Analyzing a Deal in CA

[Nayeli Marquez]

Hi everyone!

I currently have a full time job and also work as a real estate agent part time. I've been an avid listener of the podcast for the past few months and have learned so many strategies in real estate but are still trying to figure out which is best for me. I know that I want to purchase next year so in preparation I decided to call a mortgage loan officer for more information about what it would take for me to qualify. To my surprise, I found out that I prequalify for an FHA loan of $650,000 and would only have to put 3.5% down. I do live in the north Bay Area where home prices are high so I definitely want to due my due diligence and be strategic because my my mortgage payment is going to be quite high. One thing I know for sure is that I would look for a home that needs updating so that I could renovate and build equity.

I am not expecting to cashflow with this property anytime soon and would be happy to breakeven, if not pay very little out of pocket once I move out. I ultimately want to purchase a duplex so that a portion of my rent is covered and have a better chance of having the mortgage covered by tenants after I leave but those are harder to find and I would be looking at a higher purchase price so I have not ruled out single family homes. There's potential for STR since I live in the wine country, or MTR since there's a level II trauma center in my city.

For those in CA, what strategies are you implementing/type of deals are you looking for and how do you analyze your deals? Where do you look to find these deals?

[Bonnie Low]

I'm in far northern CA (near Redding). We have long term and midterm rentals in CA. We particularly like to buy severly distressed properties (think red-tagged) that already have a building that can be converted to an ADU. It takes a lot of cash, knowledge, connections and time to renovate these properties but the formula has worked for us. We typically will end up covering our nut with the main house rented out as an LTR and then our cash flow comes from the rental of the ADU as an MTR unit. California has made it very easy to build ADUs so I really love this strategy and am surprised the rest of the country isn't picking up on it. You have a lot of options with that second unit - we just happen to like the MTR option. Housing in your area will always be in high demand. If you do end up with a duplex and decide to house hack just really think about the type of tenant you might attract. If your units are attached and have shared walls it might work fine to cater to travel nurses if you're a single person living on the other side and very quiet. If you end up keeping one unit as an MTR, move out of the other and put a family in there, your mix of tenant types might not gel. Just something to think about for the future. Good luck to you!