Should I invest here in California or out of state?

[Linette Westley]

Hi everyone! This is my first post in BP. I'm 26 years old. I'm new to real estate and to California. I recently moved from Texas to California. I work for the United States Air Force! I currently live in the Bay Area and was wondering what is the best way to start in real estate with little money. I don't know if I should find a duplex here or in Sacramento or I should look into investing out of state (and if so, what the best city). What are your guy's thoughts? Thanks in advance!!

[Arie Van Gemeren]

Hi Linette - I live in the Bay Area also, and when I started investing I went through these same questions. We actually went into contract on our first deal on a 4-plex in Oakland, and I dropped out on the opportunity and started looking elsewhere. The entry prices here were prohibitively expensive - not necessarily worse, just like trying to play the $100 blackjack table versus the $10 buy-in. And when you're getting started you can't always play at the $100 buy-in table. 

I don't have a ton of advice other than to say that - Sacramento is great, I like it, and the "buy-in" is definitely lower. That being said, you have to really understand Sacramento. Neighborhoods change dramatically, and quickly, on a street-by-street basis. What appears to be a deal can actually be a really rough neighborhood, and not what you bargained on. I made that mistake a few times when first looking at Sacramento years abck.

Personally, I settled on doing my first deals out of state (Oregon) as we had extensive connections to Portland, I'd worked for a company that setup major operations there, and I really liked the growth story. The "buy-in" to acquire nice properties there was much more reasonable, too. 

If you're looking to do your first deal, and you don't currently own a house, perhaps you can consider doing a Bay Area house-hack or 2, 3 or 4-plex purchase and live in it? I still think that's the greatest strategy.