All Forum Posts by: Radhika M.

Welcome! The SoCal market is really difficult right now for acquiring new rentals. The cash flow generally gets better the further East you go, but even there you'd be hard pressed to find anything that meets the rules you mention. Buying distressed assets at a discount and then adding value via remodel is another important way to get better returns. This is a great way to go since it makes helps the cash flow and gives you an equity cushion which opens up options for alternate exit strategies (like sell at profit) and insulates you from downturns.

Finally, my observation from doing this over the last 12 years is that we are in a highly cyclical market and sometimes buy-and-hold is not the best, or even a feasible strategy. That means you will either need to sit on the sidelines from time to time and wait until buy-and-holds make more sense, be fexible and adapt your strategies to the changing market conditions (eg: transitioning from buy-and-hold to flips, and back again), or seek investments out of state. A lot of newbies pursue out of state investments, but I've been there, done that, and strongly advise against it ... that leaves you the first 2 options to consider.

Good luck and feel free to reach out further if I can be of assistance (I'm not selling anything, just giving away advice for free).

@Radhika M., house hacking a 3- or 4-unit property using FHA 3.5%-down financing is in my opinion the best option for a young person looking to get started investing in real estate. It frees up so much cash (if you have it) to invest elsewhere.

One thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% (75% in certain states) of the market rents on all the units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets like ours.

Good luck and reach out to me with any questions!

@Radhika M., Driving for Dollars essentially means getting in your vehicle and driving around looking for properties that look like they may be vacant or neglected in some way, bad roof, broken windows, unkept landscaping, etc. When you find a possible project, you take pictures, write down the address, then go home with a list of such potential deals. 

Once you're back to your desk you look up the owner of record, evaluate the property and make an offer. That's about all there is to it. There are a lot of ways to find potential real estate deals, this is just one fairly low cost, low tech ways of doing that. 

Foreclosures are extremely competitive here in SoCal. If you want to get to your goal faster and with less competition, put that car to work and start driving for $$.