idea of REI the past few months. Both my husband and I work in the film industry so we are pretty tied to this location for living, but I know neither of us can handle the film industry grind forever, hence wanting to invest in real estate with the hopes of creating passive income in the long term. While we have some cash on hand, it doesn't really make a dent in the Los Angeles market, so I would love to hear from other investors from LA or big cities, and if they did stay in their more expensive markets, what did they do? Or did they stretch their dollars and invest in out of state / growing markets? Also those investors that have very busy work schedules.. what strategies worked best for you guys?

While I know house hacking sounds like the best option, I'm just going to say it, my husband and I have lived without housemates for a very very long time so I that really isn't in the cards for us.  We also have a beautiful rental in a prime location at a very very good rate, so are more interested in options that keep us were we are but help us work to build income.

Thank you in advance for any advice and feedback!   

Malia,

Fellow Angelino and film-industry type here. Until COVID shut down feature production, my day job was editing movies. I had a ten-year plan to develop a portfolio that would replace my income, and COVID has simply accelerated my journey.

I'm a big fan of house hacking, but you've annunciated the prime reason not to: despite LA's exorbitant rents, you're paying a good rate. One thing to consider, though, is buying a duplex. No roommates, and you still get the longterm benefits of principal paydown and appreciation.

I'm also keeping my capital in LA because I believe coastal appreciation is going to build more wealth in the next 5-10 years than Midwest cashflow. It looks like you're still working in costuming; if you don't need cashflow now, I'd say you should focus on equity growth and appreciation gains. A few years down the road, sell your LA assets and 1031 into cashflowing assets in other markets; that's my plan in a nutshell.

LA is crazy expensive, but C neighborhoods in LA are a little more affordable. I was recently until contract on a $320K duplex just south of downtown (but we bailed because the building needs a new foundation). These neighborhoods are a little sketchy, but guess what? Those 1%-rule properties in Cleveland and Memphis are ALSO in sketchy neighborhoods! If you're doing to invest in C-class neighborhoods, I'd rather invest in local C-class neighborhoods where I have a much better understanding of gentrification patterns (ie, the path of progress).

And if South LA is still out of reach, I recommend considering an acquisition in Columbus, OH. I've done a lot of research into out-of-state markets, and I've found that Columbus is excellent in terms of population growth, job growth, and price point. I've also found a great realtor in Columbus; message me if you'd like a referral.

All the best!

Jon

[Brandon Goldsmith]

House hacking is the ideal situation for getting into real estate investing. If the numbers don't work or it isn't feasible to do that where you live then OOS investing is also a good option. I agree that Columbus is a good start to look for investing. Best of luck! @Malia Miyashiro-Harmon

[Dmitriy Fomichenko]

Hey @Malia Miyashiro-Harmon, it’s good to see you here on BP!

Read Beginner’s Guide to help you get started: http://www.biggerpockets.com/real-estate-investing

Best of luck on your REI journey.

[Steven Foster Wilson]

Hi ! @Malia Miyashiro-Harmon 

Columbus is an awesome market! I am born and raised, and know the local market like the back of my hand! Over the past 5 years I have seen industry & population growth in Columbus explode, and effectively it has raised our housing prices.


Househacking is a great way to get started! I started this way while I was a sophomore at OSU here in Columbus OH. I used an FHA loan to buy a duplex, rented the rooms to my friends while I renovated. Then I rented it for top dollar, refinanced, and had enough money to go buy my second property, and still that duplex is net cash flowing over $1,500/month.

[Stephen Akindona]

I really hate how guys who own no property in Memphis classify the entire market! Memphis is a great town to invest in and you do need to know your neighborhoods but that is true of any market you choose to invest in! Talk to experts in the market you want to invest in and don't take the advice of those who haven't done what you are looking to do! Just my 2 cents!

[Zeke Liston]

Originally posted by @Malia Miyashiro-Harmon:

Hi BP Community! I have just joined and been listening to the podcasts and diving into the idea of REI the past few months. Both my husband and I work in the film industry so we are pretty tied to this location for living, but I know neither of us can handle the film industry grind forever, hence wanting to invest in real estate with the hopes of creating passive income in the long term. While we have some cash on hand, it doesn't really make a dent in the Los Angeles market, so I would love to hear from other investors from LA or big cities, and if they did stay in their more expensive markets, what did they do? Or did they stretch their dollars and invest in out of state / growing markets? Also those investors that have very busy work schedules.. what strategies worked best for you guys?

While I know house hacking sounds like the best option, I'm just going to say it, my husband and I have lived without housemates for a very very long time so I that really isn't in the cards for us.  We also have a beautiful rental in a prime location at a very very good rate, so are more interested in options that keep us were we are but help us work to build income.

Thank you in advance for any advice and feedback!   

 Hi there, I would agree that Columbus, OH would be a good market to look into. 

[Remington Lyman]

Originally posted by @Malia Miyashiro-Harmon:

Hi BP Community! I have just joined and been listening to the podcasts and diving into the idea of REI the past few months. Both my husband and I work in the film industry so we are pretty tied to this location for living, but I know neither of us can handle the film industry grind forever, hence wanting to invest in real estate with the hopes of creating passive income in the long term. While we have some cash on hand, it doesn't really make a dent in the Los Angeles market, so I would love to hear from other investors from LA or big cities, and if they did stay in their more expensive markets, what did they do? Or did they stretch their dollars and invest in out of state / growing markets? Also those investors that have very busy work schedules.. what strategies worked best for you guys?

While I know house hacking sounds like the best option, I'm just going to say it, my husband and I have lived without housemates for a very very long time so I that really isn't in the cards for us.  We also have a beautiful rental in a prime location at a very very good rate, so are more interested in options that keep us were we are but help us work to build income.

Thank you in advance for any advice and feedback!   

A lot of investors from LA are investing in Columbus, Ohio right now.

[Malia Miyashiro-Harmon]

@Jon Schwartz Thank you for your insight!  Yes, while some cash flow is always great, both my husband and I still enjoy our careers and don't plan on quitting the business yet, so appreciation and growth and the long term game is what I am more interested in.  Copy on the duplexes as well.. that is something I look at a lot.. and honestly would be what I would go for if I plan on purchasing here in LA.  Thanks again for connecting and I will keep in touch!  Happy New Year!

[Malia Miyashiro-Harmon]

Aloha @Lane Kawaoka  My Dad's side of the family is from HI.. Honolulu, Haleiwa and the Big Island!  Yes, Out of State Turn Keys look very good to me but I know there are pros and cons with those too... what company did you work with and what area did you purchase in?

[Angelo Palazzo]

Great post!  I'm very much in the same boat.  I'm also in the film industry here in Los Angeles.  I've been in the industry grind for almost 30 years now and not sure how much longer I want to keep it up. 

My goal this year is to buy my first duplex by July.  I want live in one and rent the other.  I figure since I'm not married and don't have kids yet, this would be the best way to start out and stay in LA.

I would love to talk to anyone here in the LA area who has done deals on duplex who might be interested in perhaps working together or pointing me in the right direction.  I am super focused to make this happen this year.

[Malia Miyashiro-Harmon]

@Krissy Mussenden Thanks for all the info!  Yes, duplexes or multi unit property, if I decide to invest here is most likely what I would go for.

@Brandon Goldsmith  Thank you for the thoughts and seconding the OH rec!

@Dmitriy Fomichenko Thank you!

@Steven Foster Wilson Thank for reaching out and you thoughts on a market you are in.  I have a close friend who is from the area too... sounds like I should chat w her about it!!

@Stephen Akindona  Thank you for your insight.  I know if I decide to jump into an out of state market, I would visit and definitely do boots on the ground research before purchasing.  It seems too big of a deal to not do face to face due diligence.  It is like how people judge Los Angeles for being super vain or super glamorous without ever stepping foot in the city... it's both and everything in between!!!

@Zeke Liston and @Remington Lyman  Thank you for reaching out.. good to hear from people in the area.

[Axel Meierhoefer]

@Malia Miyashiro-Harmon and @Angelo Palazzo

I live in San Diego county and faced the same situation you describe since we move to CA in 2001.

What I learned is to look for a few things that others here have not yet mentioned:

1. What are the true long-term goals. It sounds like at some point in the future you want to say: "I had enough of the industry" or "I had enough of the work volume", or something along those lines". If that sounds like something aligned with your long-term vision, you want to find your answers to the question; How do we love to live if we no longer need to work in the film industry, and where would that be? If it remains in CA, then determine how much money it would take to afford that without a regular income from work. If it another location, maybe Hawaii or Florida or even out of the country, determine how much it would take per month to have a comfortable life. That's your "Economic Independence Number".

2. For myself I owned residential real estate to generate the income I want for my Economic Independence number. My number is $3000/month. That means I need to own 12 properties that pay me $250/month each in cash flow. I have 10 now, so I probably get to my goals by the end of 2021. Your number and the number of properties might be different, but doing this calculation answers the question: how many properties do I need?

3. To get the properties as quickly as possible, you want to ask and answer the question: Where do I find the best balance between performance (meaning properties that meet the 1% rule) and quality (meaning properties in nice B category neighborhoods with good schools, good tenants, low crime, etc.) For me that means out of state (OOS) and I work with turn-key providers because I am too busy to spend a lot of time to oversee my properties. People mentioned markets like Ohio (I own properties there) and midwest (I own there) and there are a few more.

4. To be able to develop a passive income portfolio OOS, you want to answer the question: Who can I trust to do all the work for me and I still get my $250/month and more as I keep holding and adding to my portfolio. For me, that meant working with a special kind of turnkey provider. They need to find the property, renovate it, get appraised at or above the making price, sell it to me, guarantee no repairs for me for 1 year, have a tenant at closing (date of purchase), and manage the property for me - all under one roof (that's the most important and pretty are part).

There are some more details, but I am living proof that this works and is very passive and hands-off. Busy professionals, especially when they are passionate about and love their work as I do, appreciate that paying a little more to have the freedom to focus on work while the Turnkey partners focus on what they do best is the ideal setup I recommend for OOS investors.

I know there are multi-family properties, apartments, syndication, etc. and they all have their place and purpose. If, on the other hand, you look for low risk, great management, constantly increasing cash flow on the way towards your Economic Independence number, the TK OOS strategy works wonderfully.

Last word: The Economic Independence you reach at some point does not mean you have to retire or stop work. It only means you have the freedom to decide if and to what extent you want to exchange your time for money.

You can create almost anything you can think of, but you can't make more time. Not just for you, but for any kids and their kinds and any future generation What you develop as your portfolio will serve you and your husband and generations to follow. That's what I have done in the last 10 years and now I am almost at the point to have that freedom. I can't wait. 

I hope you will start that journey too.

[Angelo Palazzo]

@Axel Meierhoefer

Wow, thank you for that response.  For me, my long term goal is to purchase one investment property a year for the next 5 years.  If I can get to an additional $1000/month in cash flow with 5 properties in 5 years while still working in the film industry, I believe that would be a great start for me.

[Axel Meierhoefer]

@Angelo Palazzo You are welcome.

Yes that would be a great start and you can possibly achieve more in less time. All it would take is a detailed review of expenses, and a plan to maximize the number of properties in your portfolio.

You can't necessarily predict what will happen, but good choices can make a big difference. I bought a property a little more than 1 year ago and the market appreciated 10%  in 2020.

Next year I can increase the rent a little and the mortgage gets slowly paid down.

I did not plan on it but it helps grow cash-flow and equity. In a few years, as the appreciation continues, even if it is just at the rate of inflation, I will be able to put a HELOC and use that equity money to purchase more properties.

Yes, $1000/month is a good start. I encourage you to think bigger, be brave, and set your Economic Independence number and then go for it.

[Andrew Syrios]

Welcome aboard Malia!

[Malia Miyashiro-Harmon]

@Axel Meierhoefer  Thank you for this!  Our financial advisor was recently talking about a similar process in regards to retirement.  I appreciate the thoughts and insight!

[Axel Meierhoefer]

@Malia Miyashiro-Harmon You are very welcome. Let me know if you like to talk about it and I will be happy to answer any questions you might have. I have been at this for many years and almost at the finish line

[Malia Miyashiro-Harmon]

@Andrew Syrios  Thank you for the welcome!!

[James Wise]

Originally posted by @Malia Miyashiro-Harmon:

Hi BP Community! I have just joined and been listening to the podcasts and diving into the idea of REI the past few months. Both my husband and I work in the film industry so we are pretty tied to this location for living, but I know neither of us can handle the film industry grind forever, hence wanting to invest in real estate with the hopes of creating passive income in the long term. While we have some cash on hand, it doesn't really make a dent in the Los Angeles market, so I would love to hear from other investors from LA or big cities, and if they did stay in their more expensive markets, what did they do? Or did they stretch their dollars and invest in out of state / growing markets? Also those investors that have very busy work schedules.. what strategies worked best for you guys?

While I know house hacking sounds like the best option, I'm just going to say it, my husband and I have lived without housemates for a very very long time so I that really isn't in the cards for us.  We also have a beautiful rental in a prime location at a very very good rate, so are more interested in options that keep us were we are but help us work to build income.

Thank you in advance for any advice and feedback!   

Holla