All Forum Posts by: Thomas Mc

Thanks for the responses everyone. Brian, that thread has alot of great info, I'm reading through it at the moment. Perhaps buying my first property in my own name with solid liability insurance might be best to start with. Cheers!

Hi all,

I'm a new RE investor with the hopes of getting my first property within a year or so. I'm a resident of CA and it's looking likely that my first property will also be in CA. I understand that it is wise to hold all RE property under an LLC so that my personal assets are not exposed to the operations of my RE properties; however, I do realize that there is an annual $800 fee in CA and that the protection you get from a CA LLC is not as strong as an LLC in a neighboring state like AZ and NV. Can anyone provide any guidence on whether I should form an LLC prior to getting my first property or wait until I have a more substantial amount of properties?

Thanks!

I am curious about this question too, hopefully a CA attorney can chime in?

Thanks a bunch for all the tips. After crunching some more numbers, I am starting to agree that looking somewhere cheaper will make the most mathematical sense. Now comes the tough decision.... should I stay in SoCal or venture into Arizona and Nevada... time to brush up on the tax and financing differences!

Thank you all for the wonderful responses. In regards to what my REI strategy is, here is a summary:

Short term: I want to begin the transition from my current career to one in real estate investing by acquiring at least one rental property in the next year. My mid-term goal (5 years-ish) is for my real estate investments to provide sufficient income that allows me to transition to a full-time REI business owner. My long-term goal is for my REI business to provide adequate cashflow that allows me the financial and temporal freedom to "retire gradually" prior to age 50. That gives me just over twenty years to realize this plan.

Thanks for the advice on not mentioning the amount of capital I would like to invest at the outset; I guess it is safest not to mention it. At the same time though, I'm not naive enough to enter in to any business arrangements with strangers on the internet.

There has been much advice against investing in coastal SoCal (which is unfortunately the area I know best having grown up here). I have also considered AZ as a prospective area (moreso for investing in tax liens because their laws are much kinder to tax lien investors), but I am a bit hesitant for my first investment property to be so far from home. I guess I would prefer to keep an eye on things myself, do the handywork myself, and not get a property manager involved at this point. However, if I can't make a profit on any rentals in this area, then I might not have any choice because math is math at the end of the day.

Thanks especially to Jon for your many tips. I'd like to respond to a few of them so that I can get some more free advice :) hah.

I agree with your point about not putting too much cash into a property just to enhance cash flow. This is where I've spent alot of time with the calculator actually. At the moment, I'm still getting good returns on my non-RE investments, so I'm wary of taking money out of those and putting them into my first un-tested RE adventure.

My goal at the moment is not property appreciation mostly because I think that today's macro-economic RE environment is deflationary and will remain so for another year at least (which is my time-horizon for a purchase). I'd like to pursue rental income and equity-building as my primary goals. Plus, if I were to buy a prop in west LA, I wouldn't be as worried about steep depreciation since, well, it's coastal SoCal - which has been a traditionally strong market.

Thanks for the tip on multi-units being less liquid than SFR's, I hadn't thought of that and will keep it in mind.

Can you please expand on the financing advantages for a multi-unit vs a SFR? I'm not sure what an "OO" is. The financing differences may be an important factor in my decision. Btw, I'm very familiar with the "doo-dad" concept as I've read several Kiyosaki books. I have lived very simply throughout my 20's so that I can save the biggest possible portion of my income.

Thanks everyone else for your input... Any thoughts on the original question of whether I should focus on one property at the outset or divide my capital among 2 (or more) properties?

Thanks!

Thanks for the reply Steve. I was actually just out in R.C. yesterday; small world.

I do have a full-time job (consultant), but it's not in stock investing or real estate. Stocks/Commodities trading is just one of my hobbies and I've been fortunate enough to do well in it over the past 5 years.

You read my mind in regards to living in one of the units of a triplex/quadplex, that's exactly my plan for the short term. That way, I can be a live-in property manager. I had always thought that an FHA mortgage would be the way to go, but isn't there a salary-threshold over which one becomes inelligible for an FHA? I'll have to look it up.

Thanks for the advice of 100k per unit, I'll try to stick to that as close as possible, but it's nearly impossible to find anything in West LA in a decent area for less than $400k out of the gate. If I could find a quad for that, that would be ideal, but most duplexes seem to be going for that. That's why I'm not sure whether I should start in such an expensive area.

Anywho, thanks for the input!

-T

Hello all,

This is my first post on biggerpockets, nice to (e)meet you all! I'm excited to have finally found an online forum with such a vast collective knowledge. The purpose of this post is to gather as many viewpoints as I can regarding 2 possible strategies that I am considering implementing in my initial REI strategy. I appreciate any and all input you may have.

A bit of backstory; I'm a 29 year old design consultant in Los Angeles who has been very much into commodities and equities trading for the last 5 years. I have been successful in this and have wanted to diversify my portfolio to include REI, with a goal of moving a significant portion (>50%) of my portfolio into REI over the next 5 years. The main reason for this is because I don't think the current stock/bond/sovereign debt markets are sustainable for much longer and real estate has deflated just enough for me to become more comfortable with it. Although this will be my first rental property purchase, I have read voraciously about REI for the last 3 years. In some ways, I feel as if I've over-studied this industry on paper and have not engaged in enough "actual" situations. So, my goal for the next 12 months (hopefully by the time I'm 30) is to have my first rental property closed.

I have an odd advantage that a friend is just starting out as a real estate broker, so as she is getting started in her career, she is acting as somewhat of a birddog for me. She'll send me about 3 properties a week that look to have potential for free, which is a great advantage.

So, here's where I need some advice... I am looking to start with purchasing at least one duplex, triplex, or SFR in West Los Angeles near where I currently live. I figure that having a low-unit-count property that is close to home will make learning more easy, especially since I have a full-time job outside of RE. I have roughly $100k worth of liquid assets that I can convert to cash for these purposes. What I am undecided on is whether to sink this $100k into one property or whether to distribute the $100k into two properties (i.e. $50k into each).

In West L.A., these types of properties are typcially in the $400-550k range and may not turn a rental profit if I put much less than $100k down at the start (unless I find a killer deal or magic foreclosure or something). My initial hunch is to go this route so that I can focus on one property only, but I know that I'd be putting my eggs into one basket so to speak.

The other option is to look outside of west-LA and find cheaper properties inland. This would be difficult since I would be further from them, but would any of you recommend one situation over the other? I wouldn't be opposed to bringing in investors to help with the $ side of things, but I don't have any experience in that side of things yet. I'd obviously get more leverage this way, but I'm not sure that I'm comfortable with this type of situation on my first property.

If anyone can categorically recommend one over the other, can you please provide reasons why? Or, simply describing your experiences with both would be very helpful to a newbie. Thanks for all your help!

-T