New to real estate - Not sure where to start

[Julie Bourdon]

Hey everyone! 
I've had my eye on real estate investing for about a year now, particularly interested in starting with house hacking. However, after recently relocating to California for personal reasons, I've come to realize that the market here is quite challenging for beginners like myself.

I'm contemplating shifting my strategy to out-of-state investing. I've managed to save up a decent amount for a downpayment, but I'm feeling lost about where to even begin. Learning about various investment approaches has been overwhelming and taking that initial step toward building passive income streams seems daunting. Ive read books and listened to podcast but cant seem to find the strength to take that first step.

If anyone has been in a similar situation, I'd appreciate hearing about your experiences and how you overcame the fear and uncertainty to take that first leap into real estate. What motivated you and what were your first steps to dive in and not let fear or lack of knowledge stop you from making progress. 

Thanks in advance for any advice or insights you can offer!

[Korey Pell]

Hey Julie, Id love to have a chat with you referencing all of this sometime soon. Preferably a call, there so much to speak on, and my fingers would fall off with ways to go about this! 

[Stephen Ceausu]

Hi Julie! I currently live in California and own a 4-plex in Riverside. I recently started looking in other states and just went into escrow on a 4-plex in Atlanta. What I’ve learned is that it’s JUST as important that the numbers pencil out on the deal as the location. Hope this helps! 

[Shervin Golgiri]

Are you curious about what Kentucky's real estate market has to offer? 

YES, you can still achieve cash flows of 7% to 10% in the single-family residential (SFR) sector.

If you want to learn more about these opportunities, don't hesitate to reach out. Kentucky's market is one of the few where such profitable returns are still possible.

Shervinrealtor.com

[Min Zhang]

Hey Julie! Welcome to the community! I completely understand what you're feeling. I started investing only about three years ago, so I am relatively new to real estate investing. As a starter, I recommend reading “Long-Distance Real Estate Investing: How to Buy, Rehab, and Manage Out-of-State Rental Properties”(if you still haven't). I found it to be very helpful when I got started investing. Here is a summary of the book. https://www.nateliason.com/notes/long-distance-real-estate-investing-david-greene. Also, have you considered any markets to invest in? You may want to start investing in the Midwest because it's affordable and offers good cash flow. Ohio, in particular, is a very beginner friendly state to get started with your real estate journey. I'd be happy to share my experience! Feel free to reach out if you need assistance. 

[Matthew Kwan]

HI Julie,

You can always start off by house hacking meaning you live in one UNIT or ROOM and renting out the other vacant units/rooms to offset your monthly mortgage payment.

There are several ways to run and make sure you are maximizing your rental income while keeping your living expense as low as possible. Try looking into zillow/Redfin and see what your potential rents you can get near the neighborhood by filtering the bedrooms/bathrooms of the intentional property that you are planning to buy. This will allow you give a reference point on how much potential rent you can receive. (Max vacated rents - your monthly mortgage payment) = +/- net cashflow. Happy to connect and assist you in your real estate investing journey.

Happy to connect if you are interested to expand your portfolio

@Albert Bui @Carlos Valencia

[Jake Andronico]

@Julie Bourdon

*Agents have entered the chat* haha

People are making money in virtually every market. I can definitely understand how overwhelming it can be. 

Are you able to figure out how to house hack locally? Orange County is obviously very expensive, but have you looked at neighboring cities, even Las Vegas? 

Somewhere where you can live or be in a short amount of time. Physically see it, drive it, be there for inspections, etc. 

When investors start out they're usually attracted to all of these home run and grand slam stories about 6-7 figures in 2-5 years. Incredible risk to do that. 

But I'd suggest to not get caught up trying to hit a home run on your first deal. Learn how to consistently hit singles and doubles and wait 10-20 years. This is a long game. 

Just my opinion, and best of luck to you! :) 

[Nicholas L.]

@Julie Bourdon

i would do whatever it takes to start with a house hack.  those OOS numbers look great on paper... but this can happen:

https://www.biggerpockets.com/forums/963/topics/1195280-expe...

https://www.biggerpockets.com/forums/48/topics/1193623-rent-...

i want to be clear - i'm not saying OOS is not possible, or a bad idea.  but it takes time and effort - like going to the market IN PERSON, and setting up a team IN PERSON.  buying some random property you've never seen, because someone who stands to make money off it tells you it's a deal, and then trusting it to people you've never met?  that's the issue.

the best advice I can give to you is to put in some work on that house hack.  a lot of people want to shop on Zillow, look at 3 properties in person, and have their 1st offer be accepted.  then when that 1st offer is outbid, they get discouraged.  so don't be that person.  look at 50 properties over the next 6 months and make reasonable offers that you're comfortable with.  if your offer is rejected, move on.

hope this helps.  so many people on BP have put a really strong foundation in place with house hacking.  and so many have lost money by starting with a completely random property in a completely random state.

[Brad S.]

Seems like you are doing it right with educating yourself and asking for advice prior to making your first investment move. I also think it's normal and somewhat helpful to have some fear, anxiety, concern, etc. But, that should help keep you focused and not hold you back from taking action. 

I have done many deals where I was nervous and anxious and questioning myself, but after a while you work through it and do it anyway ... but smartly.

The first thing you should do, if you haven't already, is take a good look at your current situation (income, expenses, job security, etc) and project into the future of what you want your life to look like and then work backwards filling in the gaps. In other words, if you are going for a certain amount of passive cashflow in the future, then you can work on understanding the moves you should make today to set yourself up for that future. Experienced investors will tell you that real wealth is made from appreciation and growth. It is basically preparing yourself for success and putting yourself on that path. I have many examples of both mistakes and successes regarding that principle.

Anyway, I am also in CA and my first rental was out of state. What helped me take the leap was following others that already had a team set up,  and they had already researched markets, vendors, etc, making the whole process easy. I only needed to verify them and generally their conclusions, but there was no sense in reinventing the wheel from scratch. And this was the late 90's so there were a lot less resources readily available, as compared to today. I still follow one of those people today and trust them and their conclusions 1,000%, based on my experience with them.

Once again, I feel the place for you to start is to get very clear on where you "want to be", then you will be able to get a clearer idea of what to do today to head that direction. 

And keep reaching out and asking questions or for help, as many of us have a lot of experience and are happy to share our insights.

[Stephen DeThample]

California is expensive for sure. Run the numbers on every possible scenario and see if you can find something that works.  If you’re having a hard time getting close to breaking even, I would definitely consider taking the smallest bedroom to make more from the primary bedroom rent. 

[Wale Lawal]

@Julie Bourdon

To transition from California's challenging real estate market to out-of-state investing, set your goal, keep learning,  choose a market with strong rental demand and gather a team there. Begin with one property, push yourself to start by a set time, and don’t give up. A mentor can help guide you and keep you on track. Start with safer bets and slowly get braver to beat fear and win in the property game.

Good luck

[Elizabeth Seiferth]

Quote from @Julie Bourdon:

Hey everyone! 
I've had my eye on real estate investing for about a year now, particularly interested in starting with house hacking. However, after recently relocating to California for personal reasons, I've come to realize that the market here is quite challenging for beginners like myself.

I'm contemplating shifting my strategy to out-of-state investing. I've managed to save up a decent amount for a downpayment, but I'm feeling lost about where to even begin. Learning about various investment approaches has been overwhelming and taking that initial step toward building passive income streams seems daunting. Ive read books and listened to podcast but cant seem to find the strength to take that first step.

If anyone has been in a similar situation, I'd appreciate hearing about your experiences and how you overcame the fear and uncertainty to take that first leap into real estate. What motivated you and what were your first steps to dive in and not let fear or lack of knowledge stop you from making progress. 

Thanks in advance for any advice or insights you can offer!H

 Hi Julie! I’m also in California and have debated about every strategy out there 😅. But landed on flipping (with the intent of buying and holding eventually) given that I have always wanted to do it! My big concern, like you, was the cost of property in California but there are some cheaper markets in state as well that have a lower barrier to entry than the coastal markets. I am sure you can find success in whatever you do. And let me know if you’d like to connect, I am in North county san diego and in OC often. 

[Julie Bourdon]

Quote from @Jake Andronico:

@Julie Bourdon

*Agents have entered the chat* haha

People are making money in virtually every market. I can definitely understand how overwhelming it can be. 

Are you able to figure out how to house hack locally? Orange County is obviously very expensive, but have you looked at neighboring cities, even Las Vegas? 

Somewhere where you can live or be in a short amount of time. Physically see it, drive it, be there for inspections, etc. 

When investors start out they're usually attracted to all of these home run and grand slam stories about 6-7 figures in 2-5 years. Incredible risk to do that. 

But I'd suggest to not get caught up trying to hit a home run on your first deal. Learn how to consistently hit singles and doubles and wait 10-20 years. This is a long game. 

Just my opinion, and best of luck to you! :) 

@Jake Andronico Haha, that was pretty funny!

Thanks, Jake. After browsing, it seems California options are above what I can invest, especially in the OC/LA area. While I've considered the Midwest, Las Vegas crossed my mind due to familiarity and the fact it would be at a drivable distance for me. I will look more into that market. And I agree with you; aiming for a gradual, less risky approach. Appreciate your insights! :)

[Julie Bourdon]

Quote from @Elizabeth Seiferth:

Quote from @Julie Bourdon:

Hey everyone! 
I've had my eye on real estate investing for about a year now, particularly interested in starting with house hacking. However, after recently relocating to California for personal reasons, I've come to realize that the market here is quite challenging for beginners like myself.

I'm contemplating shifting my strategy to out-of-state investing. I've managed to save up a decent amount for a downpayment, but I'm feeling lost about where to even begin. Learning about various investment approaches has been overwhelming and taking that initial step toward building passive income streams seems daunting. Ive read books and listened to podcast but cant seem to find the strength to take that first step.

If anyone has been in a similar situation, I'd appreciate hearing about your experiences and how you overcame the fear and uncertainty to take that first leap into real estate. What motivated you and what were your first steps to dive in and not let fear or lack of knowledge stop you from making progress. 

Thanks in advance for any advice or insights you can offer!H

 Hi Julie! I’m also in California and have debated about every strategy out there 😅. But landed on flipping (with the intent of buying and holding eventually) given that I have always wanted to do it! My big concern, like you, was the cost of property in California but there are some cheaper markets in state as well that have a lower barrier to entry than the coastal markets. I am sure you can find success in whatever you do. And let me know if you’d like to connect, I am in North county san diego and in OC often. 

@Elizabeth Seiferth
Hey Elizabeth! Haha, I bet. I'm glad you found what works best for you and that you enjoy it! There are so many different strategies; it's difficult to choose one. That's true, there are different price brackets locally; I just feel, for me, it might not be the best option to invest here but I'm keeping my eye out. I appreciate you! thank you for your input, and I would be happy to connect when you are in OC. I am in the San Bernardino area. :)

[Julie Bourdon]

Quote from @Wale Lawal:

@Julie Bourdon

To transition from California's challenging real estate market to out-of-state investing, set your goal, keep learning,  choose a market with strong rental demand and gather a team there. Begin with one property, push yourself to start by a set time, and don’t give up. A mentor can help guide you and keep you on track. Start with safer bets and slowly get braver to beat fear and win in the property game.

Good luck

 @Wale Lawal 
Thank you for the insightful advice! I appreciate the guidance on transitioning to out-of-state investing. I'll keep your tips in mind. Much appreciated!

[Julie Bourdon]

Quote from @Brad S.:

Seems like you are doing it right with educating yourself and asking for advice prior to making your first investment move. I also think it's normal and somewhat helpful to have some fear, anxiety, concern, etc. But, that should help keep you focused and not hold you back from taking action. 

I have done many deals where I was nervous and anxious and questioning myself, but after a while you work through it and do it anyway ... but smartly.

The first thing you should do, if you haven't already, is take a good look at your current situation (income, expenses, job security, etc) and project into the future of what you want your life to look like and then work backwards filling in the gaps. In other words, if you are going for a certain amount of passive cashflow in the future, then you can work on understanding the moves you should make today to set yourself up for that future. Experienced investors will tell you that real wealth is made from appreciation and growth. It is basically preparing yourself for success and putting yourself on that path. I have many examples of both mistakes and successes regarding that principle.

Anyway, I am also in CA and my first rental was out of state. What helped me take the leap was following others that already had a team set up,  and they had already researched markets, vendors, etc, making the whole process easy. I only needed to verify them and generally their conclusions, but there was no sense in reinventing the wheel from scratch. And this was the late 90's so there were a lot less resources readily available, as compared to today. I still follow one of those people today and trust them and their conclusions 1,000%, based on my experience with them.

Once again, I feel the place for you to start is to get very clear on where you "want to be", then you will be able to get a clearer idea of what to do today to head that direction. 

And keep reaching out and asking questions or for help, as many of us have a lot of experience and are happy to share our insights.

@Brad S
Hey Brad! Thanks for the advice! Totally get what you mean about using fear to make smarter choices and stay focused. Once I get my first deal, I know the rest will be way smoother. Your tips are super helpful! I remember reading about filling in the gaps and going backwards, so I'll definitely give that a go. Bet having a solid team in place was a game-changer for you. Creating mine is the next big step!

[Becca F.]

@Julie Bourdon

I agree with other comments about house hacking. If that isn't do-able, are there areas within a 2 hour drive? 

I invest in the Bay Area and the Indianapolis metro area (lived there for a while then moved back to CA). One thing I didn't do which I should have done before putting in offers in 2023 was to talk to very knowledgeable property management companies (referred to me by other investors), which I did after I closed on 2 homes, sight unseen. The PM companies gave me very honest feedback about my properties. I did have a construction management company walk a few properties that I was considering making an offer on/made an offer on (deals didn't go through) - the renovation costs consistently were over what I projected with my numbers and their opinion of the ARVs was lower (if you were planning to do a BRRRR, which I didn't).

I should have also paid an experienced local investor like $100 or $150 to do a detailed video tour of the property and neighborhood, someone unbiased and who isn't on the agent's team. I did fly out there later and walked the properties and drove around the neighborhoods - they look very different in person than in photos and video. I won't ever close on a property now without seeing it in person. 

I'd recommend attending local real estate meetups where you can talk to other OC investors who buy locally or OOS. I learned so much from talking with other Bay Area investors, things I would have never thought of. Good luck!

[Drew Sygit]

@Julie Bourdon investing should be approached logically, not emotionally.

Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with little or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

PM us if you’d like to discuss this logical approach in greater detail!

[Twana Rasoul]

Hi Julie, I help multiple individuals house hack here every month here in San Diego and most of them feel that it is not doable and consider out of state. There are a ton of strategies but you being in Southern California, I'd recommend you exhaust every effort of trying to get started with a house hack here than going out of state. Find an agent in your market that also is a seasoned investor and they should be able to assist you to find success in house hacking. Your county is relatively similar to San Diego County, where I am myself. Besides the fact that you'd need less funds to start a house hack here than invest out of state, your overall ROI is likely to be significantly higher than a random cheap market OOS. for instance even though San Diego has had amazing overall appreciation over the last half century, it was still the #1 in appreciation the past 12 months at a rate twice that of the national average. California in general is not the easiest to invest in due to barrier to entry and tenant laws but more real estate wealth is generated here than any other state.

OOS investing comes with a bit more complexity and risk.  Starting local is usually the best strategy for most that are starting off.