All Forum Posts by: Joshua McGinnis

Welcome @Lee Davis from one Los Angeles software engineer to another.

I totally feel you on the tax burden. California has the highest state income tax rate. And given that we developers tend to fall into higher tax brackets, our total tax bill can be quite brutal.

As the others have stated, there are a few local LA meetups. There's also the podcast, the blogs, and other really helpful posts if you use the search.

Nothing beats real experience though. If you (or anyone in LA) is ever so inclined to go out and look at prospective investment properties in person and do the analysis of whether or not it'd be a good investment as a group, just let me know. I'd be happy to try and set that up.

This 4-unit property (2 beds/1200 sq.ft. per unit) is listed in the low $800's. It currently brings in $4600 in rents. The area has about a 3% vacancy rate, is within a few miles of a major university, and is generally in a location that is up and coming.

It has annual expenses of about $27K - which seems a little high.

I think the rents are a little low for the area and could be increased, especially if some minor updates were made to each of the units.

Any thoughts on if this is a good deal?

I'm bummed. I'd love to go but I have a prior engagement. I hope this will become a recurring thing so I can come to another one in the future.

Thanks for organizing it anyway @Ali Boone

Welcome @Account Closed

I can speak a little more to your getting your real estate license since my wife and I just did it this past year.

First, the actual getting of your license is probably the least difficult part of the whole thing; though, despite what some will say, it does require some studying and practice to ensure you pass on the first try.

In addition, real estate sales is not a part-time gig and will require your full time and attention to do it properly.

Per the California Bureau of Real Estate requirements for sales agents, you will need to take:

1. Real Estate Principles, and
2. Real Estate Practice, and
3. One other course from the list on website.

To get licensed, you need to pass a 150 question multiple choice test. If you're scared of math, don't be. It's super basic and both my wife and I had no math questions on our test. (Which is too bad because I'm a math/science geek. I was actually bummed by this).

Once you have your license in hand, you will need to find a broker/owner to hang your license. I cannot recommend Keller Williams high enough for their excellent training program which is largely developed and created through the Baylor University Keller Center for Real Estate Research.

For me, there was no cost to join my brokerage. This is not to say there aren't any costs. Since real estate requires your full time and attention, you will need to live on savings until you start generating income.

Here's a few upfront costs worth mentioning:

• Testing & Licensing Fees
• Access to the MLS for your area
• Realtor association membership dues
• Living expenses while working towards your first commission
• Marketing & Setting up your brand (website, signs, tools like DocuSign, etc)

Which leads me to my next point ... Marketing.

If you're thinking about sales, you need to be thinking about marketing. A huge part of real estate is about lead generation.

Aside from the constant networking and relationship building you need to constantly be doing, on any given day, you may be out door-knocking your farm (a geographic area of 300-600 homes that you market to with a min 3-5% annual turnover), working on designing a postcard or flyer to deliver to your farm, handwriting letters to your contacts, cold-calling expired listings, previewing homes, and/or showing buyers around.

All that said, a solid degree in marketing with a speciality in internet marketing + real estate courses would be an excellent way to exit college with some of the equipment you need to be successful.

And if it doesn't work out, there's a huge market for internet marketers. I only mention failure because statistically, most agents don't make it in the long-run and need to be able to fallback on something reliable.

If you are successful at getting listings and finding buyers, you can earn between 2.5% - 6% gross commission on the sale of a home. 3% on a million dollar home is $30,000. Your broker may take 30% of that, leaving you with $21,000. You'll then need to make sure you put enough away for taxes (don't forget to log all your expenses and save receipts!)

With the simple math above, you would need to sell about 48 hours to gross $1 million dollars (after brokerage fees, but before taxes).

It is entirely possible to do, especially in SoCal where the avg price of homes are higher than most of the country. But just like anything else, it takes a lot of work, discipline, risk taking, and the ability to push yourself outside of your comfort zone.

I hope this is helpful.

Welcome @Sovannary O

Have you looked at the West Adams area of Los Angeles? It's an up and coming area with a high rental demand. There's a new Expo line going in soon and it is close to USC. And personally, I love the old craftsman architecture representative of its time.

In fact, I just got back from looking at two different properties that would net between $300 to $1K a month after all expenses.

SoCal is expensive compared to the country, but there are some neighborhoods that are relatively affordable and have potential for a good investment.

I'd be happy to share these two homes for you and/or refer you to my wife (she's an agent in LA) if you'd like.

Otherwise, welcome and in the meantime, don't let that $20-30K burn a hole in your pocket. Keep saving, learning, and going to look at properties. You'll find something.

One option would be to install it yourself since you were already considering doing it anyway.

You could then ask the tenant to re-up their lease with a slightly increased rent.

Because it is a capital improvement and you're paying for it yourself, you'd be able to write off the expense and/or depreciation.

This approach sounds reasonable for the tenant, but lets you retain control over the improvements.

My first down payment was funded through savings, cashing out some stock, and doing work on the side as a consultant.

When I first started the job I was in at the time, they offered me some stock as part of my benefits package. The RSU's (restricted stock units) became available after 2 years of work and I started cashing some of them in. That contributed a big part of the down payment and about $10K towards repairs.

At the time, the stars aligned such that we were getting additional monies from all over the place. Both my wife and I were working, we had stock, and I was able to bring in about $30K extra in just a few months of doing software and web dev consulting.

They key thing for us was to not change our lifestyle by going out and ramping up our spending. We knew we wanted to invest in real estate so we saved it all and planned the best way to get a return with the funds we had.

Great deal.

Just curious, if someone can pay double what your mortgage is - why wouldn't they buy a home themselves?

Do you think it is because they have bad credit, lack downpayment funds, aren't able to commit to a long-term investment, or something else?

This is an interesting structure @Paul Jamgotch

What do the returns look like with this type of structure for each of the parties involved?

I haven't done much with private money lenders, but I've spoken to several that advertise in my area. Without a track record, they tend to want a big down payment and have fairly aggressive terms.

I suspect, as with any business or finance relationship, if you have a proven track record, you can structure better deals.

As far as approaching private lenders, I would start by Googling. Many of the private lenders in my area have their own websites with contact info. Start by giving a few a call and asking them what their process looks like and how some of their more recent deals have been structured.