All Forum Posts by: Brian Quo

Really, really bad to buy with negative cash flow. And that's because you can buy with positive, so why buy negative.

Question for you Brian - What will you do doing at the property during its tenancy if you buy the new construction house (which is over an hour drive). Will you be needed for maintenance? or will you have a PM do that. Will you manage yourself or hire a PM. Will you be able to spot an issue by doing a drive by every couple of weeks.

I'm challenging you Brian to get of the fear of "out of state". You will need to invest OOS unless you are ok with losing money for years. Just like learning anything. Once you know how, you know how. There are methods. Your fear is not real.

Just trying to help. I got the same talk years ago and I've been killing it OOS ever since. I own zero rentals in Cali and never will.

@Brian Quo

50k increase per year on say a 1million dollar house is 5%. But you are losing 12K a year. And if you account for vacancy you may be losing more like 20k/year. That’s a hefty loss, which, as passive income you cannot even take against your W2 income.

Can you make it a short term rental? Would it cash flow better? Or a mid term rental?

You said you are “afraid” of out of state. That’s sounds like inexperience and lack of knowledge about other markets talking. Why not go see some other markets, meet some realtors, call property management companies, or network? Why not buy new construction in the south east or mid west, and pay 100% cash (since you can still buy houses for 200-300K that are brand new in these areas)? Or buy 5 new construction houses for what you would pay for one in California?

I think you are weighing the right options if you have the downpayment to enter those markets in a smart way. A lot of Cali folks focus on the Midwest but don't know the states, towns, or cities, and also don't know anyone so they are flying blind there. It can still work, but focusing in and around your backyard is smarter as long as you don't rush to make a net negative deal which you aren't doing.

If you are nearby, I would skip property management for a single-family home. You can save 10-12 percent right there. Why do you need a property manager to manage a long-term renter who lives near you on a new construction home with a builder's warranty and no cap ex?