Purchase multifamily with low cap or invest out of state

[Mike Thoeresz]

I currently work in north Irvine and live in the west side of Costa Mesa. I'm renting a gorgeous house and I live on the second floor. I rent out the three bottom bedrooms so my rent is $855/month (nothing for out here for my quality of life). Last year I purchased an investment property in Indiana which is cash flowing nicely $300-$400/month. The renters just renewed their lease. I'm purchasing another one out there right now. I'm debating about continuing to purchase SFH's out of state or purchase a duplex/triplex/quad in OC and live in one of the units. The cap rates out here are brutal but it could be a good long term investment. I've seen duplex's in Costa Mesa for $750k; triplex's in Santa Ana for around $850; and quads in southern Anaheim for $800k. Southern Anaheim would be brutal but I could drive to work at 6:30am and workout before work. I work late so traffic coming home wouldn't be bad. I'm 35, single, make about $145k/year, and looking to get more involved in real estate investing. Would love everyone's opinion on maintaining a higher quality of life in Costa Mesa or purchasing multifamily in Santa Ana or southern Anaheim. Thanks!

[David Carte]

I would say your best bet would be investing out of state with properties that cash flow more nicely what you'll find in those areas. As you pointed out, your cap rate is pretty bad. 

Considering you've already managed to successfully invest in real estate out of state, I would try to scale that aspect of your business up. I think a big challenge for investors (myself included) is feeling comfortable enough to invest out of state due to a lot of unknowns and the trickiness of managing those properties. But if you have a team established out of state that is successful in managing your properties, I would use your capital to scale your properties under the same team you have out of state. How are you getting your properties in Indiana? Do you have partners you're working with? using a Turnkey? I'm actually looking towards out of state investing simply for the reasons I described above (living in LA) and would be interested to learn how you got into your first property out of state.