CA investors? Bay Area? Help with strategy.

[Andrew Christian]

Hi there, I am a CA bay area resident with about 60k of capital looking to break into the real estate market.  I have read a lot on the forums and listened to a lot of podcasts and am leaning towards investing in multifamily areas in CA outside of the bay area (price is the big reason) hopefully within driving distance.

I am looking at places like Merced and other college towns with a clear growth potential and lower home prices to get my feet wet.  However, I also come across other possible avenues such as Sacramento (and areas north of the American River) which yield higher rents and good deals, but a more unstable market for consistent rent and home prices.  

I am just fishing for opinions here and ideas...BUT...if you were in my position and had 60k AND lived in the bay area, I'm curious what your strategy would be and why.  Thanks.

[Jay DeCima]

Andrew

You are not far off with your areas and what you are looking for.

For 40 years I have been investing and teaching about my kind of real estate vehicle.  Let me explain by telling you what has worked for me over the years with 200 rental houses at my "high point":

Northern Calif.

Smaller cities.

Older "groups of houses", ideally 5 or more on a single parcel.

Poor condition is good for me.  The sellers have fewer options.  With 5 or more dumpy looking houses, you will never get a bank, commercial loan.  Sellers of these properties know they will be carrying the financing.  This IS HUGELY LUCRATIVE, mutually beneficial and I have had seller financing on over 85% of all my purchases.  Many times I have even gone back to these sellers that were carrying the financing and bought back my note (the money I owe them) for big discounts of 20-40%, years after I bought the property.

I always buy in the older, blue collar, part of town.  Never in the slums.

Over the years my down payments have been about 10% (remember, I don't have a bank telling me THEIR requirements).

Although I have done all kinds of real estate, holding simple rentals has been far and away the best kind of investment for me.

My fix up cost run about 10% of purchase price for a light fixer and 20% for a heavy fixer. Note that all the work does not have to be done right after purchase.

I like safety in numbers.  If I have  5 simple rental houses on a single parcel, and have a vacancy, my vacancy rate is 20% (I can live with that).  If I have vacancy with a single family house

My best piece of advice is to pick the kind of real estate vehicle you think will work for you, find the experts in that field, thoroughly check that person out.  Then do that kind of investing. Use that person as a model.  If you look at several kinds of real estate investing, you will never get good at one of them..........you will become a "wander generality".

Take a few dollars and invest in books and courses regarding what you think will be your type of "vehicle".  DON'T think you need to buy a fancy $5-$20,000 course.  Most folks on BP would tell you the same--LOUD AND CLEAR.

Good luck.

Fixer Jay DeCima