All Forum Posts by: Melvin Martinez

 Hey man

I am an agent/investor here in LA and also an investor in other markets. IT is a hard question, do i buy in my real expensive market, or do i rent here and invest in a better market (and by "better" i mean better for traditional investing)

I would say this: The traditional idea that I am "missing out" if I don't own a primary residence in my chosen market to live in, is not necessarily a true notion.

I know a guy, a friend of mine who actually told me about BP back in the day. We started out kind of at the same time, and made similar money, both self employed attorneys with successful firms, but not huge money guys by any means.

He looked at the LA/So Cal area, and said "none of this makes sense, you cant cash flow here so I am not investing here" 

and i said "I believe in so cal real estate, i will invest here, live here, and play the long game"

So I started house hacking here in LA, and doing the more traditional deal. 

he rented in a place that he liked to live (by the beach, where nobody can afford to buy) and started buying stuff in Chicago, where he is from.

He still rents here- but 10 years later, he owns 400 doors in chicago and could retire if he wanted to (but isn't). I am still working, and even though I have done quite well, dont get me wrong- I cannot retire.

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Now he and myself are different people, he is an absolute machine, and maybe a stronger /more dedicated investor than i am. So take it all with a grain of salt.

But the point is, there is no rule that says I have to have my primary somewhere, and that I have to worry about being "priced out" - 

(a) who cares, if you have successful incestments elsewhere, its all ego that cares about renting vs buying in my hometown; and

(b) My buddy, if he wanted to, could sell one of his apt buildings in Chicago and buy whatever he wants over here- but he still doesn't. He rents a high end house for 12k a month or something like that.

just food for thought.

It depends on the performance of the investment compared to the performance of the personal residence.

If the investment property doesn't add to your monthly earnings, and doesn't appreciate equally to what your personal residence would, it's not worth the investment. Being that you mentioned that the personal residence would appreciate well, the favor lies with buying the personal residence.

Generally, it's better to buy the investment property first, if you buy what will perform. This way, you're adding to your income and when you buy the personal residence, you're more stable than before (if considering an equivalent purchase price as before and not increasing your affordability due to the extra income).

You are exactly right in pursuing other markets for your investment property. Feel free to connect for more insight on asset class and choosing the right type of investment suitable for your targeted performance. I'm a licensed PA realtor and have plenty of opportunities that could be of Interest to you in your price margin/targeted performance.

I now live in Los Angeles. After giving up a $1,600/month lease I had for 4 years in Studio City, I moved twice and now similar apartments go for $2,800/month in the same area. As a renter in Los Angeles, I almost view leases as an asset since we're basically a protected class here. If you plan on staying in LA and aren't moving elsewhere, I'd follow the advice others are giving and continue saving money for the next 12 months. I really really don't think home prices are going up relative to historical averages in the next 12 months (in other words, I think real inflation-adjusted growth will be stagnant in the next 12 months). Keep your lease. And keep saving. 

If you didn't live in a coastal CA city I might have different advice. But as someone who was in an almost identical situation, I feel qualified to give this advice.

First off, you don't want to buy $100k properties - that is not a recipe for success. Buying cash also doesn't get you as much of a discount as you think, so you should be buying on a levered basis to get the best quality asset you can afford.

You're asking a hard question as there isn't a clear answer in current market environment. A few years ago I would have suggested you buy instead of rent, but today I honestly can't say with confidence. I've seen prices in LA market move down considerably in last 12 months, and certain cities it looks attractive to buy. I buy MF properties in 626 so I'm familiar with your area, and I think SFH are still a bit overvalued. That being said, you'll likely also face some higher demand from those displaced by Eaton fires, so that will put upward pressure on prices for a bit.

I've owned a few condos in the past so they aren't horrible purchases, but they're not the best. I'd prefer to buy SFH instead of condo, but you'll need to be ready to put some sweat equity into the SFH.

if I had to give you an answer today, I would advise you keep renting and put your cash into a mix of securities and bonds to compound your saving. Wait another 12 months and hopefully market will be a little more clear. You can win big, but also lose big when betting in a volatile market. You give up some upside when sitting out a bit, but you save yourself for another battle down the line. 

seems like you can make things work by investing in local markets, so don't chase the paper dreams of long distance markets just yet. 

Hi Melvin, Welcome to Bigger Pockets. I'm in Socal as well, in Long Beach. 

Need a bit more info. What city are you currently in? How much could you rent your property for? Do you want to stay in same city if you buy? 

It depends on the market, deal and your situation.  a house hack type of property could dramatically help your bottom line

OP need numbers.
 
If you rented a new place what would the monthly rent be?

Where you live.  Pick a place you would buy.  What are the numbers?  Pick a place you can add value.  Split to rent part.   A 2/1 you can make into a 3/2.   Examples.  

Currently how much do you save monthly without a stretch?  The $1,000?

Your best first REI investment will always be your living arrangement.

It's a matter of math and goals.

It's cheaper to rent than to buy in many markets. If you were to buy a house comparable to what you are renting, it would eat up that $1000/month you are currently saving.

I would count your lucky stars for the cheap rent (my brother pays that much for a 1bed/1bath apartment in Long Beach) and use the savings to invest in another market. Think about buying when the market balances back out.