Newbie from Torrance, California

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Newbie from Torrance, California

Kaitlyn Masai
Phoenix, AZ · Member since 2016 · 15 posts · 5 votes

Hi BP community! 

My name is Kaitlyn and I'm a newbie from the Torrance, South Bay area of Los Angeles. I have been listening to the podcast for a couple months now. Josh and Brandon are awesome so I had to check out the site. I more recently started reading real estate books and BP blogs. I find myself most interested in buy and hold investing for retirement. I am in my final year of a Ph.D. program, so I'm waiting to finish and save up some money before buying property. In the meantime, my goal is to learn as much as possible about REI. If there are any experienced investors in my area, I would love to meet you for lunch or coffee sometime (my treat, of course!). I also want to say a big thank you to all of you who have spoken on the podcast; your knowledge and experience is invaluable.

A question for real estate investors in California: I have realized the many cons of buy and hold investing in this county and state. Are any of you holding property in California? If so, do you recommend it for new investors? I wanted to house hack with a multi-family property but now I'm thinking buying out of state may be a smarter move.     

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Matt Mason
Investor · Los Angeles, CA · Member since 2013 · 231 posts · 260 votes
10y

Kaitlyn,

At this point in the cycle, I'd take my time and look for a deal locally as you may want to wait until you obtain your PhD and start your career.  House hacking is a great way to start in CA as you will learn a lot quickly.  You may not want to live next to your tenants long term, but you don't have to live there forever.  I know a lot more people who are successful now that started house hacking over going out of state.

As far as buying a few small properties out of state, I think there are a lot of problems.  One is you are immediately at a disadvantage compared to local investors who know local neighborhoods, can better monitor their properties, can network with local investors and on and on.  You still have to manage your manager or asset manage your properties.  That is much tougher from afar and you better subtract occasional travel costs from your returns.  A property manager is going to pay more attention to someone who can meet with them in person or who is going by their properties i.e. very so often rather than someone 2,000 miles away in CA that only sends an email or an occasional phone call.

You have to think of your exit strategies too.  Who are you going to sell to?  Another out of state investor?  If you are buying retail in a low growth market it can take many years just to get to break even proceeds as you have to budget 10% for selling costs.  If you plan to hold for a long time, how are you going to renovate the property down the line as it becomes dated?  Not easy from long distance.

Locally, initial cash on cash returns are weak at first, but cash flow does come especially if you implement a value add plan effectively.  I bought a 4 plex 4.5 years ago and I have been able to push rents close to 30%, while the property taxes have gone up less than 5% due to Prop. 13.  Back then most people on BP would have said I was crazy to buy in CA, when out of state returns were so much better.  However, now my cash flow equals those out of state deals with a huge amount of price appreciation to boot.  The next 4.5 years won't be so generous, but if you are in for the long haul you will be okay.  

Sometimes when I read these posts, I feel like many on BP put their hands together and say look a Californian with a good income, let's see if I can make some money off them.  I'd always ask myself on these out state deals why isn't someone locally buying this.  Just my 2 cents.

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  • Account Closed
    Real Estate Agent · Los Angeles, CA · Member since 2016 · 15 posts · 6 votes
    10y

    Welcome Kaitlyn! I just started posting on BP as well and am in Playa Vista-Westchester area. I don't see myself as qualified to give advice on whether out of state deals are better or buying local is better, but I will share with you why I am not considering buying out of state for now: I have no friends or relatives living outside LA. I think if I had grown up out of state and my family is still in my home town I may consider investing there :)

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    10y

    @Charles Lemelle California is a huge state, with many different regions. I moved to southern California when the market crashed, from an area that was hard hit, because we knew southern California is ALWAYS the first place in the country to rebound. Why? Because of all the reasons I listed in my first post. Whereas, areas where there is no economic base, high unemployment, tough winters, etc. plug along and take years to recover. 

    Southern California is expensive, but rents are high too. At the same time, there is a broad based economy, large pool of qualified buyers, tenants, etc. Because of the demand, homes appreciate in most areas very nicely, and usually will outpace the cash flow you might realize in the more depressed areas. Here, should someone be looking for cash flow, there's the potential for that too with vacation rental properties. 

    However; the poster was asking about investing in turn key properties out of state. It might work in some instances. I personally just think for new investors to trust someone they don't really know, with what often is their lifes savings, is risky and they'd be better off trying to find an investment closer to home. It's great it worked out for you, but that's not always the case. 

    0Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Karen Margrave:

    @Charles Lemelle California is a huge state, with many different regions. I moved to southern California when the market crashed, from an area that was hard hit, because we knew southern California is ALWAYS the first place in the country to rebound. Why? Because of all the reasons I listed in my first post. Whereas, areas where there is no economic base, high unemployment, tough winters, etc. plug along and take years to recover. 

    Southern California is expensive, but rents are high too. At the same time, there is a broad based economy, large pool of qualified buyers, tenants, etc. Because of the demand, homes appreciate in most areas very nicely, and usually will outpace the cash flow you might realize in the more depressed areas. Here, should someone be looking for cash flow, there's the potential for that too with vacation rental properties. 

    However; the poster was asking about investing in turn key properties out of state. It might work in some instances. I personally just think for new investors to trust someone they don't really know, with what often is their lifes savings, is risky and they'd be better off trying to find an investment closer to home. It's great it worked out for you, but that's not always the case. 

     You do realize that this website that you are a Moderator of has spun off a Turnkey Review website, right ?

    0Reply
  • Jynell BerkshirePro Member
    Real Estate Attorney, Broker, Investor · Indianapolis, IN · Member since 2013 · 207 posts · 58 votes
    10y

    Kaitlyn,

    Welcome to the BP community! BP has a wealth information and knowledgeable investors. Feel free to contact me as the Indianapolis market.

    Happy Investing!

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    10y

    @Charles Lemelle My name is Karen Margrave, not Moderator. As such, I have my opinions as you have yours. Biggerpockets is a site where people from all walks of life, from every professional background, real estate niche or specialty can come together and express their opinions, ask for help from others, and learn. As moderators we aren't here to push forward any agenda for BP, but to contribute from our base of knowledge and experience, and offer help where it's needed. Much the same as every other member! Thank you for taking the time to share your thoughts. Have a great day! 

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    I am a moderator and totally unaware of a turnkey review site spun off from this site. I am curious to what you are referring to.

    0Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Karen Margrave:

    @Charles Lemelle My name is Karen Margrave, not Moderator. As such, I have my opinions as you have yours. Biggerpockets is a site where people from all walks of life, from every professional background, real estate niche or specialty can come together and express their opinions, ask for help from others, and learn. As moderators we aren't here to push forward any agenda for BP, but to contribute from our base of knowledge and experience, and offer help where it's needed. Much the same as every other member! Thank you for taking the time to share your thoughts. Have a great day! 

    I'm just yanking your chain Karen. I really liked your input on the So Cal market. Thanks and keep up the great posts !!

    Chuck

    0Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Ned Carey:

    I am a moderator and totally unaware of a turnkey review site spun off from this site. I am curious to what you are referring to.

    http://turnkey-reviews.com/

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Charles Lemelle "Spun off" as you have used it implies the site has ties to BP.  

    This site is the creation of @Jay Hinrichs and @Brie Schmidt. Other than the fact they are both regular posters here, there is no connection with BP. 

    4Reply
  • Kaitlyn Masai
    OP
    Phoenix, AZ · Member since 2016 · 15 posts · 5 votes
    10y

    @Darin Owens Interesting suggestion. I hadn't really considered out of country investing because it seems pretty complicated but it would be awesome to own property in Costa Rica. I would love to meet up and talk about this more with you. 

    0Reply
  • Kaitlyn Masai
    OP
    Phoenix, AZ · Member since 2016 · 15 posts · 5 votes
    10y

    @Ali Boone I'm getting my Ph.D. in clinical psychology so I will eventually be a psychologist. Wow congrats on a second Master's! It's definitely a lot of work. Thanks for your thoughts on this. It is hard to let go the thought of cash flow, but it may be worth it just to have somewhere to live and the possible appreciation. 

    0Reply
  • Kaitlyn Masai
    OP
    Phoenix, AZ · Member since 2016 · 15 posts · 5 votes
    10y

    @David Varvaro Good point. I hadn't thought about doing both. I'm glad to see real estate agent and investor from my area on BP. 

    @Vincent Guerrero Thanks for the advice

    @Matt Mason Yes, the problems you brought up are the main reasons I'm hesitant about out-of-state investing. I am happy to hear that you have had success investing in this area. 

    @Eric F. Oh I didn't know that about capital gains! The focus is usually on cash flow. I'll have to look into that more. 

    0Reply
  • Kaitlyn Masai
    OP
    Phoenix, AZ · Member since 2016 · 15 posts · 5 votes
    10y

    @Matt R. Thanks! That's interesting that the top 3 cities for total returns are in CA. This conversation makes me realize that there's some upsides to CA investing that I haven't considered. 

    @Charles Lemelle Thanks for your thoughts on this too. I had considered turnkey as well but I think I like the idea of rehabbing a place myself. 

    @Dan H. I'm glad to hear you have had such great success in the So Cal area. It makes me hopeful that I might be able to do well here too. 

    @Ron B. Good to meet you! Let me know how your first deal goes. I would love to know whether you end up going with out-of-state or local. I'm also leaning more to the A/B locations.  

    1Reply
  • Kaitlyn Masai
    OP
    Phoenix, AZ · Member since 2016 · 15 posts · 5 votes
    10y

    @Karen Margrave Great advice about the process behind this decision. I have noticed the price differences you mention about I didn't have a clear understanding of why that was. I will definitely keep that in mind. 

    0Reply
  • Kaitlyn Masai
    OP
    Phoenix, AZ · Member since 2016 · 15 posts · 5 votes
    10y

    @Sydney Hall Thanks for the welcome! Good to meet another CA newbie.

     @Mike D'Arrigo Thanks for the advice. It seems like house hacking might be my best bet if I want to stay local. 

    @Robert L. Thanks! I will keep you in mind for sure :)

    0Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Kaitlyn Masai:

    @Matt R. Thanks! That's interesting that the top 3 cities for total returns are in CA. This conversation makes me realize that there's some upsides to CA investing that I haven't considered. 

    @Charles Lemelle Thanks for your thoughts on this too. I had considered turnkey as well but I think I like the idea of rehabbing a place myself. 

    @Dan H. I'm glad to hear you have had such great success in the So Cal area. It makes me hopeful that I might be able to do well here too. 

    @Ron B. Good to meet you! Let me know how your first deal goes. I would love to know whether you end up going with out-of-state or local. I'm also leaning more to the A/B locations.  

    Oh yeah. If you can find the right deal, Fix and Flip. Take that big chunk of cash, walk away, and find your next deal. Much success to you !

    1Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Ned Carey:

    @Charles Lemelle "Spun off" as you have used it implies the site has ties to BP.  

    This site is the creation of @Jay Hinrichs and @Brie Schmidt. Other than the fact they are both regular posters here, there is no connection with BP. 

    First, you knew exactly the website that I was referring to. I gave you the link just to play along. Second, I used the phrase spun off. What it "implies" is for me to know and/or communicate. It is also for you to interpret anyway you wish. As far as "no other connection", the site is referenced throughout BP.

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y
    Originally posted by @Charles Lemelle:
    Originally posted by @Kaitlyn Masai:

    @Matt R. Thanks! That's interesting that the top 3 cities for total returns are in CA. This conversation makes me realize that there's some upsides to CA investing that I haven't considered. 

    @Charles Lemelle Thanks for your thoughts on this too. I had considered turnkey as well but I think I like the idea of rehabbing a place myself. 

    @Dan H. I'm glad to hear you have had such great success in the So Cal area. It makes me hopeful that I might be able to do well here too. 

    @Ron B. Good to meet you! Let me know how your first deal goes. I would love to know whether you end up going with out-of-state or local. I'm also leaning more to the A/B locations.  

    Oh yeah. If you can find the right deal, Fix and Flip. Take that big chunk of cash, walk away, and find your next deal. Much success to you !

     Those return numbers are for buy and hold not fix and flip. IDK nubers for fix and flip and I think that varies year to year a lot vs the buy and hold. The fix and flip is all over the map quarter to quarter even but you will find specific Cali zips in the top 10 still. 

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    10y

    @Charles Lemelle As @Ned Carey indicated, the website you are referring to is NOT a "spin off" of BP, anymore than the websites of any of the other thousands of members of BP would be. One of the people that is a partner in the business that owns that website is a moderator and that's as far as the connection goes. We moderators volunteer our time to moderate on the site and share our experience. You will note I too have a website, and it has no connection to BP, only to my business. Should you become a paid member of BP, you too can have your website in your signature and become part of the conspiracy! (just yanking your chain back) 

    1Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Karen Margrave:

    @Charles Lemelle As @Ned Carey indicated, the website you are referring to is NOT a "spin off" of BP, anymore than the websites of any of the other thousands of members of BP would be. One of the people that is a partner in the business that owns that website is a moderator and that's as far as the connection goes. We moderators volunteer our time to moderate on the site and share our experience. You will note I too have a website, and it has no connection to BP, only to my business. Should you become a paid member of BP, you too can have your website in your signature and become part of the conspiracy! (just yanking your chain back) 

     I'll have to check out your website. Have you seen a good business flow from it ?

    0Reply
  • Account Closed
    Real Estate Agent · Los Angeles, CA · Member since 2016 · 15 posts · 6 votes
    10y

    @Kaitlyn Masai haha very tricky question! Had I owned properties where I grew up (my mom is still there) I would have asked my mom to keep an eye on them for me, but of course that depends on her willingness to help and her ability to solve problems. 

    0Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    10y

    @Charles Lemelle  To be honest, other than using it to showcase our properties, I don't really try to pick up other business. However; I have had offers from investors wanting to partner, and others wanting us to build for them. So far the right project for partners hasn't come up, and for now, we are only building our own projects. I have had a great deal of traffic to the website from BP, especially when I post consistently. It's a great site for building your network, no matter what niche you're in. I just wish @Joshua D. ( the internet for that matter) would have been around when we first started ... but he'd be an old man now, so it's best for him he wasn't! 

    0Reply
  • Charles Lemelle
    Punxsutawney, PA · Member since 2016 · 45 posts · 16 votes
    10y
    Originally posted by @Karen Margrave:

    @Charles Lemelle  To be honest, other than using it to showcase our properties, I don't really try to pick up other business. However; I have had offers from investors wanting to partner, and others wanting us to build for them. So far the right project for partners hasn't come up, and for now, we are only building our own projects. I have had a great deal of traffic to the website from BP, especially when I post consistently. It's a great site for building your network, no matter what niche you're in. I just wish @Joshua D. ( the internet for that matter) would have been around when we first started ... but he'd be an old man now, so it's best for him he wasn't! 

     Those are awesome modern properties you have listed on there. Very impressive !

    1Reply
  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    10y

    Thank you! 

    0Reply
  • Chinmay Goswami
    Investor · Alpharetta, GA · Member since 2016 · 17 posts · 0 votes
    10y

    @Kaitlyn Masai ! Congrats on your PHD ! If time permits  i would request you to please read http://www.rbcpa.com/mungerspeech_june_95.pdf . The paper discusses very essential thoughts from Charlie munger on human misjudgment and the tenets which can be used for your investing! 

    I have moved to South cal recently but most of my investment is in low cost destination. I can buy  multiple properties at the same cost and doing that helps me diversify the risk and create better returns! Remember Price is what you pay , value is  what you get! This has worked for me but you might to experiment to find your own niche! 

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