All Forum Posts by: Joey Kincer

You don't need to strictly adhere to the 1% rule; some see it only as a guideline. My first investment property (which was turnkey SFR) only met the "2/3% rule" but still managed a $650/mo cash flow (soon to be $800/mo due to pending tenant turnover). Anything that meets or exceeds the 1% rule are likely to be cheaper properties that carry a higher risk with tenant clientele. I'd rather keep risks minimal and buy upscale properties, even though it sacrifices a little return, as long as the cash flow and ROI are still decent. Obviously it depends on how much capital you have to get started. Also, everyone's risk tolerance is different, you may have the temperament to deal with potential riff-raff while others (like myself) do not.

The 1% rule is a nice-to-have if you can get it, but don’t let it be your sole “make or break” stat if all the other numbers make sense.

I've lived in SoCal my whole life (43 years) and currently own a townhome smack in the middle of Orange County. That said, despite the decent year-round weather I personally would never buy residential investment property in this area. Not only is California one of the most tenant-friendly states around, but compared to the rest of the country, prices are super-inflated at the moment (my dad just sold a 1600sqft tract home in Cerritos, CA for $880k!) so any SFRs you buy will be lucky to meet even the 1/2% rule. I can't speak for commercial or MFR since I'm not in that space, but I imagine those scenarios are similar.

If you're hell-bent on finding something in this area, there are many counties to choose from: high-priced Los Angeles, Orange, and San Diego counties, mid-priced Riverside and San Bernardino counties, and low-priced Imperial county (out in the desert). Cap rates would probably be more reasonable in the latter counties, but you're still going to pay elevated prices regardless.

You would honestly do better in other states where laws are more friendly to landlords and communities are still becoming established. You'll receive way more bang for your investing buck. (Bought my first investment SFR in Arizona last year and it's off to a great start.)

Howdy all. Thought I'd hop in this forum and join the legions of other RE investors building up their fortunes. Found this place courtesy of Bogleheads.org, which is great for investing topics but too many anti-RE folks over there. I live in the middle of Orange County, CA and have owned my primary residence since 2010 (bought during the financial downturn, and has appreciated nicely since then).

Began my RE investment escapade last summer.  I had a bunch of dry powder saved up to invest in the markets early in 2020, but with COVID-19 turning stocks volatile and bonds no longer paying decent yields, figured better to try elsewhere. My dad who's been a realtor since 1974 told me "You really need to get into real estate!" With interest rates at all time lows, that didn't sound like such a bad idea. Need those rates to work for me rather than against me. But where to begin? I sure as heck wasn't going to buy in tenant-friendly California.

Considering I plan on moving to Arizona in later years/retirement, and they're a landlord-friendly state, that seemed as good as any place to begin. After much research, Dad referred a local broker so I drove out in July and spent 4 days looking at new and existing homes in the northern suburbs of Tucson (Marana/Oro Valley). Narrowed it down and put in an offer, and after a bit of negotiation, went under contract on a 2-story tract home (4br/2.5ba/2575sqft) in Rancho Vistoso, an upscale community in Oro Valley. Had to stretch to the very top of my budget, but it was in turn-key condition and the sellers were very accommodating, so virtually no fixing/cleaning expenses. 25% down, 30 years @ 3.25% interest rate (0.25 point) which is stellar for investment rates.

Drove back out 30 days later to sign papers, get the keys and meet with a reputable property manager. With all the new protocols and screening qualifications shaped by the pandemic, PMs would surely look for quality tenants who wouldn't be taking advantage of any moratoriums. Home was marketed well and only took 2 weeks to find qualified tenants, at $100 over the appraised rent estimate! (Likely due to families moving away from dense cities to the outer suburbs).

Knock on wood, there's been zero issues with the tenants and PM. Cash flow is $650/mo and overall ROI is north of 7%, which I know is lower than most investors would target but I'm willing to sacrifice a little return for an upscale/stable investment, especially my first time out. It doesn't meet the 1% "rule" by any means (more like 2/3%) but no decent property does right now, and I'm perfectly OK with that. To add a cherry on top, the property has already appreciated almost 10% in the eight months I've owned it, which is crazy.

No regrets so far! Would love to buy another one in the next year or so, but with prices shooting up like they have, I'm a little hesitant to go in for a 2nd round right now. If we hit a bust cycle then I'll be ready to spring into action, but I'm super happy with what I have for now.