Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Rental Property Investor · Hollis, NH · Member since 2017 · 108 posts · 67 votes
2y
Do you want to directly own and invest in real estate, or are you open to indirectly investing in it? If the latter, you may want to look at some of the crowdsourcing platforms such as Fundrise. Or invest into other private deals and/or funds. It would give you an opportunity to get real estate exposure anywhere in the country, but avoid the issues you are concerned about. It may depend on your accreditation status though, just check that.
Do you want to directly own and invest in real estate, or are you open to indirectly investing in it? If the latter, you may want to look at some of the crowdsourcing platforms such as Fundrise. Or invest into other private deals and/or funds. It would give you an opportunity to get real estate exposure anywhere in the country, but avoid the issues you are concerned about. It may depend on your accreditation status though, just check that.
Hi Kyle, thank you for the reply. I do want to invest directly in RE and have a little more control.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Hey @Mark Cotter. I ran into the same issue when I first started investing in 2021. I ended up choosing to invest out of state b/c the numbers and landlord laws just didn't make sense to me. Not to mention the fact that there is a piece of legislation set to be on the November ballot that can really hinder a landlord's ability to maximize profits with new tenants. --> "Justice for Renters Act".
When I started exploring OOS investing, it just made more sense for me. I ultimately settled on Columbus as my target market and haven't had any regrets as the years have progressed. The key for me has been having the right teams in place and trusting them do their jobs. The trust part can be hard b/c you're not able to check on the properties as easily but that's part of building long term business relationships.
Happy to share some of my experiences both as an OOS and in-state investor.
Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.
When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.
Here’s our OPINION for the Metro Detroit market (always verify each area for yourself!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:
Class A Properties: Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation. Vacancy Est: Historically 10%, 5% the more recent norm. Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.
Class B Properties: Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation. Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support. Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years
Class CProperties: Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts. Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages. Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.
Class DProperties: Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages. Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.
Make sure you understand the Class of properties you are looking at and the corresponding results to expect.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
If you're going to do the out of state thing in Cleveland, 1st thing I'd recommend you do is read The Ultimate Guide to Grading Cleveland Neighborhoods. The Cleveland market is a tough nut to crack for Cali dudes.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Another San Diego guy who got out, lol. It was a nice 40 years there and the weather is great, but between the insane prices and the insane politics I just had to leave.
I would strongly suggest you look a little to your East over in Arizona. That's where I ended up after much research. No it's not as cheap as the Midwest but the appreciation here is starting to rival what we saw in Cali a few decades ago. Remember that real estate investing is not just about cash flow or making immediate money.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
If you're going to do the out of state thing in Cleveland, 1st thing I'd recommend you do is read The Ultimate Guide to Grading Cleveland Neighborhoods. The Cleveland market is a tough nut to crack for Cali dudes.
Hey James, Your article is a great help, thank you for linking it. I am curious how much the numbers have changed in the years since you wrote it. I think I'm more interested in A and B properties to start since they likely pose fewer challenges.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Hey @Mark Cotter. I ran into the same issue when I first started investing in 2021. I ended up choosing to invest out of state b/c the numbers and landlord laws just didn't make sense to me. Not to mention the fact that there is a piece of legislation set to be on the November ballot that can really hinder a landlord's ability to maximize profits with new tenants. --> "Justice for Renters Act".
When I started exploring OOS investing, it just made more sense for me. I ultimately settled on Columbus as my target market and haven't had any regrets as the years have progressed. The key for me has been having the right teams in place and trusting them do their jobs. The trust part can be hard b/c you're not able to check on the properties as easily but that's part of building long term business relationships.
Happy to share some of my experiences both as an OOS and in-state investor.
Thanks for the reply Mike, how did you go about finding your team?
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Hey @Mark Cotter. I ran into the same issue when I first started investing in 2021. I ended up choosing to invest out of state b/c the numbers and landlord laws just didn't make sense to me. Not to mention the fact that there is a piece of legislation set to be on the November ballot that can really hinder a landlord's ability to maximize profits with new tenants. --> "Justice for Renters Act".
When I started exploring OOS investing, it just made more sense for me. I ultimately settled on Columbus as my target market and haven't had any regrets as the years have progressed. The key for me has been having the right teams in place and trusting them do their jobs. The trust part can be hard b/c you're not able to check on the properties as easily but that's part of building long term business relationships.
Happy to share some of my experiences both as an OOS and in-state investor.
The justice for renters act has made the ballot every two years. I personally think that there should be a mandatory minimum period before the same proposition is put up for election after being defeated.
The aids foundation has contributed over $10m for this election initiative. I do not know the source of their funding but if they received donations for aids and are using it for this, then that would seem to be inappropriate use of funds. I do not know how much they contributed to the two defeated equivalent measures but I suspect it is a similar amount.
Crazy but there are a lot of tenants who are ignorant to the consequences who may vote for this. The result will be rentals are not maintained and will be come $hit hole units. There will be no new large unit residential development. It will increase the housing shortage.
If they keep putting it on the ballot and spending over $10m to support it, law of averages will indicate it could eventually pass.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
It does not matter where you start as long as you develop your Core 4. The core 4 is David Greene’s long-distance investing strategy and consists of a realtor, contractor, property manager, and lender. Once you have this team in place, you should be able to invest in any market confidently.
As for picking a specific market - I would go after one with an increasing job and population growth. I invest and work in Columbus, Ohio. I am also looking to invest in Cincinnati and Cleveland.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Hey Mark, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
In the end, you have to decide where you want to plant your seeds. There is no argument that wealth can be built everywhere, whether its CA, NY, WI, or OH. There are expensive and inexpensive areas in every state.
People will argue that politics and local rent control laws can be a deciding factor. And the list of other reasons can go on and on. You just need to pick a location and get moving. You must accept the pros and cons of local and distant investing. If you are choosing REI as your vehicle, then it is likely that you want more control rather than just stock investing. Thus, by virtue of that statement, there should be a tendency to stay local. However, a good team can make OOS investing worthwhile, and it's been proven.
There is only one question left, are you a hand's on investor willing to add sweat equity, or are you a hand's off investor who wants to leverage money to buy labor and skills to achieve your goal? What personal time commitment are you willing to put in? What is your goal's time line?
Personally, I believe that you can reach FI faster locally. But that was my initial focus. I want to be free to do what I want in my 40s with my family and guide my children now, not in my 50 or 60s. It may not be yours. Youay really love your work and your W2/schedule may already be awesome. If you are more focused on building wealth and enjoying the benefits at the traditional retirement age, you should choose a different path. I wanted out of my 9-5 as quickly as possible and enjoy the benefits while I'm young and able. I felt that life and longevity is not guaranteed and my kids are only kids for a brief moment in time. There was an urgency and I was willing to put in a lot of sweat equity to accelerate the journey.
Im a big believer in CA. Rent control and politics can be overcome. I completed an Eviction last week, one this week, and will start another next week. Lately, it's been a few every year. But it is by design because I focus on those types of properties that have the most upside. I have been running about 5-7 vacancies since September. That's over a $100K in loss rent. Buts it's perfectly fine because it's part of the strategy and by design. It's CA. It's local to me. It's all a matter of expectations and perspective.
I know you will get some great honest advice from other members. We all just want to see others succeed and share our experience to help you get there quicker. Best of luck.
Detroit, MI · Member since 2020 · 150 posts · 68 votes
2y
I'll be another guy in here to throw my vote in for Detroit Michigan. With the right team in place, it makes for a promising market to get into at the moment.
Hi all, I am not new to investing but I am new to RE investing. The majority of my money is in Stocks and I'm looking to move some of my funds over to RE. I'm not looking to get rich or replace a W2, but I am looking to build a portfolio of properties that will eventually add to my income streams in retirement. The challenge for me is that I live in San Diego CA and the market is expensive and I compete with owner-occupiers who will pay top dollar. Buying a run-down property and fixing it is difficult because building costs here have become ridiculous. I am slowly coming to the realization that maybe Cali isn’t the best place to invest ( I love the joint). I have seen places like Cleveland and Columbus get mentioned on the forums as a good place to invest but I’m open to other ideas. I want to start slow and build from there. Any help would be much appreciated.
Hey Mark! I love the hustle of getting into of REI. Have you looked into Greater Cincinnati at all (Cincinnati and Northern Ky)? It is similar to Columbus, but I think Northern Ky is more of a hidden gem than anything. I think it is worth a search and a talk to a realtor about the area. Let me know if we can make that happen to talk about the market!
I wouldn't go out of state for your first property. Stay local. If you can afford something in your area, and you find a good deal, you should do that. You're not going to find better long term appreciation than California. I live in Santa Monica and invest in Inglewood where price to rent ratios are much more reasonable, albeit still way above anything in the Midwest. But there's a reason prices are so high - everyone wants to live here! If you want to invest for the long term, stay close by and buy a place in a great location.
Know why you want to invest will help guide where to invest and how much time and capital you want to put in to reaching your goals. As other commenters have stated CA can be a good market and there are still people who want to live in CA. It's a challenging market for various reasons. I'm working the Reno Tahoe Nevada Market because of the proximity to CA, landlord friendly, low property taxes and no state income tax. The amount of capital needed to invest to cash flow is lower than CA and there are still plenty of deals that will be great for appreciation.
Property Manager · Cincinnati, OH · Member since 2024 · 64 posts · 69 votes
2y
Hi Mark, we have a lot of out of state clients investing here in Ohio, especially those that live in CA! I will send you a message if you would like to chat more.
Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
2y
@Mark Cotter I am a firm believer that San Diego is one of the best markets to invest and even though the data would confirm what I am saying for the past half century or so, I still recognize I am biased as I am a local investor with single family and multifamily properties locally and of course am in brokerage also.
My most recent purchase was a duplex in Carlsbad which I 1031 exchanged into by selling one of my single family homes in East County San Diego. I traded a positive cashflowing property to a negative for higher appreciation near the beach.
San Diego is not for everyone with the higher barrier to entry but there are certainly less costly ways to get started such as house hacking with little to no money down depending on loan type for both single family homes and multifamily properties.
Be sure to consider total ROI instead of just initial cashflow numbers and consider the market/ economy and stats for the last several decades instead of just the last decade as most markets did well in last 5-10 years.
