Investor · Santa Cruz, CA · Member since 2017 · 61 posts · 50 votes
So, my wife and I have been have been saving for a while, which isn't really easy. (Two kids, tuition, CA prices..) But we do live a pretty thrifty lifestyle. 2001 ford truck for me and 2010 Pilot for the Mrs. All paid off and very little CC debt. Mortgage on our PR is $1500/mo.
That said, where would you park your $40k? Strongly feeling this bubble is near the popping point, and don't want to make the same mistake I've seen so many make. I'm really getting interested in MF syndication.
I'm not you so I'm answering this from my perspective. I had around $60,000 to invest.
I bought 3 cheap/low income houses paying cash. I'm bringing in $1,650/month and own the properties free and clear. Used that money and just put a 4th one under contract that will close those week which will bring my monthly income to $2,350/month. Once again I own everything free and clear. Already have my 5th one lined up as well. Just going to wait another month to save up another $2,000 that I can use towards repairs on the 5th house.
Robert DeForge
Hello!
Your best option is to find a reliable and honest agent that will direct you to the area that is up and coming. After pinpointing the exact area that doesn't have a bubble start looking for multi families. Multifamiles gives you the opportunity to invest and create positive cash flow that is less riskier than the counterparts ( flipping rehabbing etc). Taking advantage of the interest rates at the moment will also increase your cashflow. Keep in mind if your investing for the long term the short term price ,if right, shouldn't matter as much. The reason I say this is that if you pay ten grand more for a home over ten years you will recuperate the premium with appreciate and/or rental income.
Good luck on your endeavors!!
I have my 40k in a synchrony 1.2% account while I wait for an opportunity. They also have a 1.55% cd at the moment. Better than nothing but definitely a short term position.
40k can go a long way just really depends on what your goals are. You want to flip it or do you want to buy, hold, and collect rent? I would say find someone in your area that is doing tax deeds and see if they can find you a deal below 40k. In the last year in a hot South Florida Market Ive gotten over 20 properties under 40k. Some in good condition some not so great. All of them had room to fix and flip and some were able to be rented immediately. Ive also had some investors use the little money they had as leverage to get more money for new construction loans. Investors are always happy when they can use the least money possible out of their own pockets and make a great return.
I like what a previous poster said... Pick a reasonably priced market - hopefully you have some friends that live in a market where you'd want to invest (OKC, Cleveland, Texas, whatever) where you can visit for a few days and do some on-the-ground research. Or some short flight locations like inland CA (Fresno, Bakersfield)? New Mexico? Idaho? Don't vacation... use that time wisely. Find a realtor who specializes in investments ahead of time (people on BP can give you references) and view a few investible B-class areas/properties during your visit. Look for 1-4 unit properties. Then you can do everything else remotely... get some PM and local financing references.
This may be time consuming, but it's most certainly a lower risk way to get your beak wet than syndication or flip funding or some other arrangement where you'll have to place your trust in others, plus I would assume that syndication/flip-funding deals in your area of CA would also have higher capital requirements than other US locations anyhow. You'll always be able to get into these other REIs down the road if you want. Plus you'll learn a lot more owning and setting up your own RE investment too.
Invest in Detroit!
There's a lot of misinformation out there about Detroit. There are basically 3 cities here, in terms of real estate. There is downtown, there are the run down neighborhoods, and then there are the neighborhoods on the upswing. Downtown, you can cross off of your list @ $40,000. But with $40,000, you can buy, renovate, and hold or buy, renovate, and flip (turnkey to an investor or to an end user).
Obviously, there are some risks, which can all be mitigated with some due diligence. But the turnaround time on a cash flow or a flip, as well as the returns both short and long, are going to be a lot better than in most cities.
***Tip*** East English Village is a great place to start looking @ that price point.
Other than that little pitch on Detroit, I think you will find that there are plenty of opportunities in your price point in a lot of markets, but will all come with some risk and hard work.
Good luck!
1) I wouldn't worry about perceived trends because it leads to speculation and then builds fear. No one and I mean no one can tell you when the market will crash or take a down turn.
2) If you buy a property correctly, it does not matter what the "bubble" does unless you panic and try to sell. Its all about perspective in the market. If you are trying to get rich quick (which will not likely happen) then I would be worried about the "bubble" popping especially if you buy hoping to ride the appreciation wave. If you are of the long term mind set then buy a solid cash flow investment and hold it. (might have to be outside of your market). That In my opinion is the best thing for $40K of investment.
3) REIT can come in many flavors and I would be very careful about them considering huge commercial big box stores are taking it on the nose right now and many REITs are heavily vested in that type of asset. Looking at past performance of an REIT fund is silly too considering what the economy looked like a few years ago. "Past performance is not a sign of future performance."
I have been a buy and hold investor for 16 years. The last 5 I have done single family flips... Now I am focusing on raw land. I am looking for money partners. I am looking for private money to help fund bigger acreage deals. Business model is buy at 40% of market and double our money quick. You make 50% on your cash. PM me if you are interested. Close at title in the entity name of your choice. Split the equity. I find them, market and sell them. You fund them.
You can buy shares online through a broker like Vanguard, Fidelity, etc., the same as you would any publicly traded stock. You can buy them from your retirement accounts (IRA, 401k, etc.) or in a taxable account. You can buy them in small increments too, rather than needing to save up 10s of thousands of dollars, and immediately reinvest the dividends via DRIP. Lots of advantages ... I still prefer hands on local investment in individual properties because of the control you have, but if you want passive without as much control, you are not an accredited investor, and don't yet have the REI skills to analyze and manage individual properties, PMs, rehabs, etc. (which usually comes from hands experience) then I think REITs are a good option ... much safer than going out of state investing in individual properties as an inexperienced investor IMO.
Robert DeForge I have lived in of the hottest places. Tampa, FL, Ft Lauderdale and Trinidad WI. And one of the best ways to invest would be in Real Estate. Tangible and you're in control of your investments unlit the stock market where you have no control. While you make under 5% ROI, they are investing in Real Estate with your money making over 50% ROI. Look, as long as you have people like myself who can help you through the process of flipping properties or renting them, you can increase your net worth.
$40K isn't really that much for real estate. Real estate is capital intensive. This means you might be able to buy one property with a loan. Probably not since you're from the bay area.
If you're a newbie, take it slow. You're right to be on BP to educate yourself. See if you can get a mentor.
I do not believe we are in a bubble, at least compared to the last downturn. Parts of the California market are frothy.
Aaron, investing in the mid-west is not parking your money. Investing in a D class asset that doesn't increase in value is. I have invested in the mid-west and have turned $20k into over many times over 7 figures. It's about strategy, location and buying right. Somehow in California when times are good everyone forgets that their real estate could soon be worth half of today's value. Investing in the Ghetto in California cities is also a sure way to park your money.
If someone lives here in California and is thinking of buying out east based solely on price or bubble fears, compared to Southern California, all real estate in the Midwest is D class assets. You'll work a lot harder turning your $20K into 7 figures out there than you will here.
And 7 figures isn't anything to brag about. Well, maybe where houses sell for 5 figures it is. That's ghetto rich. A million dollar net worth puts you in the middle class at best. How many typical rentals do you have to buy and manage to get to $1m? Ten? Fifteen? I can do it right in my backyard with 2-3 typical, crappy, 1950 stucco boxes.
A wise real estate investor once told me (paraphrasing), "Make offers on cheap houses, buy cheap houses. Make offers on expensive houses, buy expensive houses." Work hard or work smart.
And if you think California real estate will ever be worth half of what it is today based on a one time event during a global depression that saw entire countries go bankrupt, you're view of history is very limited. Even if our real estate did drop 50%, it would still be worth 25% more than the crap between the Rockies and the Appalachians. Also, rents wouldn't suddenly drop 50% so it would make even more sense to stay and play locally. But of course, if all our real estate goes down, so does everyone else's because the California economy is the coal that fuels this entire country.
Well, if I have the kind of capital to buy California houses in Santa Cruz I wouldn't be messing around with the Midwest.. Santa Cruz bounces back and forth with San Francisco as one of the most unaffordable places to live. I think the median house price here is close to $900,000.