Should I invest here in California or out of state?

Question

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!!

Patrick Drury · Answer

@Linette Westley @Remington Lyman and @Brandon Goldsmith both hit the nail on the head. If the numbers don't work with a house hack you should invest out-of-state in a market that the numbers do work, as well as one that has good population growth, and job opportunities. I would recommend Columbus OH where there are lots of job opportunities (battelle, L-Brands, OSU, and etc) as well as good population growth the city is constantly growing and expanding. In Columbus, you get good appreciation and cash flow unlike some of the other cities in OH where its slightly more cash flow and basically no appreciation.

Jay Hinrichs · Answer

VA loan to a owner occ in the bay area .. hands down.. get that first.. I take it your paying rent right.. why pay someone's house offeast bay you can still get resonable pricing in Richmond area..

Arie Van Gemeren · Answer

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.

Matthew Lee · Answer

Hi Linette! I'm also a new investor in the Bay Area and had the same question of Out of State vs buying locally. Worked with the David Greene team who sent me this video, and that made the decision pretty easy for me. Feel free to check out!I used FHA for low money down (for Bay Area prices at least) and just closed on my first duplex here in Oakland two weeks ago! I'll be house hacking / owner occupying at least the first year. Still getting up and running, but needless to say I'm pretty excited and think it's a viable option to consider.

Stephen Brown · Answer

Although I help out of state investors invest in Ohio, I would recommend you to invest in Texas IF you have the capital for it. You want to have as much knowledge as possible for the market you're investing in. An agent will help you but if you've been in that market for years then that will give you an advantage over other investors. With that being said, the Ohio market is great because it has low prices, strong rents, and long term tenants.

Corby Goade · Answer

Welcome! Much of this depends on what you mean by "little money." You have access to VA loans, which can be a great jump start to investing, but you'd have to occupy at first, which leaves out of state investing off of the table. In general, if you are investing out of state, you'll need 25% down. Approx 75% of my clients are from California, so it's defintiely possible if you have the right team put together. You'll get lots of help on these boards if you can be more specific about your budget and long/short term investing goals. Good luck!

Linette Westley · Answer

@Matthew Lee thanks for the link! That video was super helpful! I really appreciate! Also I’d love to connect sometime whenever you’re free

Brian Garlington · Answer

Thank You for your service Linette!

Remington Lyman · Answer

I think you should try to house hack locally first. After you do that then you should start investing in real estate out of state.I recommend you read this article on OOS investing. It explains the importance of creating your core four. You will need to get a local, rockstar Realtor, contractor, lender, and property manager. https://www.biggerpockets.com/blog/core-four-real-estate-team I invest locally in Columbus, Ohio

Brandon Goldsmith · Answer

You could always try and house hack but if the numbers still don't make sense then you could look at possible OOS markets. Just try and narrow down what your criteria would be. Good luck! @Linette Westley