All Forum Posts by: Becca F.

@John Russo

I agree with the other comments about it being difficult to cash flow. You don't mention where you're located. Where are you looking for these long-term rentals for $200k-$300k? In your local area or within a 2 to 3 hour drive?

I would suggest NOT to buy out of state/unknown markets for sub $200k properties. I've posted about this many times. Any "cash flow on paper" will be eaten up by repairs, capital expenses and potential tenant issues. One of these days I'll add up the all money I've put in on these Class C type properties - so far I'm out $70,000+ with uncertainty about appreciation (I have a lot of passive activity losses on my tax returns so that's the only bright side). 

I've talked to recent California investors who are buying high quality properties in appreciating markets, some are ok with some negative cash flow.  To reduce negative cash flow: rent by the room (called co-living by some people), medium term rentals, STRs, new builds where the builder will offer a lower interest rate. 

I wouldn't focus so much on cash flow but look at the overall big picture: economic growth of the area, rents increasing, appreciation, property tax increases reasonable or extremely high, insurance costs skyrocketing in those areas (or worse not being able to get insurance) and other factors. 

In my several years of buying property, I haven't signed any Buyer's Agency Agreements, except for starting in 2022 where I signed a BAA specific to that property. After talking to a couple of agents, I was asked to sign a BAA for 6 months. I understand spending time with a buyer, researching, and looking at properties, an agent wouldn't want someone to jump ship to a different agent. 

With the NAR ruling, if I'm interviewing agents, I asked how the commission works out if the seller isn't willing to pay the buyer's agent commission and if I need to cough up the 3% for the total 6% which is split between selling and buying agent.

Example: One way to structure when I asked: Compensation is coming from the seller, not the buyer. If the seller is paying 2% or more, we will not ask the buyer to pitch in the difference to make up 3% compensation. If the seller is paying at least 2.5%, we will purchase a home warranty for the buyer up to $550 (copied and posted this from the agreement). Are there any holes with this language? 

For me to pay 3% on a $400k to $500k+ property is a good chunk of money, if seller isn't willing to pay any part of buyer's agent commission. What additional questions should be asking them? Other ways to structure this, build my cost into closing costs and do some kind credit/debit with other things? 

If it matters, the market I'm looking at is Nevada, flying out to Vegas soon and already looked in Reno. So far numbers aren't  working with traditional LTR but I'm exploring all avenues (rent by the room, MTR, new build with lower interest rates etc ). My investor friends referred me to a couple of agents. 

I just sent you a detailed DM. I forgot this in the DM but both CPAs do free 30 minute consultations so maybe write down all the questions have you for them. 

I know a CPA in the Bay Area who works with a lot of real estate investors and does tax strategy. He's even doing an educational webinar soon. You could probably meet him in person since he does in-person workshops for free sometimes.

I could also give you the name of another CPA (not local) that I talked to extensively that I think would do a great job.

DM me if you would like more info. 

 100% agree with this. To the OP, Shyla, I invest in California and also out of state, in the Indianapolis metro area. To put this in context, I also lived in Indiana so I didn't just pick a random market 2000 miles. I rented out the Indiana home (Class A, nice suburb with great schools) I lived in when I moved back to CA. This went well then I started making mistakes. 

I wanted to scale faster and bought "cash flow on paper" Indianapolis properties (Class C) in 2023. To be fair, I'm not dogging on Indy but I should have bought higher quality properties. I have literally put in $70,000 or more that I regret, two 20% down payments (about $58,000 total) and all the repair costs and capital expenses (stolen AC unit, new roof which was partially paid by my seller, new water heater). I've posted about this many times. I'm uncertain of how much this property will appreciate (sold one recently to cut my losses sooner). I think these types of properties are better suited for locals who can be hands on, do their own repairs and check on them frequently. I would have been better off putting that money into a HYSA earning 4 to 5% interest or some index funds for far less stress. 

I don't know SoCal very well but some of the more affordable areas in California: Sacramento and the Central Valley, Fresno, like Nicholas mentioned but these might a little far for you. You will care about and take care of your property more than an agent, property manager etc. who's over a thousand miles away. 

I'd recommend attending local meetups in the LA area to ask other investors where they invest in with SoCal and OOS. I have nothing to sell you and I don't  benefit financially in any way from helping you.

Feel free to DM me if you have questions. Good luck!

 I didn't do any creative financing, any subject to deals, or work in any RE related services. I started by buying a home using 10% down, moved, then rented the house out. I did a cash out refinance when the interest rates were low then used that money to help pay for a renovation for a different property. 

I did the college path then went back to school to get a Master's degree to increase my salary and opportunities. I job hopped and I've been able to increase my W2 salary significantly in a relatively short period of time. This helps with just having more money to buy properties. Nothing exciting and no magic formula. I'm a low risk investor and after making some mistakes learned to not rush into decisions. Someone else might be willing to take on more risk, which works for them. 

If college isn't the route for you, I'd suggest looking at trade school or doing an apprenticeship in a construction related field: plumbing, electrician, carpentry, etc. There's a shortage of great tradespeople. 

I'd recommend attending local real estate meet ups so you can talk to investors. I'm still learning a lot now when I attend meet ups. 

Totally agree! Real estate investing is a long game.  To address the "scaling up quickly" the fastest I've seen someone scale up is 7 years to a substantial portfolio. These are friends who both worked in tech - husband was earning $400k a year in his mid/late 20s, don't know the wife's income but it was high (guessing $200k+). They have amassed a significant portfolio and turned real estate into a business in their early 30s but they also took on risks (that I wouldn't do). The other friend (not a high W2 earner) lucked out and bought in 2014 to 2021 (not in California) and has a decent portfolio (10 doors). We're at 7%+ interest and higher prices now. 

I attend a lot of real estate meet ups and I'd estimate 90% of young investors (20s to 40), I talk to are software engineers, engineers, or tech sales with high W2 incomes. Interestingly haven't met any doctors - seems like a stressful job and adding on RE investing would be more stress, that's my theory. I'm in the tech hub of the USA with Silicon Valley though.

To the OP: will you attend college/trade school? I'm assuming you're currently living at home with parents. I would look at going into a high paying career field. There are different statistics on this but so many people become real estate agents and very few become top earners. Lenders love people with stable W2 jobs especially for getting conventional loans. 

I think that's great that you're thinking of this before you even turn 18 - good luck on your journey!

I replied about a month ago but here's an update after talking to a few California investors who bought recently. I'm assuming you're in the Bay Area or LA. 

- Sacramento: buy duplex, do Long Term Rental on one side and Mid-Term Rental on other side. I think you could find $500k to $800k range (I was looking at closer to $500k range about 2 years ago and doing 1031 exchange of Indiana properties, too many moving parts for me so didn't do 1031,  higher property taxes didn't work for me).  A bit more landlord friendly than Bay Area. Follow the money where Bay Area people are moving to and I think this area will appreciate a lot. 

- Nevada: Las Vegas or Reno, lower property taxes on equivalent value CA property. Range is $400k to $600k when I looked in Reno. Higher quality tenants at high range. 

- Utah: know CA 2 investors buying there, doing new builds. One will do rent by the room/co-living to get more cash flow. One is doing long term rental and knows it won't positive cash flow for a few years.  Purchase price $399,000 for LTR. The rent by the room investor didn't share purchase price but my quick Google search said up $900k to $1+ million. I didn't get into a deep conversation yet but they must see economic growth, etc. 

- Colorado: recently visited there, not for for real estate reasons. Denver and surrounding area out 4 hours, nice appreciation and beautiful state. Don't know about their property tax rates and increases for investors. 

- Arizona: low property taxes, haven't visited there personally and don't know about local economy but I have seen price declines with the areas I considered near Phoenix. 

Thoughts on rent by the room, if it's college town or young single people, you'll usually get more than renting to a single person/couple/family but the dynamics of roommates may need more management (e.g. how to split water bill if one person is taking 45 minute showers)

OP is you are still here, please update us on your journey.

ACTIVE investor (mostly), but if we're getting down to details, PASSIVE investor (very small part - REITs)

Am I BUSINESS participant if I'm self managing? Since I'm the property manager for two properties. Is there overlap with these categories? Just curious. 

Great points about the syndication and the different roles! 

For one of my properties, I also pay for trash/recycle and sewer. The city will only allow the owner to pay because they said if a tenant stops paying, they will put a lien on the house.

I add the cost onto the base rent. It's a fixed amount but goes up about every 3 years or so.