Where should I invest

[Harrison Haynes]

Hello everyone, I'm trying to get into real estate investing but don't really know where to look. I live in San Diego, so my market is slightly out of my price range. Any suggestions on good areas to invest in rental properties? Looking to build some cash flow. I'm grateful for any input!

[Twana Rasoul]

@Harrison Haynes I used to have investments in the Midwest and now all my investments are local here in San Diego and all of them started out as "initially" cash flow negative..many would think I'm crazy but those are usually people who don't have any investments here in San Diego.

The best place to start for most is starting local, where ever that is, even if it is in the midwest.  Going long distance only adds more complexity and one can be successful in any market but you have to understand the local market and economics and having people you trust on the ground.  There is no inherent value in Real Estate, its value is derived from the surrounding economy.  (That's why the same exact home can be $100k in one part of the country and $1M in a different part)

There are some on here that invest out of state and do very well with 1000s of units but they are not the norm. 

Few items to consider as you decide what to do:

1. House Hacking - would you be better of house hacking vs continue renting? We all have to pay mortgage whether it is our own or someone else's.

2. When calculating your numbers in markets you don't know very well, your returns on paper can and likely will be different from realityl;

3. Markets that are lower cost and higher cap rates are generally perceived to have higher risk and lower appreciation in the long term and thus have to pay a higher cash flow.

4. Generally the higher the Cap Rate of a market the lower the appreciation...If Cap Rates are high enough in a market then the real estate is likely losing value each year.

5. Being cash flow negative initially in coastal markets like San Diego, Los Angeles, etc is not the end of the world if there is a plan in place to get it to break even and then to positive within a known period of time...

6. food for thought: investing in a 401k is a negative cashflow investment (for those that say they'd never invest in anything with negative cashflow  and have a 401k account ;)   )

7. Investing locally with owner occupied loan options can be less of initial $ investment than buying an investment out of state since you can buy owner occupied with 3.5% down payment and investments are generally 20%-25% down.  (i.e. local investment - 3.5% down payment of $800k = $28,000 and OOS - 25% of $200k = $50,000)

8. If you are adamant about investing out of state,  I'd connect with other successful locals here in San Diego who have shown success over a number of years investing in a particular out of state market and learn that market from them...it will be alot more helpful than reading a book on long distance investing.