La Palma, CA · Member since 2015 · 14 posts · 0 votes
This question is to all seasoned investors. I live In Orange County, CA and have $80,000 to do my first RE investing. I am open to all types of investing. What should I do?
Welcome to BP! I am in Mission Viejo and would love to connect if you have the time.
I am primarily a buy 'n hold investor with properties in Memphis, Atlanta and Indianapolis. Although I have purchased SFRs, I am now focused 100% on multifamily.
$80,000 won't do a lot in California but could do a lot in other states, where properties are much less, CAP rates are high and Cash-on-Cash returns significantly higher. In Indianapolis and Memphis, for example, it is very easy to find duplexes for $40-50K. With $80K, instead of buying two for cash, you could easily buy 8 duplexes for 20% down. That would give you 16 units/doors and, at say, conservatively, $100 per door net, that's $1,600 cash flow per month. That's a 24% cash-on-cash return. If you paid cash for 2 duplexes and the rent was $600 per unit, using the 50% rule, you could cash flow $1200 per month and later do a cash-out re-fi to purchase more properties. You have a number of different options.
Now, there may be some BPers that invest in California that might have a different suggestion for California investment options but that is my recommendation based on my experience.
Let me know if you want to grab a coffee sometime. I'm always happy to meet and share what I know.
Welcome to BP! I am in Mission Viejo and would love to connect if you have the time.
I am primarily a buy 'n hold investor with properties in Memphis, Atlanta and Indianapolis. Although I have purchased SFRs, I am now focused 100% on multifamily.
$80,000 won't do a lot in California but could do a lot in other states, where properties are much less, CAP rates are high and Cash-on-Cash returns significantly higher. In Indianapolis and Memphis, for example, it is very easy to find duplexes for $40-50K. With $80K, instead of buying two for cash, you could easily buy 8 duplexes for 20% down. That would give you 16 units/doors and, at say, conservatively, $100 per door net, that's $1,600 cash flow per month. That's a 24% cash-on-cash return. If you paid cash for 2 duplexes and the rent was $600 per unit, using the 50% rule, you could cash flow $1200 per month and later do a cash-out re-fi to purchase more properties. You have a number of different options.
Now, there may be some BPers that invest in California that might have a different suggestion for California investment options but that is my recommendation based on my experience.
Let me know if you want to grab a coffee sometime. I'm always happy to meet and share what I know.
Rental Property Investor · Chico, CA · Member since 2016 · 625 posts · 336 votes
10y
@Shawn Tang....Welcome!......1 thing to consider would be an owner occupied 4 plex or even a duplex. This would allow good financing via FHA (I think 3% or so down and a lender can chime in here) and great rates to boot. A perfect start to see if the apartment investing is the way to go. You are able to watch the property first hand while others are paying your mortgage and you are gaining equity. Just one option but very viable. Good luck!
La Palma, CA · Member since 2015 · 14 posts · 0 votes
10y
@ bill manassero, I had a cousin with the same investing idea years ago but he decided that it would be too hard to manage being that the properties were so far away. I would definitely love to get your take on it and hear some of your experiences to see if this is something i would be interested in. Thanks so much for reply! I will be in touch.
La Palma, CA · Member since 2015 · 14 posts · 0 votes
10y
@ Dylan Vargas, definitely am considering multifamily however already have a primary resident so owner occupying would be out of the question. Thank you for the suggestion!
Some people definitely cannot handle out-of-state investing. It's not for everyone. However, there are lots of BPers that prefer it. I've generally have had good experiences but I've also had some narly ones. It really depends on your team on the ground. But, overall, I am committed to generating real passive income -- meaning I don't want to mess with the property unless I absolutely have to. If the properties were close to me I know I would be there all the time. Instead, I chose to call my property managers weekly (only if necessary) and have people I know in the area of the property periodically check on it out for me. As long as we get good tenants, minimal turnover, the property is well maintained and we meet our cash flow projections, I'm good. But, as I'm sure you can imagine, I also go through a great deal of effort upfront to make sure I have an excellent property management team in place first.
La Palma, CA · Member since 2015 · 14 posts · 0 votes
10y
@Bill Manassero I've heard of the out of state investing from those RE courses years ago but was always hesitant to believe it. It just sounded too good and easy. I guess the hardest part of it all is to establish a good team to manage it for you. How did u purchase? Did u physically go there to look at the property? Very interesting!
Funny you should write because I am preparing for a podcast I am doing on "Why I Buy Properties Out-of-State." California is ridiculous for multifamily investing so I really had no choice but to go out of state. Regarding picking properties, I actually search for "emerging markets" first. When I determine the emerging top markets, I next starting checking out properties in those areas - looking at things like price, CAP rates, cash-on-cash returns, etc. Then I narrow down to maybe 2 or three main markets. Then, I start calling brokers in those areas to see if I can find a really great broker -- one who will feed me great off-market deals. Once that happens and I start making offers, then I start developing my team, which often starts with referrals from my broker. Once a team is in place and an offer accepted, I will fly out (usually in coordination with the property inspection). On that trip, I interview and solidify team contacts (provided the inspection goes well). After that, I have the option of closing remotely or flying out again. It all depends on what is needed.
@Bill Manassero I've heard of the out of state investing from those RE courses years ago but was always hesitant to believe it. It just sounded too good and easy.
Exactly, the ONLY reason those properties cash flow on paper is because the price is so low. IF, it were that easy then the prices would be bid up instead of just churned, novice Cali investor after novice Cali investor.
La Palma, CA · Member since 2015 · 14 posts · 0 votes
10y
@Bill Manassero thanks for the info. Bill curious what kind of return on deposit do you expect on a good investment if you were to finance the property and not pay all cash for it?
@Account Closed Hi Bob! Thanks for replying. So do you invest only in Hawaii or have you ever tried out of state?
Yep I'm invested in Vegas and CA and managed my Honolulu properties for almost 40 years from CA after my Honolulu PM turned out to be a dud. Of course it is different to be flying to take care of $1500-$3500 rents vs. $800.
My Vegas have been virtually flat for 20 years but did at least have a boom then bust then boom...At least if you time it right you can get out with a little money.
Supply and demand is what will make you successful. CA and HI have that. I based Vegas on water restricting the supply but that hasn't stopped anything. If rents and prices have been flat in an area don't count on any fake cash flow to make you money.
La Palma, CA · Member since 2015 · 14 posts · 0 votes
10y
@Bob
@Account Closed So Bob what are your feelings about Las Vegas properties as of now? Have you ever considered or invested in hotel condos such as MGM Signature, Vdara, Palms Place or Trump Towers? Im interested in your thoughts on that. Thanks in advance!
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Vegas is not a good place for rents. If you can get in on the low cycle and sell on the high you could make some money but you'll work for it by renting in between and holding costs will eat your profit.
I've looked at condotels here in Honolulu and have properties that can do 30 day vacation rentals but the mgt. fees etc. is not very favorable. It would be a job if you did it yourself. Vegas is so boom and bust and there is always a "new" spot coming along that will make your place obsolete.
Investor · Cincinnati, OH · Member since 2008 · 319 posts · 243 votes
10y
Reporting from the midwest here. The reason why out of state investing can cashflow is because there are many other areas where people do not bid up the prices based off of hope for appreciation. I have not done out of state investing, but it is definitely not something to be taken lightly..
You did not mention what your goals are. This is going to impact what you want to do significantly. There is a difference between trying to do something "smart" with the money you are earning from your career or wherever you stockpiled 80k from and trying to retire in a couple years.
Fresno, CA · Member since 2016 · 25 posts · 10 votes
10y
Shawn Tang I would have to agree with Bill Manassero on Cali being too expensive for multifamily investing. My wife and I went out of state to invest. You just need the right team. I was fortunate enough to have former teammates doing REI in another state that wanted to help me get started and grow long term wealth. We currently have a 8 unit apartment complex under contract for $307,500 that produce 5k in gross rent. It's actually under rented and we can get $675/unit in current state once we close. They also have skin in the game to make sure that my investment is protected. They spilt cost/revenue w/ my wife and I 75/25 (75% to me and my wife, and 25% to them). They also manage the property at a 7% gross rent fee, which helps to keep more money in the biz. You need to find like minded ppl that you can trust. Good luck and happy hunting!
Investor · Monterey Park, CA · Member since 2016 · 24 posts · 2 votes
10y
I'm from California and I haven't been able to find anything there. If you would consider partnering, I have some properties I am looking at. If you send me a private message with your e-mail I will break down the financials for your consideration.
@Tyler Weaver my goal has always been cash flow. Not too concern with appreciation.
Why would you not focus on profit?
Bob I did think that came out wrong. Obviously appreciation is a big part of RE investing but what I meant was I'm focusing more on the property turning as much positive cash flow per month and the appreciation is not my main focus in finding an investment but yes it is always a part of the overall consideration. Thanks for the reply.
Real Estate Investor · Las Vegas, NV · Member since 2016 · 399 posts · 260 votes
10y
Hi Shawn. I read through all the post but didn't read what are your goals. Are you looking for cash flow or flips? Are you looking to be full time active investor or a more passive role. There are a lot of variables that you need to take in consideration. A word of caution, do your due diligence and know who you are working with. BP is a wonderful place with many great people but there are some real slimy ones as well. So make sure your investment strategy is sound and balance risk vs reward. If you're ever in Las Vegas come say hi. Best of luck to you.