I own rentals all over SoCal, even in OC. Lots of stuff cash flows here, but you have to stop looking at the prices of properties in Homes & Land magazine and instead get knees to knees with an owner of a property and work something out with him/her. You could conceivably buy and ocean front mansion and get it to cash flow IF you negotiate the right terms. Is this possible? Absolutely. Are you going to close one this week? Most likely not. However, you'd be surprised what you can buy if you stop talking to real estate agents and start talking to people.
This past summer, my buddy closed on a 6,000 sq/ft south OC house with an ocean view. 90% seller financed. It wouldn't cash flow the way he negotiated it, but he was looking to move into it so cash flow wasn't his objection. It's such a bad *** house the pool has its own house that is bigger than my house! Could he have gotten it to cash flow? I bet if that is what he was looking for.
You need to study creative financing but not with numbers. You need to look at the psychology side and focus on motivation. Here is one of the key points that once you comprehend it, things will look entirely different to you; not everyone is in real estate for the money, unlike the bunch of sharks on this forum. All you are looking at is dollar signs so you think every other person who owns real estate only sees dollar signs too. I guarantee you of the 100s of houses I bought, not one single seller ever said to me, "I need to sell because I need the money to go do...." NEVER. Not once.
It is more like, "I want to sell because_____" You can fill in the blank from this partial list;
I'm tired of dealing with it.
I let my stupid/loser/deadbeat brother/sister/grandson/daughter/son live there and he/she stopped paying me/isn't helping out/has a bunch of drug addict friends.
I want to simplify my life.
It needs a lot of work and I don't have time/energy for it.
I'm getting old.
I don't want to sell to someone who will kick out my tenants.
I can't afford my mortgage any longer.
I got a job transfer.
I want to be near my kids/grand kids.
The list goes on and on, but I've never once heard "I need $100K to get heart surgery/kidney replacement/triple bypass or I'm going to die!!!"
Stop price shopping and start talking to people. And by people I don't mean real estate agents. They aren't people. They're lazy, greedy pigs who are looking to destroy people's financial lives by telling them, "Sell today and convert 100% of your equity into cash so you can pay all those taxes!" because they're financial idiots who also like to pay high taxes and very few own any investments or understand anything at all about investing.
As far as making money when you buy, I disagree 100% with that. I've never made money the day I bought I house other than the change I find laying on the floor. All I ever did was take on more debt and a huge mess that costs me more money to fix up. Let me tell you from experience, just because you have equity on the day you close doesn't mean it's going to be there the day you're ready to sell! Equity is a myth. It's a false sense of security. You only make money the day that escrow check clears the bank and the deed transfers to someone else.
Forcing appreciation is another myth I don't understand. A house is only worth so much. Yeah, you can find an amazing lot and go nuts building some super spec home that will sell for an outrageous price, but the average house in SoCal is a tract house and those have a ceiling on value both on retail sales price and rental income. I think some people have this idea they can put in granite counter tops and charge another $100/month rent. Then put in a tile tub surround and charge another $50 a month. Well, you're going to hit a point where the perspective tenants will just rent the house down the street that is on the market for about the same rent as every other vacant house in the neighborhood. If by forced appreciation you mean flipping, same rule applies. The house has a top value the day you close. You might have to invest money to get it up to that value, but I wouldn't say you're forcing appreciation. You're just getting back what is there, but not being utilized.
Forcing appreciation to me sounds like being the market maker in a neighborhood. I do this quite often, but I'm not getting some absurd price above what the comps sell for. I might get 10%, but I'm also spending more money to get it there so it's a trade off and it is a risky one. It is more likely here in SoCal that you'll be the market maker in setting the new low comp in the neighborhood than the new high comp. An investment house can only sit on the market so long while your lender and time burn up your potential profit in monthly interest payments, taxes, insurance, vandalism, theft and utilities. At some point, you're going to take the next offer that comes across the table no matter how many thousands of dollars in credit the buyer wants in closing cost assistance.
Building wealth takes time. I know a few investors who beat that clock and have become fabulously wealthy making consistent great plays or a few lucky ones. Most wealthy investors I know buy houses at a discount from today's prices, leverage them up, and wait... for years and years and years. Then one day you look at the pile of junk you own and realize you have 7 figures of equity tied up and it's not changing your life one bit, but you're a millionaire on paper.
