@David Martin Jr I think all above have the right answers and directions. It really comes down to what make sense in your situation. Maybe you don’t want to dive right in, maybe you do, or maybe you want do something more in your comfort zone. But unless you start or dip your toes in, you won’t know how powerful real estate investing is! Rather buy out of state, being a investor or even live-in investor. You just need to get started and it will snow ball from there. Happy investing man!
@Robert Chuang Well, first thing is I want to get out of the place I live into something better. Maybe that has nothing to do with investing or maybe it does. Second would be I want to start building wealth. I'm not necessarily trying to make real estate as my main source income. I also don't want to have all my money (down payment) tied up for years in a property and I never see my ROI. Maybe out of state is the move. I'm open to the possibility of different scenarios.
@David Martin Jr Real estate investing doesn't have a set route but sounds like you can start with 2 units - 4 units with low % down payment while you are collecting rent? As long as you are occupying the space, you can put lower down.
I'll give you my perspective since I was maybe in a somewhat similar boat 4 years ago. Random thoughts in no particular order:
1. Don't confuse living in real estate with investing in real estate. I look at this way, if you only own places you personally live are you an RE investor? Maybe. The places I invest I wouldn't live. The place I want to live is very expensive, so I rent it. House hacking sounds horrible to me. Also MF is really tough in LA due to tenant's rights. So the house hack a quad so popular in the midwest doesn't work that well out here.
2. Sounds like you want some diversification into RE which can have great returns done right and has sometimes has tax benefits. Think about if you want to be active (buy your own RE) or passive (invest in other people's deals).
3. If active - what do you want to buy and RES or Commercial lending? Do you like strip-malls, car washes, apartments, triplexes, etc. You have time to learn and ponder.
4. If passive what do you want to do - private lending (debt), equity investing for a share of the returns, short term or long term holds? Again, learn and ponder. You know what they say about a fool and his money...
5. Do you want to invest in CA or out of state?
Just a few things to get you started. Read and learn. You can get great returns and have some fun in RE. You also can do all of the above but you have to get started with something.
Is the place you currently live, a home that you own? If so, the best options IMO are to either:
1. SELL IT- Take the money to buy a cash flowing , preferably value add 2-4 unit property. You can buy a 2-4 unit with 3.5% or 5% down owner occupied loan. Live there a year and then buy another and so on.
2. BUY A NEW HOME-If you've lived in your current residence for over a year, you can get another owner occupied, low down payment loan. The key is to make sure once you move out of this property, it will cash flow.
Both optioms will allow you to buy real estate with little down and best loan terms. And make sure you find an investor friendly lender. They will make sure to help you structure a great plan based on your personal situation.
I disagree with a lot of investors that say your primary is not an asset. If you buy a good deal and can rent it out or when you pay the loan down it provides benefits that you will never have as a tenant.
You said earlier you want something better....so I'm assuming you want something to live in. But that comment concerns me. This market is hot, but does not mean it will stay that way. So if you're looking at things that are shiny and new you are probably going to pay a high premium for that.
I strongly recommend looking at different markets in So Cal before investing in another state. I love investing in the Antelope Valley because I live here and understand this market very well. I have also heard of people doing well in San Bernadino and Victorville (also currently growing).
Right now and actually always cash flow is important. With a lot of uncertainty I am only buying with equity and with strong cash flow to where if rents drop 20% I would still be satisfied with my return.
@David Martin Jr I am not an expert on the LA market, but many investors that I talk to are from the area and are investing out of state. If you're able to purchase multifamily so that you can bring only 5% down and have the help of your tenant's rental payments to utilize towards your debt service then I'd consider that as a first step!
@David Martin Jr connect with a team doing deals out of state with double digit net caps . Unless you have 500k ++++ for flips ( but you are not anywhere near ready for that ) how are you going to make money in LA ? Certainly not with rentals you are lucky if you get 3% net. Its all about knowledge and your team
@Shelley Sheri thanks for the reply, I am currently a renter and have never owned. I’m open to other areas in So Cal for sure.
I want to live in a nicer place than I do now but I understand that’s completely different or can be completely different than investing, I can separate the two.
I’m looking to get started in real estate investing and just trying to see where to start. Since your in SoCal I would love to pick your brain if you have time?
@Bob Prisco I’m open to that but I know assembly or finding the right team is no easy task which is ok as well I’m in to working hard just don’t want to be that nightmare story guy
@David Martin Jr I think all above have the right answers and directions. It really comes down to what make sense in your situation. Maybe you don’t want to dive right in, maybe you do, or maybe you want do something more in your comfort zone. But unless you start or dip your toes in, you won’t know how powerful real estate investing is! Rather buy out of state, being a investor or even live-in investor. You just need to get started and it will snow ball from there. Happy investing man!
@David Martin Jr connect with a team doing deals out of state with double digit net caps . Unless you have 500k ++++ for flips ( but you are not anywhere near ready for that ) how are you going to make money in LA ? Certainly not with rentals you are lucky if you get 3% net. Its all about knowledge and your team
Why do people assume this? This is just not true for all of California. I have 2 deals I found on redfin with 24% and 19% CoC return. One of them is zoned for up to 4 units in which the cash flow should be even higher if I build them. Both cash to close are under $75k and if I refi, I may be able to pull that money back out. If he is new why recommend to invest out of state....where he has to trust people to tell him about a process he hasn't seen before? Maybe there's something I'm missing. Seems a lot of people recommend that.
@Grey Stone because I have dozens and dozens and dozens of clients from California from San Diego into Silicon Valley flipping them hundreds of properties they all tell me the same thing. None of them invest in California. They all invest out of state for double digit net caps. They all tell me the same thing you’re not going to make anywhere near 10% per year on a rental. Just going by what I’m told.
@Grey Stone because I have dozens and dozens and dozens of clients from California from San Diego into Silicon Valley flipping
From what I've seen I think it depends on the area of California. I grew up in Rancho Cucamonga where prices are much higher and cash flow is much lower than the AV. Fortunately and unfortunately this area attracts investors from other areas. I have very little experience with doing deals out of state. So I'm not saying you're wrong, but I really am trying to understand how someone new would do well out of state. Can you share steps and tips from your experience with investing out of state? I'm really curious because I hear people doing it, so maybe there is something I'm missing.
@Grey Stone simple, just like I started 10 years ago. Connect with those doing deals,I bought my 1st two, site unseen , back then we used to get 25- 30% nets and provide 20% ish nets to clients. So many overthink. Again, simple, connect with experts in an area that do deals vs reading books and analyze things to death ..... It really is not difficult for the clients all they do close , everything else is handled
@David Martin Jr I can't speak to LA, but in San Diego I have found a sweet spot in buying distressed 2-4 unit properties where the rents are below market, repairing these properties, finding tenants, and then refinancing. Implementing the BRRRR strategy. This can be an expensive undertaking, so having access to capital to finance the repairs is a must, but if you can buy and rehab for the right price, you can absolutely make it work.
I will say investing in CA does have its challenges including but not limited to:
1. Very tenant friendly state. Be prepared for the benefit of the doubt to always be given to the tenant and to have to go the extra mile as a landlord/owner to get things in your favor. I often feel like the state views me as the 'bad guy' as a property owner.
2. High cost of entry. Properties are expensive so you need to really sharpen your analysis skills to make sure you are buying good deals. (This has turned into a blessing though because now my partner and I are confident in our analysis skills and have found great deals in out of state markets we invest in.)
Hope this helps! Never hesitate to reach out if you think I can be of assistance.