New investor looking for some honest advice/help

10 Replies

Hello, my name is Jonathan Larios, and I am wanting to begin to invest in real estate. I am located in Southern California (greater la county) and was wondering what type of investing I should look into. I work a full time job and own a business as well, so I am pretty busy, but have always wanted to invest in RE. I was considering next year buying a multi-family home in the Bakersfield area, but not sure if thats the best thing to do. I do have a descent amount of financial reserves, so thats the reason I was considering doing the conventional put 25% down and rent out the units, but again, I am not too knowledgable of the RE investing world. I have heard about wholesaling (have heard it is very difficult to find leads and follow through on them, etc), fixing/flipping (have heard I should buy cash as market for investors with this is flooded, but don't have that much in reserves), and preforclosure (I am pretty interested in this method as I heard it is not too difficult to learn about?). But anyway, if there are any investors who could help me out and provide some insight for me as to where I should begin and likely succeed. Thanks in advance, and have a great day!

@Jonathan Larios At this point it seems that you don't know enough to start. The best way to learn what works in your area, how and why, is to begin attending local investor meetings. Real estate is extremely local and what works in one area of the country can be extremely difficult in other areas. For example, I have a lot of rentals because they cash flow well here in the Carolinas. However, I have business partners in New York and New Jersey for whom rentals don't cash flow much or, often, at all.

You can find local meetings on MeetUp.com and NationalREIA.org. Also attend your local landlord association meetings if there is one in your area. I know a lot of investors in So.Cal. and that area is nothing like mine.

Good luck to you!

@Jonathan Larios I think its awesome that your Opening up to real estate. Its defenetly a great place to park your money. Be very careful who you deal with. I've been investing for a long time now and I actually have partners from San Diego that I work with. As far as investing in Cali I'd say don't do it. Returns are too low and I believe that Calis bubble is going to burst soon. My partners and I average about a 20- 45% Return On Investment. We also manage all investments. All deals are a partnership. So it gives you free time to focus on your business. Its transparent on Quickbooks and Dropbox. Investing can become another job. So my advice is to work with someone like me or someone similar who can offer what we do. Because you could lose alot of money. Remember if your new to anything you will lose money and those mistakes are comparable to paying for an education. Either way feel free to reach out to me. I'd be more than happy to help you further. Good luck investing

@Jonathan Larios Welcome to BP! You mention that you have a f/t job and a business. That made me think: do you have time to be an active investor? If not, there're tons of ways to be a passive one. What it comes down to: are you willing to give up control for someone else to make the decisions and for you to be on the receiving end: get the returns. I can give you a ton of ways to be active, but it sounds like you're familiar with a lot of them already. In terms of being passive investor, you can:

1) lend other people money for a fixed return - mostly to flippers

2) invest in notes

3) invest in REIT's

4) invest in the commercial real estate via syndications

5) partner up with someone where you bring in the funds and they do all the work

If you would like to speak further about any of the above, feel free to PM  me. 

Best!

Bakersfield still has solid fundamentals and is a pretty logical place to invest for long term cash flow. That said, prices are much higher than they were a few years ago and it can be hard to find a deal that will truly cash-flow. Many of the older properties in Bakersfield that cash flow on paper has major issues with deferred maintenance and after adding real world CAPEX, the numbers generally are not as rosy as projected.

The other thing is that small multifamily is extremely competitive in Bakersfield right now.  

There are investors still buying decent deals and making the numbers work, but it isn't easy.

Originally posted by @Frank Wolter :
@Jonathan Larios I think its awesome that your Opening up to real estate. Its defenetly a great place to park your money. Be very careful who you deal with. I've been investing for a long time now and I actually have partners from San Diego that I work with. As far as investing in Cali I'd say don't do it. Returns are too low and I believe that Calis bubble is going to burst soon.

My partners and I average about a 20- 45% Return On Investment. We also manage all investments. All deals are a partnership. So it gives you free time to focus on your business. Its transparent on Quickbooks and Dropbox.

Investing can become another job. So my advice is to work with someone like me or someone similar who can offer what we do. Because you could lose alot of money. Remember if your new to anything you will lose money and those mistakes are comparable to paying for an education. Either way feel free to reach out to me. I'd be more than happy to help you further. Good luck investing

Every legitimate source will indicate the historical return on RE in LA will clobber the historical return of Cleveland and every other Midwest city.  

Do you know that the average San Diego SFR has produced more dollars of appreciation in the last 5 years than the average Midwest SFR property has produced dollars of cash flow for the last 50 years?

Claiming the returns on California RE has been low is simply false.  Look up the returns.  Compare the average Ca returns to the average Midwest returns.  

@Dan Heuschele I've just been watching Cali for awhile. I actually have partners in Cali. They are actually selling their properties in Malibu to invest more in my system here in Cleveland. They have about 30 in Malibu an San Diego area. I also just had 4 other Cali investors fly in town to meet me. They just told me that returns are so low that are buying with a zero percent return and hoping for appreciation. Cali at one time I'm sure was a good investment. But right now the bubble has expanded so much alot of people are sitting back and waiting to see the housing market burst. I see flocks if Cali investors running here. But I respect your opinion.
Originally posted by @Jonathan Larios :

Hello, my name is Jonathan Larios, and I am wanting to begin to invest in real estate. I am located in Southern California (greater la county) and was wondering what type of investing I should look into. I work a full time job and own a business as well, so I am pretty busy, but have always wanted to invest in RE. I was considering next year buying a multi-family home in the Bakersfield area, but not sure if thats the best thing to do. I do have a descent amount of financial reserves, so thats the reason I was considering doing the conventional put 25% down and rent out the units, but again, I am not too knowledgable of the RE investing world. I have heard about wholesaling (have heard it is very difficult to find leads and follow through on them, etc), fixing/flipping (have heard I should buy cash as market for investors with this is flooded, but don't have that much in reserves), and preforclosure (I am pretty interested in this method as I heard it is not too difficult to learn about?). But anyway, if there are any investors who could help me out and provide some insight for me as to where I should begin and likely succeed. Thanks in advance, and have a great day!

 Hello and welcome! Best of luck to you!

Originally posted by @Frank Wolter :
@Dan Heuschele I've just been watching Cali for awhile. I actually have partners in Cali. They are actually selling their properties in Malibu to invest more in my system here in Cleveland. They have about 30 in Malibu an San Diego area.

I also just had 4 other Cali investors fly in town to meet me. They just told me that returns are so low that are buying with a zero percent return and hoping for appreciation.

Cali at one time I'm sure was a good investment. But right now the bubble has expanded so much alot of people are sitting back and waiting to see the housing market burst.

I see flocks if Cali investors running here. But I respect your opinion.

 Last year (2017), the appection in my primary market (a San Diego suburb) according to Redfin was 17%.  Same source indicates top appreciation in the country of large cities was San Jose at 34%.  

If financed at 20% equity position, the 17% appreciation in my primary market would produce an 85% return without accounting for any cash flow.  Remember this is the average return from appreciation; not an isolated return.  Anyone who achieved poor returns in coastal So Cal RE last year invested incredibly badly.  I could say the same about virtually anywhere, if you achieved poor returns last year in RE investments you are an exception as it was a good year in most locales including coastal So Cal. 

I expect 2018 to not have as good returns as 2017 but to still have a good average return for coastal So Cal RE investors.  

Historically, coastal So Cal and the San Francisco area have produce outstanding returns for RE investors.  This takes a minute of research to confirm. 

@Jonathan Larios welcome to the community!  Great place to get advice and start investing!  I hope it helps you learn and grow.  

As far as your question, I am in a similar boat to yours in that I am very busy but still need to continue investing.  

Bakersfield, in my opinion, is one of the next opportunities in CA because of our changing world and job requirements.  We have seen a historical growth rate in Bakersfield that is pretty strong, but what I am interested in is our future.  

Bakersfield is projected to 3x growth in the next 10-15 years, and is now being discovered by the MNC's as the transportation hub of CA.  We can reach 90% of CA population within less than 4-5 hour drive of Bakersfield.  

You can see that our growth is looking strong because we now have Amazon bringing their fulfillment center to Bakersfield, along with L'Oreal, Ikea, Ross, Target, Caterpillar, etc.  

On top of that we are looking at one of the largest development projects in Bakersfield history (10 years in the making) starting this year.  The East Hills mall is being renovated into a higher scale mall, which if you see it now, you will be surprised at the current condition of the property.  

Where else in CA can you go and purchase a decent house for yourself and your family for less than $250,000, in a neighborhood with low crime, decent schools, less than 20 years old, etc.? 

Now, looking at your investment strategies I would recommend a more passive buy and hold strategy.  It seems like your income is at an increased level, but now you need to start building in more passive growth so eventually you can retire.  

If you can get an absentee investment property that earns you are 5-6% cash on cash return then you will be in good shape with a steady growth rate on your investment.  Those properties can be found in Bakersfield.  

Looking at Flipping or Pre-Foreclosure, I would say those are more time intensive, unless you are REALLY good at building systems.  The process of the flip isn't necessarily the hard part, it is more the human capital variance that you will have a problem with.  Being that you are already busy, probably not a good idea to take time away from an already steady and growing business, and put time towards a new business that would have a large learning curve and hurt your overall income in the beginning, and therefore your overall return in the long run.  

This is not to say that people don't flip from a distance and do very well with it. 

In my opinion, at the end of the day it seems like you have your base income figured out and you are learning how to grow a business which will give you a higher return on investment, so you need a safe place to park your money in a location that has good potential for growth, and given the terms I have stated above, coupled with the fact that CA is always going to be CA and therefore more valuable than some other places around the country, buy and hold in Bakersfield is a good strategy.  

Hopefully that helps!

If you would like to chat further feel free to PM me as well!

Wow, thanks to everyone who responded to my post. It means a lot that there are people out there who do really want to help others. I will definitely be reaching out to some people and look for further advice. Thanks again, it means a bunch to me!