All Forum Posts by: Twana Rasoul

 It’s surprising how many BP'ers would choose a property with $100/month positive cash flow in a low-cost, low-appreciation market over one with $100/month negative cash flow in a high-cost, high-growth market like San Diego—assuming similar upfront investment.

While cash flow is important, it’s not the only factor in building wealth through real estate. In many cases, the long-term appreciation, rent growth, and tax advantages in strong coastal markets can far outweigh a small initial monthly shortfall—especially for investors thinking long-term.

Ironically, many who swear off any deal with negative cash flow are also contributing to a 401(k)—which is essentially negative cash flow. You're putting money in each month, with no immediate return, betting on long-term growth. Real estate works the same way in many solid markets, but with far more control, leverage, and overall benefits.

The blanket rule of “never buy negative cash flow” can lead investors to overlook wealth-building opportunities in markets that have historically outperformed over time.

 hahaha...definitely appreciate you sharing, its not negative, its the reality for many including myself with previous investments I had in cheap markets.  Thanks again for sharing!

 hey @Rodrigo Serzedello Hope all is well. It is more difficult here but I think having 1 duplex here is less risky than 10 properties in midwest and value is likely similar assuming $1M san Diego duplex and 10 properties out there $100k each....thats numerous roofs, foundations, water heaters, hvac, etc and the appreciation of that 1 duplex will easily outperform all  10 properties.  the 10 properties would be less of a diversification and more of a liability for most.  Hoping you are doing well with yours.

@Austin Wolff 

Yes, I get it, initial cash flow is tough in places like San Diego, LA, and other high-cost markets. But if someone has the ability to house hack a duplex or a home with an ADU and instead chooses to keep renting just to cash flow $100–$200 on paper in a cheap out-of-state market… that’s a massive missed opportunity.

Cash flow alone should never be the only metric when deciding between investing locally or out-of-state. Just because a property cash flows in a cheaper market doesn’t automatically make it a good investment and conversely an initial negative cashflow property in a market like San Diego or Los Angeles doesn't automatically mean its not a good investment

Personally, I’ve had properties in San Diego that were cash flow negative at first, but they ended up performing 20X better over four years than my out-of-state rental in a cheap market. Appreciation, rent growth, loan paydown all added up big time and not even counting tax benefits.

@V.G Jason

Yeah, we might actually be on the same page on some of this, just looking at it from slightly different angles/assumptions.

I’m thinking about the person who can qualify for a low down payment loan here in San Diego, but decides to buy their first property out of state instead, while still paying rent locally. If someone’s making $50K, sure, they probably won’t qualify here yet. But once they do, they usually don’t need a ton of cash to get started.

That’s why I’m not big on running straight into out-of-state investing as a first move. It’s more complicated, has extra risks, and you really need someone on the ground you trust completely. And no, a property manager or agent doesn’t count—I’m talking close friend or family member type of trust.

Buying in a random cheap market when you don’t really know the area can turn into a money pit real quick. I’ve met quite a few people here in San Diego who’ve gone that route and ended up regretting it. Most don’t talk about it publicly like @Becca F. has, because let’s be real, it’s not a fun story to share.

@V.G Jason 

A common misconception in San Diego is that out-of-state investing is more accessible. But if you're renting here and spend $40K to buy a $200K property out-of-state with 20–25% down, you're missing a huge opportunity.

That same $40K could go toward a $750K–$1M duplex locally using an FHA 3.5% or 5% down conventional owner-occupied loan. You live in one unit, rent the other, and start building wealth at home.

In most cases, house hacking in San Diego will outperform buying a cheap rental elsewhere. So yeah, if someone is skipping that to chase OOS for their first property while paying rent here is a silly goose 🐣

@Austin Wolff 

I don’t know the specifics of Los Angeles, your property, or price point, so I can’t speak to that directly. But I will say this, from the perspective of someone in San Diego:

If a local resident is renting here and chooses to buy their first property as an investment property in a cheaper out-of-state market instead of buying locally with low money down (especially via house hacking), that’s often a huge missed opportunity for long-term wealth building.

Buying locally with owner-occupied financing can be a game-changer in terms of appreciation, equity growth, tax benefits, and long term cash flow especially in a coastal market.

@Brandon Seidel It really depends on your goals.  You would not regret holding on to it if you decide not to sell. On the other hand, having a low and decreasing return on equity overtime, the funds could be deployed to get yourself better returns although I'm partial to real estate for better returns instead of the stock market.  

I gave up 2 properties last year here locally with sub 4% interest rate to 1031 exchange into 2 properties for better return on equity and one of those was in Carlsbad also.  

@V.G Jason @Henry Lazerow Thanks for chiming in..

Without going too deep into the weeds, I want to offer a perspective that I think gets overlooked here on BP, especially by those in high-cost areas like Southern California.

A lot of newer investors in San Diego (and similar coastal markets) get told they have to invest out of state in cheaper markets and only focus on cash flow. That advice might make sense for some, but it often ignores the real opportunity local buyers have right here, especially with owner-occupied financing.

Let’s say someone spends $30K–$40K to buy a $150K–$200K property out of state, putting down 20–25%. Meanwhile, they're still renting in San Diego.

But that same $30K–$40K could be used as a 3.5%–5% down payment on a $750K–$1M duplex right here in San Diego using an FHA or other owner-occupied loan. By house hacking, living in one unit and renting out the other, they not only reduce their cost of living, but also build wealth through appreciation, principal paydown, and better loan terms.

No matter how you slice it, in this scenario the San Diego duplex buyer ends up far wealthier over time than the person who puts the same capital into an out-of-state rental while paying high rent locally.

One common misconception I see, among both new  investors, is the belief that higher cap rate markets are automatically “better.” What’s often missed is that high cap rate markets tend to have much lower historical appreciation, and in many cases, they experience flat or even negative long-term growth. When appreciation doesn’t keep up with inflation, you’re actually losing value over time, even if the cash flow looks solid on paper.

High cap rates often exist because those markets have to offer something to offset the higher risk of minimal appreciation, or even long-term stagnation.

This isn’t to say that out-of-state investing doesn’t work. It can work and some on here do really well with it. But if you live in a high-cost market, you owe it to yourself to run the numbers locally first, especially with house hacking as your entry point.

@V.G Jason 

That’s the beauty of San Diego, contrary to popular belief, you don’t need deep pockets to build serious wealth here over time. I started with low money down and built from there, and now I help many others do the same.

The average person who doesn't understand real estate or finance probably shouldn’t be investing, especially in low-cost markets—unless they’re local and know the area intimately.

Cheap properties in lower-cost markets might look good on paper, but they can easily become money pits. Most people don’t realize that a $100,000 property in the middle of the country still costs $10K–$15K to replace a roof—the same as a $1M property in San Diego. The difference is, in the cheaper market, that capital expense can wipe out years of cash flow, with little to no appreciation to offset it.