Seeking Advice for a Beginner in a HCOL Area

Los Angeles County, California
Starting Out
8moFollow

Seeking Advice for a Beginner in a HCOL Area

Evan Shults
New to Real Estate · Redondo Beach, CA · Member since 2022 · 7 posts · 5 votes

Hi all!

I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

Background

  • Age: 35
  • Industry: Aerospace Engineering (W-2 income: $140k/yr)
  • Household:
    • Spouse (34), part-time nurse, stay-at-home mom
    • Two children (4 years, 6 months)
  • Location: High Cost of Living (South Bay, CA)
  • Available Time: ~10–15 hours/week
  • Funds Available to invest: ~50k

Objectives

Primary Goal:

  • Achieve W-2 income independence within ~15 years.
  • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

Constraints & Assumptions

  • Geographic constraint:
    • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
  • Experience constraint:
    • First investment property.
    • Common advice suggests avoiding out-of-state (OOS) investing initially.
  • Cashflow constraint:
    • Current w2 works now but children wont become cheaper
  • Time constraint:
    • Part-time involvement only (10–15 hrs/week)

Problem Statement

Given:

  • High local acquisition costs
  • Warnings against OOS investing for a first deal,
  • A near-term need for cash flow

What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

Options Under Consideration

Option A: Local House Hacking / Multifamily

  • Status: Though most interesting, likely infeasible due to South Bay pricing.

Option B: Out-of-State Long-Term Rentals

  • Potential Benefits
    • Markets better positioned to align with long term goals
    • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
  • Concerns:
    • Higher execution risk for a first investment.

Option C: Short-Term Rentals (STRs)

  • Possible Target Markets within 3hrs of home:
  1. Big Bear
  2. Joshua Tree
  3. Palm Springs
  • Potential Benefits:
    • Higher cash flow potential
      • Could satisfy 2-year income requirement
    • Possible secondary use as a family vacation property
  • Concerns:
    • Risk, regulation, volatility, and scalability relative to long-term goals
    • Time commitment

Open Questions for Feedback

  • Is STR a reasonable first investment given the constraints?
  • Are there alternative strategies that better balance risk, cash flow, and time?
  • How should I weigh short-term cash flow vs. long-term scalability at this stage?
  • Looking for good meetups in the South Bay area
5Reply
325 views

Most Popular Reply

Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
7mo
Quote from @Evan Shults:

Hi all!

I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

Background

  • Age: 35
  • Industry: Aerospace Engineering (W-2 income: $140k/yr)
  • Household:
    • Spouse (34), part-time nurse, stay-at-home mom
    • Two children (4 years, 6 months)
  • Location: High Cost of Living (South Bay, CA)
  • Available Time: ~10–15 hours/week
  • Funds Available to invest: ~50k

Objectives

Primary Goal:

  • Achieve W-2 income independence within ~15 years.
  • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

Constraints & Assumptions

  • Geographic constraint:
    • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
  • Experience constraint:
    • First investment property.
    • Common advice suggests avoiding out-of-state (OOS) investing initially.
  • Cashflow constraint:
    • Current w2 works now but children wont become cheaper
  • Time constraint:
    • Part-time involvement only (10–15 hrs/week)

Problem Statement

Given:

  • High local acquisition costs
  • Warnings against OOS investing for a first deal,
  • A near-term need for cash flow

What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

Options Under Consideration

Option A: Local House Hacking / Multifamily

  • Status: Though most interesting, likely infeasible due to South Bay pricing.

Option B: Out-of-State Long-Term Rentals

  • Potential Benefits
    • Markets better positioned to align with long term goals
    • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
  • Concerns:
    • Higher execution risk for a first investment.

Option C: Short-Term Rentals (STRs)

  • Possible Target Markets within 3hrs of home:
  1. Big Bear
  2. Joshua Tree
  3. Palm Springs
  • Potential Benefits:
    • Higher cash flow potential
      • Could satisfy 2-year income requirement
    • Possible secondary use as a family vacation property
  • Concerns:
    • Risk, regulation, volatility, and scalability relative to long-term goals
    • Time commitment

Open Questions for Feedback

  • Is STR a reasonable first investment given the constraints?
  • Are there alternative strategies that better balance risk, cash flow, and time?
  • How should I weigh short-term cash flow vs. long-term scalability at this stage?
  • Looking for good meetups in the South Bay area

You’re ALWAYS better off investing locally, where it’s easier to:

  • Learn the market
  • Network to find deals
  • Network to find contractors
  • Be more hands-on
  • Driveby property to keep tabs on it
  • Network to find a decent Property Management Company (PMC)

Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.

If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.

The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!

They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.

Then they’re shocked when their performance expectations aren't met😞

If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.

You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:

  • Many of them don't know/care what Class the properties are, so they're incompetent.
  • Others know exactly what they are doing, so should be labeled as crooks!
    EITHER WAY YOU LOSE!

Here's some copy & paste advice you might find useful:

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.

The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.

Why is that important?

Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

  • Property Tenant Pool: closely linked to location, but not always.
  • Property Location: closely linked to tenant pool, but not always.
  • Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score

Pct of Population

Default Probability

800 or more

13.00%

1.00%

750-799

27.00%

1.00%

700-749

18.00%

4.40%

650-699

15.00%

8.90%

600-649

12.00%

15.80%

550-599

8.00%

22.50%

500-549

5.00%

28.40%

Less than 499

2.00%

41.00%

Source: Fair Isaac Company

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.

We can also share numerous examples of properties & portfolios we’ve assisted investors with!

DM us if you’d like to discuss this logical approach in greater detail!

Horror Stories from those that did NOT Understand What they were Buying:

https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain

https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss

https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs

https://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years
Logical Property Management4.9446 Reviews
WebsiteView Page
4Reply
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18 Replies

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  • Ellis San Jose
    Specialist · Westlake Village, CA · Member since 2010 · 1k+ posts · 781 votes
    8mo

    I feel your pain. The first house I bought with my wife was a foreclosure in the Golden Triangle of Redondo decades ago. Consider working in other less expensive counties (San Bernardino, RIverside, Kern) vs out of state to get your foot in the door.  Also, joint venture with a seasoned operator in those counties could be a good combination.

    1Reply
  • Garret Rumbea
    Inland Empire, CA · Member since 2017 · 151 posts · 79 votes
    8mo

    Hey Even noticed you're from the South Bay. My partners are based out there and I'm out near Temecula. We invest in larger multifamily out of state. Happy to connect 

    1Reply
  • David Cherkowsky
    Investor · Alexandria, VA · Member since 2023 · 92 posts · 52 votes
    7mo

    Hi Evan, here's my two cents on your STR question:

    - Is STR a reasonable first investment given the constraints?

    I think the biggest challenge with STRs is the initial setup and development of systems. 10-15 hours a week is more than enough time to manage your STR once you have all your systems in place (think cleaners, guest messages, house turnover, pricing management, etc). However, for the first few weeks/months, as you develop these systems, it is going to be time consuming. Also, besides getting your systems setup, there are a lot of things that add a significant amount of initial time compared to a LTR. Off the top of my head: building furniture, stocking the home initially, finding fun artwork for the walls, finding a reliable cleaner, etc. With a LTR, the main few activities are cleaning the house, listing it, screening applicants, showing the property, and signing a lease. While also still pretty time intensive, it's much less work than getting a STR furnished and ready to go.

    This is not to say an STR is not doable, but just know that the first few weeks while you get everything prepared, it is incredibly time intensive. I say this as someone who owns an LTR and STR. The LTR takes maybe 10 hours of my time the entire year. The STR takes closer to 200.

    However, in a a HCOL market, I think STR is a great way to get in the market and benefit from long term appreciating while still generating some cash flow. The added benefit of a potential vacation home is the cherry on top.

      0Reply
      • Evan Shults
        OP
        New to Real Estate · Redondo Beach, CA · Member since 2022 · 7 posts · 5 votes
        7mo
        Quote from @David Cherkowsky:

        Hi Evan, here's my two cents on your STR question:

        - Is STR a reasonable first investment given the constraints?

        I think the biggest challenge with STRs is the initial setup and development of systems. 10-15 hours a week is more than enough time to manage your STR once you have all your systems in place (think cleaners, guest messages, house turnover, pricing management, etc). However, for the first few weeks/months, as you develop these systems, it is going to be time consuming. Also, besides getting your systems setup, there are a lot of things that add a significant amount of initial time compared to a LTR. Off the top of my head: building furniture, stocking the home initially, finding fun artwork for the walls, finding a reliable cleaner, etc. With a LTR, the main few activities are cleaning the house, listing it, screening applicants, showing the property, and signing a lease. While also still pretty time intensive, it's much less work than getting a STR furnished and ready to go.

        This is not to say an STR is not doable, but just know that the first few weeks while you get everything prepared, it is incredibly time intensive. I say this as someone who owns an LTR and STR. The LTR takes maybe 10 hours of my time the entire year. The STR takes closer to 200.

        However, in a a HCOL market, I think STR is a great way to get in the market and benefit from long term appreciating while still generating some cash flow. The added benefit of a potential vacation home is the cherry on top.


          Yeah that makes sense. I think if I go the STR route I think I would have to time up a long leave from work to truly devote the time/energy in standing everything up (and probably living at the property while that happens). Thanks for the insight, David!
           

          0Reply
      • Alfath AhmedBusiness Member
        Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
        7mo
        Quote from @Evan Shults:

        Hi all!

        I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

        Background

        • Age: 35
        • Industry: Aerospace Engineering (W-2 income: $140k/yr)
        • Household:
          • Spouse (34), part-time nurse, stay-at-home mom
          • Two children (4 years, 6 months)
        • Location: High Cost of Living (South Bay, CA)
        • Available Time: ~10–15 hours/week
        • Funds Available to invest: ~50k

        Objectives

        Primary Goal:

        • Achieve W-2 income independence within ~15 years.
        • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

        Constraints & Assumptions

        • Geographic constraint:
          • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
        • Experience constraint:
          • First investment property.
          • Common advice suggests avoiding out-of-state (OOS) investing initially.
        • Cashflow constraint:
          • Current w2 works now but children wont become cheaper
        • Time constraint:
          • Part-time involvement only (10–15 hrs/week)

        Problem Statement

        Given:

        • High local acquisition costs
        • Warnings against OOS investing for a first deal,
        • A near-term need for cash flow

        What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

        Options Under Consideration

        Option A: Local House Hacking / Multifamily

        • Status: Though most interesting, likely infeasible due to South Bay pricing.

        Option B: Out-of-State Long-Term Rentals

        • Potential Benefits
          • Markets better positioned to align with long term goals
          • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
        • Concerns:
          • Higher execution risk for a first investment.

        Option C: Short-Term Rentals (STRs)

        • Possible Target Markets within 3hrs of home:
        1. Big Bear
        2. Joshua Tree
        3. Palm Springs
        • Potential Benefits:
          • Higher cash flow potential
            • Could satisfy 2-year income requirement
          • Possible secondary use as a family vacation property
        • Concerns:
          • Risk, regulation, volatility, and scalability relative to long-term goals
          • Time commitment

        Open Questions for Feedback

        • Is STR a reasonable first investment given the constraints?
        • Are there alternative strategies that better balance risk, cash flow, and time?
        • How should I weigh short-term cash flow vs. long-term scalability at this stage?
        • Looking for good meetups in the South Bay area

         I like the thesis. I would buy a long-term rental first if i was in your position. Identify a market out-of-state (because california is not good for 1st time investors) that has a ton of tech growth, that is promising with jobs/populations/overall economy. 

        Connect with an investor agent in that market using the (biggerpockets agent finder). Make sure the agent owns property themselves. The agent will connect you with good conventional lender (lowest rate option at the moment), contractor(s) if needed, and a good property manager that can lease/manage. 

        Buy properties ~20% below market value turnkey so that you have equity on the get go. Use your 2% seller credit (allowed by conventional loans), get rent-prorations, security deposits, etc.

        That is the best way to do. Get a rental and be a landlord first, then look into doing short-term rentals or brrrr/value-adds which ever you like. 

        I've sold 120+ properties in 2025 and own over 28 rental units. This is exactly what i would do.

        [email protected]614-802-5698
        ReafCo | Ahmed Group 55 Reviews
        WebsiteView Page
        1Reply
        • Evan Shults
          OP
          New to Real Estate · Redondo Beach, CA · Member since 2022 · 7 posts · 5 votes
          7mo
          Quote from @Alfath Ahmed:
          Quote from @Evan Shults:

          Hi all!

          I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

          Background

          • Age: 35
          • Industry: Aerospace Engineering (W-2 income: $140k/yr)
          • Household:
            • Spouse (34), part-time nurse, stay-at-home mom
            • Two children (4 years, 6 months)
          • Location: High Cost of Living (South Bay, CA)
          • Available Time: ~10–15 hours/week
          • Funds Available to invest: ~50k

          Objectives

          Primary Goal:

          • Achieve W-2 income independence within ~15 years.
          • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

          Constraints & Assumptions

          • Geographic constraint:
            • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
          • Experience constraint:
            • First investment property.
            • Common advice suggests avoiding out-of-state (OOS) investing initially.
          • Cashflow constraint:
            • Current w2 works now but children wont become cheaper
          • Time constraint:
            • Part-time involvement only (10–15 hrs/week)

          Problem Statement

          Given:

          • High local acquisition costs
          • Warnings against OOS investing for a first deal,
          • A near-term need for cash flow

          What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

          Options Under Consideration

          Option A: Local House Hacking / Multifamily

          • Status: Though most interesting, likely infeasible due to South Bay pricing.

          Option B: Out-of-State Long-Term Rentals

          • Potential Benefits
            • Markets better positioned to align with long term goals
            • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
          • Concerns:
            • Higher execution risk for a first investment.

          Option C: Short-Term Rentals (STRs)

          • Possible Target Markets within 3hrs of home:
          1. Big Bear
          2. Joshua Tree
          3. Palm Springs
          • Potential Benefits:
            • Higher cash flow potential
              • Could satisfy 2-year income requirement
            • Possible secondary use as a family vacation property
          • Concerns:
            • Risk, regulation, volatility, and scalability relative to long-term goals
            • Time commitment

          Open Questions for Feedback

          • Is STR a reasonable first investment given the constraints?
          • Are there alternative strategies that better balance risk, cash flow, and time?
          • How should I weigh short-term cash flow vs. long-term scalability at this stage?
          • Looking for good meetups in the South Bay area

           I like the thesis. I would buy a long-term rental first if i was in your position. Identify a market out-of-state (because california is not good for 1st time investors) that has a ton of tech growth, that is promising with jobs/populations/overall economy. 

          Connect with an investor agent in that market using the (biggerpockets agent finder). Make sure the agent owns property themselves. The agent will connect you with good conventional lender (lowest rate option at the moment), contractor(s) if needed, and a good property manager that can lease/manage. 

          Buy properties ~20% below market value turnkey so that you have equity on the get go. Use your 2% seller credit (allowed by conventional loans), get rent-prorations, security deposits, etc.

          That is the best way to do. Get a rental and be a landlord first, then look into doing short-term rentals or brrrr/value-adds which ever you like. 

          I've sold 120+ properties in 2025 and own over 28 rental units. This is exactly what i would do.


           Thanks, Alfath! The insight is much appreciated

          0Reply
      • Michael SmytheBusiness Member
        Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
        7mo
        Quote from @Evan Shults:

        Hi all!

        I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

        Background

        • Age: 35
        • Industry: Aerospace Engineering (W-2 income: $140k/yr)
        • Household:
          • Spouse (34), part-time nurse, stay-at-home mom
          • Two children (4 years, 6 months)
        • Location: High Cost of Living (South Bay, CA)
        • Available Time: ~10–15 hours/week
        • Funds Available to invest: ~50k

        Objectives

        Primary Goal:

        • Achieve W-2 income independence within ~15 years.
        • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

        Constraints & Assumptions

        • Geographic constraint:
          • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
        • Experience constraint:
          • First investment property.
          • Common advice suggests avoiding out-of-state (OOS) investing initially.
        • Cashflow constraint:
          • Current w2 works now but children wont become cheaper
        • Time constraint:
          • Part-time involvement only (10–15 hrs/week)

        Problem Statement

        Given:

        • High local acquisition costs
        • Warnings against OOS investing for a first deal,
        • A near-term need for cash flow

        What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

        Options Under Consideration

        Option A: Local House Hacking / Multifamily

        • Status: Though most interesting, likely infeasible due to South Bay pricing.

        Option B: Out-of-State Long-Term Rentals

        • Potential Benefits
          • Markets better positioned to align with long term goals
          • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
        • Concerns:
          • Higher execution risk for a first investment.

        Option C: Short-Term Rentals (STRs)

        • Possible Target Markets within 3hrs of home:
        1. Big Bear
        2. Joshua Tree
        3. Palm Springs
        • Potential Benefits:
          • Higher cash flow potential
            • Could satisfy 2-year income requirement
          • Possible secondary use as a family vacation property
        • Concerns:
          • Risk, regulation, volatility, and scalability relative to long-term goals
          • Time commitment

        Open Questions for Feedback

        • Is STR a reasonable first investment given the constraints?
        • Are there alternative strategies that better balance risk, cash flow, and time?
        • How should I weigh short-term cash flow vs. long-term scalability at this stage?
        • Looking for good meetups in the South Bay area

        You’re ALWAYS better off investing locally, where it’s easier to:

        • Learn the market
        • Network to find deals
        • Network to find contractors
        • Be more hands-on
        • Driveby property to keep tabs on it
        • Network to find a decent Property Management Company (PMC)

        Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.

        If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.

        The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!

        They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.

        Then they’re shocked when their performance expectations aren't met😞

        If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.

        You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:

        • Many of them don't know/care what Class the properties are, so they're incompetent.
        • Others know exactly what they are doing, so should be labeled as crooks!
          EITHER WAY YOU LOSE!

        Here's some copy & paste advice you might find useful:

        Why is Property Class so important for investors to understand and apply in their investing strategies?

        Because the Property Class dictates the Class of the tenant pool that the property will attract.

        The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

        Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.

        The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.

        Why is that important?

        Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?

        Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

        So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.

        We use the following to rank Property Classes, in order of importance:

        • Property Tenant Pool: closely linked to location, but not always.
        • Property Location: closely linked to tenant pool, but not always.
        • Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

        Key metrics for each Property Class:

        Class A Properties:
        Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
        Tenant Default: 0-5% probability of eviction or early lease termination.
        Section 8: Class A rents are too high and won’t be approved.
        Vacancies: 5-10%, depending on market conditions.
        Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

        Class B Properties:
        Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
        Tenant Default        : 5-10% probability of eviction or early lease termination.
        Vacancies        : 10-15%, depending on market conditions.
        Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
        Section 8: Class B rents are usually too high for the Section 8 program.

        Class C Properties:
        Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
        Tenant Default: 10-20% probability of eviction or early lease termination.
        Section 8: Class C rents usually meet program requirements, proper screening still recommended.
        Vacancies: 10-20%, depending on market conditions and tenant screening.
        Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

        Class D Properties:
        Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
        Tenant Default: 20-30% probability of eviction or early lease termination.
        Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
        Vacancies: 20%+, depending on market conditions and tenant screening.
        Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

        Where did we get our FICO credit score information from?

        Check out this chart:

        FICO Score

        Pct of Population

        Default Probability

        800 or more

        13.00%

        1.00%

        750-799

        27.00%

        1.00%

        700-749

        18.00%

        4.40%

        650-699

        15.00%

        8.90%

        600-649

        12.00%

        15.80%

        550-599

        8.00%

        22.50%

        500-549

        5.00%

        28.40%

        Less than 499

        2.00%

        41.00%

        Source: Fair Isaac Company

        Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

        Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.

        We can also share numerous examples of properties & portfolios we’ve assisted investors with!

        DM us if you’d like to discuss this logical approach in greater detail!

        Horror Stories from those that did NOT Understand What they were Buying:

        https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain

        https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss

        https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs

        https://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years
        Logical Property Management4.9446 Reviews
        WebsiteView Page
        4Reply
        • Evan Shults
          OP
          New to Real Estate · Redondo Beach, CA · Member since 2022 · 7 posts · 5 votes
          7mo
          Quote from @Michael Smythe:
          Quote from @Evan Shults:

          Hi all!

          I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

          Background

          • Age: 35
          • Industry: Aerospace Engineering (W-2 income: $140k/yr)
          • Household:
            • Spouse (34), part-time nurse, stay-at-home mom
            • Two children (4 years, 6 months)
          • Location: High Cost of Living (South Bay, CA)
          • Available Time: ~10–15 hours/week
          • Funds Available to invest: ~50k

          Objectives

          Primary Goal:

          • Achieve W-2 income independence within ~15 years.
          • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

          Constraints & Assumptions

          • Geographic constraint:
            • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
          • Experience constraint:
            • First investment property.
            • Common advice suggests avoiding out-of-state (OOS) investing initially.
          • Cashflow constraint:
            • Current w2 works now but children wont become cheaper
          • Time constraint:
            • Part-time involvement only (10–15 hrs/week)

          Problem Statement

          Given:

          • High local acquisition costs
          • Warnings against OOS investing for a first deal,
          • A near-term need for cash flow

          What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

          Options Under Consideration

          Option A: Local House Hacking / Multifamily

          • Status: Though most interesting, likely infeasible due to South Bay pricing.

          Option B: Out-of-State Long-Term Rentals

          • Potential Benefits
            • Markets better positioned to align with long term goals
            • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
          • Concerns:
            • Higher execution risk for a first investment.

          Option C: Short-Term Rentals (STRs)

          • Possible Target Markets within 3hrs of home:
          1. Big Bear
          2. Joshua Tree
          3. Palm Springs
          • Potential Benefits:
            • Higher cash flow potential
              • Could satisfy 2-year income requirement
            • Possible secondary use as a family vacation property
          • Concerns:
            • Risk, regulation, volatility, and scalability relative to long-term goals
            • Time commitment

          Open Questions for Feedback

          • Is STR a reasonable first investment given the constraints?
          • Are there alternative strategies that better balance risk, cash flow, and time?
          • How should I weigh short-term cash flow vs. long-term scalability at this stage?
          • Looking for good meetups in the South Bay area

          You’re ALWAYS better off investing locally, where it’s easier to:

          • Learn the market
          • Network to find deals
          • Network to find contractors
          • Be more hands-on
          • Driveby property to keep tabs on it
          • Network to find a decent Property Management Company (PMC)

          Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.

          If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully outsourcing all of the above.

          The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!

          They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.

          Then they’re shocked when their performance expectations aren't met😞

          If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.

          You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:

          • Many of them don't know/care what Class the properties are, so they're incompetent.
          • Others know exactly what they are doing, so should be labeled as crooks!
            EITHER WAY YOU LOSE!

          Here's some copy & paste advice you might find useful:

          Why is Property Class so important for investors to understand and apply in their investing strategies?

          Because the Property Class dictates the Class of the tenant pool that the property will attract.

          The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

          Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.

          The Property Class will also impact the maintenance & renovations you do to, “Maintain to the Neighborhood”.

          Why is that important?

          Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?

          Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

          So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.

          We use the following to rank Property Classes, in order of importance:

          • Property Tenant Pool: closely linked to location, but not always.
          • Property Location: closely linked to tenant pool, but not always.
          • Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

          Key metrics for each Property Class:

          Class A Properties:
          Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
          Tenant Default: 0-5% probability of eviction or early lease termination.
          Section 8: Class A rents are too high and won’t be approved.
          Vacancies: 5-10%, depending on market conditions.
          Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

          Class B Properties:
          Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
          Tenant Default          : 5-10% probability of eviction or early lease termination.
          Vacancies          : 10-15%, depending on market conditions.
          Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
          Section 8: Class B rents are usually too high for the Section 8 program.

          Class C Properties:
          Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
          Tenant Default: 10-20% probability of eviction or early lease termination.
          Section 8: Class C rents usually meet program requirements, proper screening still recommended.
          Vacancies: 10-20%, depending on market conditions and tenant screening.
          Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

          Class D Properties:
          Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
          Tenant Default: 20-30% probability of eviction or early lease termination.
          Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
          Vacancies: 20%+, depending on market conditions and tenant screening.
          Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

          Where did we get our FICO credit score information from?

          Check out this chart:

          FICO Score

          Pct of Population

          Default Probability

          800 or more

          13.00%

          1.00%

          750-799

          27.00%

          1.00%

          700-749

          18.00%

          4.40%

          650-699

          15.00%

          8.90%

          600-649

          12.00%

          15.80%

          550-599

          8.00%

          22.50%

          500-549

          5.00%

          28.40%

          Less than 499

          2.00%

          41.00%

          Source: Fair Isaac Company

          Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

          Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying. Check out the map on our website where we’ve made this all easy to follow.

          We can also share numerous examples of properties & portfolios we’ve assisted investors with!

          DM us if you’d like to discuss this logical approach in greater detail!

          Horror Stories from those that did NOT Understand What they were Buying:

          https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain

          https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss

          https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs

          https://www.biggerpockets.com/forums/963/topics/1195280-experience-of-oos-investing-in-cleveland-after-15-years
          This is really great advice, thank you. I still have family and close friends in the places I used to live mentioned in my post and have not done a thorough analysis on those markets yet. I think I will start there. 
          0Reply
      • Juan Yepes
        Lender · Miami, FL · Member since 2025 · 121 posts · 33 votes
        7mo

        Hi Evan,

        First of all, great job laying out the parameters for your strategy.

        I agree that investing locally is naturally the best option but with today’s technology the value-add of investing locally has narrowed down to just face to face interactions. If that is highly important to you, then invest locally. If not, you are likely better off investing out of state.

        You mentioned a few other states you would be willing to consider. I think FL and GA are great markets. You also mentioned scale, and that’s much easier to do when you open your search to a few other states. Narrowing your search to one high cost area will likely result in lower cash flow, lower returns and slower scale.

        On the topic of STR vs LTR, if you are a first time investor, I would lean towards LTR which is much more straight forward. Some folks in this thread have already explained the complexities of STR. Especially if you do end up widening your search to other states.

        Regarding lending strategies, I’m happy to connect and explore which options best fit your background and needs.

        0Reply
      • Allan C.
        Rental Property Investor · Member since 2018 · 826 posts · 809 votes
        7mo

        I get the appeal of looking OOS, so question that I have is if you plan on living in SoCal long term? There are trade-offs investing OOS and investing locally - I do both. 

        What's great about SouthBay is job diversity, weather and lifestyle. you already know that, and so do the millions that live in the area. I'm assuming you work for Northrop or Raytheon equivalent so you likely have good salary growth potential over time.

        Don't think about your investment decision solely based on your current situation, but think forward 5 and 10 yrs. Do you want 50 doors in Ohio or 10 doors in nicer area. Every individual will have different answer so you need to find your own.

        one last tip to offer, why not buy MF in Long Beach? It's a legit city with its own economy (and aerospace growth), while having lower price points. 

        I do think CA has an affordability issue that will test markets, but socal has many factors that will maintain demand. Make sure you're investing in the right fundamentals and not blindly chasing cash flow. 

        2Reply
        • Evan Shults
          OP
          New to Real Estate · Redondo Beach, CA · Member since 2022 · 7 posts · 5 votes
          7mo
          Quote from @Allan C.:

          I get the appeal of looking OOS, so question that I have is if you plan on living in SoCal long term? There are trade-offs investing OOS and investing locally - I do both. 

          What's great about SouthBay is job diversity, weather and lifestyle. you already know that, and so do the millions that live in the area. I'm assuming you work for Northrop or Raytheon equivalent so you likely have good salary growth potential over time.

          Don't think about your investment decision solely based on your current situation, but think forward 5 and 10 yrs. Do you want 50 doors in Ohio or 10 doors in nicer area. Every individual will have different answer so you need to find your own.

          one last tip to offer, why not buy MF in Long Beach? It's a legit city with its own economy (and aerospace growth), while having lower price points. 

          I do think CA has an affordability issue that will test markets, but socal has many factors that will maintain demand. Make sure you're investing in the right fundamentals and not blindly chasing cash flow. 


           That's a great point. And yes, its in line with the big box aero companies. I do think we are in the South Bay long term. I've honestly never considered somewhere like Long Beach even though I know there has been a lot of growth in the aerospace industry for some time. Thanks, Allan!

          Evan

          0Reply
      • Laura Navaquin
        Investor · Member since 2024 · 83 posts · 58 votes
        7mo

        HI Evan, I'd definitely recommend investing locally first. I'm originally from California, grew up in SoCal, lived in NorCal, and have been out east since 2010, so I'm very familiar with the areas you mentioned. My husband and I now invest in 6 different states, but when we started about 10 years ago, we focused on local deals. Starting close to home helped us learn the market, build experience, and minimize risk before expanding elsewhere. We are in the midst of expanding to our 7th state, being CA and we have personally been looking at Big Bear, Running Springs, Joshua Tree for STR's. In Joshua Tree, one thing to be conscious of are land fees.

        1Reply
        • Evan Shults
          OP
          New to Real Estate · Redondo Beach, CA · Member since 2022 · 7 posts · 5 votes
          7mo
          Quote from @Laura Navaquin:

          HI Evan, I'd definitely recommend investing locally first. I'm originally from California, grew up in SoCal, lived in NorCal, and have been out east since 2010, so I'm very familiar with the areas you mentioned. My husband and I now invest in 6 different states, but when we started about 10 years ago, we focused on local deals. Starting close to home helped us learn the market, build experience, and minimize risk before expanding elsewhere. We are in the midst of expanding to our 7th state, being CA and we have personally been looking at Big Bear, Running Springs, Joshua Tree for STR's. In Joshua Tree, one thing to be conscious of are land fees.


          Did you start with STRs? And did you diversify at all in each state or did you apply roughly the same strategy aiming at similar markets?

          0Reply
        • Laura Navaquin
          Investor · Member since 2024 · 83 posts · 58 votes
          7mo
          Hi Evan, 
          we diversified. We have a mix of STR, mid and long term. Our approach varies by state. 

          We didn’t necessarily buy seeking similar markets but rather bought where we frequent personally. 

          Quote from @Evan Shults:
          Quote from @Laura Navaquin:

          HI Evan, I'd definitely recommend investing locally first. I'm originally from California, grew up in SoCal, lived in NorCal, and have been out east since 2010, so I'm very familiar with the areas you mentioned. My husband and I now invest in 6 different states, but when we started about 10 years ago, we focused on local deals. Starting close to home helped us learn the market, build experience, and minimize risk before expanding elsewhere. We are in the midst of expanding to our 7th state, being CA and we have personally been looking at Big Bear, Running Springs, Joshua Tree for STR's. In Joshua Tree, one thing to be conscious of are land fees.


          Did you start with STRs? And did you diversify at all in each state or did you apply roughly the same strategy aiming at similar markets?


          1Reply
      • Scott AllenBusiness Member
        Real Estate Agent · Columbus, OH · Member since 2020 · 449 posts · 471 votes
        7mo

        @Evan Shults Sounds like you should move to a more affordable market and house hack a duplex to get started. 

        Option B is not risky if you build a proper core four when you get started (good agent, local lender, well referred property manger, contractors/go-to handyman). Consider finding a partner as well.

        Option C is higher maintenance/more of your time, more competition, I think some investors are finding better success with mid-term rentals. 

        [email protected]614-698-1227
        Reafco - Columbus, OH
        WebsiteView Page
        1Reply
      • Israel Hilerio
        Member since 2022 · 11 posts · 6 votes
        7mo

        On Option B - the fact that you've actually lived in Alpharetta, Pensacola, New Orleans, and Denver is a real edge. Most first-time OOS investors are flying blind, just trusting a spreadsheet and an agent they found online. You have actual gut-level knowledge of what those places feel like.

        That said, even in places you know, block-by-block matters more than most people realize. Two properties with identical numbers can have totally different outcomes - one's on a quiet street trending up, the other's next to a busy road with high tenant turnover. That stuff doesn't show up in the cap rate.

        If you go OOS, make sure you really know the specific neighborhoods before committing.

        1Reply
      • Neil Potts
        Los Angeles, CA · Member since 2026 · 24 posts · 7 votes
        7mo

        Great question, and welcome out of 'lurk' mode! 

        For context, I'm a Los Angeles agent, as well as an investor/developer too.

        You’ve clearly put a lot of thought into this, and you’re starting from a very strong position. Solid income, clear goals, realistic time constraints, and an understanding that strategy matters more than chasing whatever is trending this year.

        There’s already a lot of good advice in this thread, so I won’t rehash what others have covered well. I’ll just add a few perspective-level thoughts that may help you cut through the noise and actually move forward.

        First, be careful not to over-optimize the decision. Online real estate content can make it feel like there’s one “right” strategy and a hundred wrong ones. In reality, house hacking, small multifamily, out-of-state rentals, STRs, and value-add deals can all work. At your stage, the bigger risk usually isn’t choosing the wrong strategy, it’s getting stuck analyzing and not taking action.

        Second, don’t discount LA County just because it’s expensive. The South Bay and greater LA market are expensive for a reason. From a fundamentals standpoint, it’s one of the strongest real estate markets in the country. Long term asset appreciation here has historically been very hard to beat. That doesn’t mean every deal works, but it does mean that buying well and holding quality assets locally can be extremely powerful over time.

        On the feasibility point, I hear a lot of people assume that duplexes and triplexes in the South Bay just don’t pencil. In practice, that hasn’t been my experience. Even recently, I’ve walked several local small multifamily properties that made sense because they had below-market rents, deferred maintenance, or obvious opportunities for light to moderate renovation. Nothing fancy or over-improved, just smart, functional upgrades that improve rent and long-term durability. When you underwrite those deals properly, having tenants cover a large portion of the mortgage while the property appreciates can be a very solid first step.

        On the local versus out-of-state question, I think the risk discussion matters more than the price discussion. Lower-priced out-of-state markets can absolutely deliver stronger percentage cash flow in the early years. What you give up is familiarity and control. For a first investment especially, knowing the neighborhoods, rent ceilings, tenant base, and resale demand is a real advantage. It reduces execution risk in ways that are hard to quantify on a spreadsheet.

        Long term, a blend often works well. Appreciation-focused assets in a market like LA paired with cash-flow-focused assets elsewhere can complement each other nicely. You don’t have to solve for the entire 15-year plan on your first purchase.

        As for STRs, they can work, and the markets you mentioned are real markets, not fantasy spreadsheets. That said, they are a business, not passive real estate. Regulation risk, seasonality, management complexity, and time commitment are all real considerations, especially with young kids and limited weekly hours. If you go that route, I’d do it with eyes wide open and very conservative assumptions.

        One final thought that I think is often overlooked: make sure the people advising you actually think like investors. Many agents are excellent at traditional residential transactions but don’t underwrite deals, model renovations, or evaluate risk the way an investor needs to. Having someone in your corner who understands both the local market and investor math can make a big difference, especially on a first deal.

        You’ve done a great job putting yourself in a strong position financially and mentally. There are multiple paths here that can work. The key is picking one that fits your life, your time, and your risk tolerance, then executing it well.

        I'd love to chat more about this, feel free to email me any time.

        1Reply
      • Vijay FriedmanBusiness Member
        Miami, FL · Member since 2026 · 766 posts · 122 votes
        4mo
        Quote from @Evan Shults:

        Hi all!

        I've been a long time lurker, first time poster here! Thanks in advance for any feed back you are willing to offer!

        Background

        • Age: 35
        • Industry: Aerospace Engineering (W-2 income: $140k/yr)
        • Household:
          • Spouse (34), part-time nurse, stay-at-home mom
          • Two children (4 years, 6 months)
        • Location: High Cost of Living (South Bay, CA)
        • Available Time: ~10–15 hours/week
        • Funds Available to invest: ~50k

        Objectives

        Primary Goal:

        • Achieve W-2 income independence within ~15 years.
        • Generate sufficient cash flow in the near term to allow my wife to be work optional. Ideally <2years

        Constraints & Assumptions

        • Geographic constraint:
          • South Bay HCOL pricing limits feasibility of local house hacking or multifamily purchases.
        • Experience constraint:
          • First investment property.
          • Common advice suggests avoiding out-of-state (OOS) investing initially.
        • Cashflow constraint:
          • Current w2 works now but children wont become cheaper
        • Time constraint:
          • Part-time involvement only (10–15 hrs/week)

        Problem Statement

        Given:

        • High local acquisition costs
        • Warnings against OOS investing for a first deal,
        • A near-term need for cash flow

        What investment strategy best satisfies the 2-year cash-flow goal while aligning with the 15-year independence goal?

        Options Under Consideration

        Option A: Local House Hacking / Multifamily

        • Status: Though most interesting, likely infeasible due to South Bay pricing.

        Option B: Out-of-State Long-Term Rentals

        • Potential Benefits
          • Markets better positioned to align with long term goals
          • I have lived in several areas where I could potentially go for (Alpharetta, GA, Pensacola, FL, New Orleans, LA, Denver/Boulder,CO)
        • Concerns:
          • Higher execution risk for a first investment.

        Option C: Short-Term Rentals (STRs)

        • Possible Target Markets within 3hrs of home:
        1. Big Bear
        2. Joshua Tree
        3. Palm Springs
        • Potential Benefits:
          • Higher cash flow potential
            • Could satisfy 2-year income requirement
          • Possible secondary use as a family vacation property
        • Concerns:
          • Risk, regulation, volatility, and scalability relative to long-term goals
          • Time commitment

        Open Questions for Feedback

        • Is STR a reasonable first investment given the constraints?
        • Are there alternative strategies that better balance risk, cash flow, and time?
        • How should I weigh short-term cash flow vs. long-term scalability at this stage?
        • Looking for good meetups in the South Bay area

        @Evan Shults

        You’ve done a great job laying this out. Honestly, this is one of the more thoughtful breakdowns I’ve seen from someone starting out.

        Based on everything you shared, I’d simplify the decision quite a bit:

        Your constraint isn’t just capital, it’s time.
        With a full-time job, family, and ~10–15 hrs/week, you need something that’s:

        • Predictable
        • Low operational burden
        • Easy to scale

        That’s where I’d be careful with STRs as a first deal. They can produce cash flow, but they come with:

        • Higher volatility
        • Regulation risk (especially in CA markets like Big Bear/Joshua Tree)
        • More hands-on management

        For your situation, I’d lean toward:

        - Out-of-state long-term rentals (LTR), professionally managed

        Markets like parts of TX, FL, or the Midwest can give you:

        • Better rent-to-price ratios
        • More stable cash flow
        • Easier financing options (including DSCR as you scale)

        The biggest misconception I see is that OOS is “riskier” in reality, a bad local deal is riskier than a well-bought OOS deal with the right team in place.

        With $50k, you’re likely looking at:

        • 20–25% down on a $180k–$220k property
        • Something that can actually produce positive cash flow day one

        If your goal is 2-year income relief, I’d prioritize boring, predictable cash flow over higher-return but higher-risk strategies.

        If you want, I can break down a few real scenarios (OOS LTR vs STR vs local) so you can see what actually hits your goals based on current rates and rents.

        786-656-0387
        DreamPoint Capital
        WebsiteView Page
        0Reply
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