1st investment SOCAl or Out of State?

Question

Hello Everyone! My name is Johnny I have a question for all of you and appreciate any advise. I’m liking to make my first investment fairly soon. I’m a bit torn in which route to go as everyone knows California is expensive. Would you recommend investing in properties in California or out of state first to generate more cash flow? Please advise.

I have equity in my current property I’m looking to use to get started

Frank Wong · Answer

Hi Johnny,

It will depend on how much money you have and what your objective is.  If you have a lot of money to play with then you can make things work and invest in CA.  If you don't you have no choice but to go out of state.  Pretty simple.

If you are looking for cash flow.  No brainer. OOS. Price is much lower to start and you can scale into multiple deals in a few years.  You won't be able to scale in CA.

You said "I'm liking to make my first investment fairly soon"  Slow down cowboy. Do you know what you are doing? Do you know how to properly analyze deals?  Listening to BP podcasts is not knowing what you are doing.  If you are going OOS you need to know exactly what you are doing or you will lose your shirt.

Subbie Kaur · Answer

@Johnny Espinoza

CA is a very expensive market... I personally would go out of state but like @Frank Wong said it is very important to know the market you are going into! A lot of investors who are new to this don't analyze deals with all the actual expenses or aren't aware of what exactly to calculate. BP is a great platform, but be careful what you read there is a lot of inaccurate information given by "investors".

To give you a little breakdown of what we look for when picking a high cash flow market, of course, there are many other things but if we don't see the following in a market we don't even bother...

1. Low taxes: this could make or break a deal, the higher the taxes, the more expenses out of your pocket!

2. High Rental Demand: Very important, you want your tenants to stay and in case any vacancies do occur you can easily fill the units.

3. Landlord friendly laws: Less stress if you need to evict...

4. A good property manager... Key for OOS investors, this plays a big role in any OOS investment. Make sure your property manager is very experienced not only with property management but also has knowledge about the market. A lot of investors who property from us, buy again because they are in good hands even after we close on a property with them.

Good luck to you and feel free to reach out to me personally if you have any questions:)

Johnny Espinoza · Answer

@Subbie Kaur Thank you very much, they’re areas in LA that have different landlord laws separated by a side of the street.

Johnny Espinoza · Answer

@Frank Wong Thank you, yes this will be my first investment and I’m nervous as hell which is why I haven’t pulled the trigger. I’ve read books, listen to bigger pockets and feel the need to take the leap.

I always viewed real estate as a vehicle for financial freedom. I won’t to have more time with my kids and enjoy life well I can.

I appreciate your knowledge and input. Any help or advise I’ll take it.

Steve Rozenberg · Answer

@Johnny Espinoza

I would suggest you look at real estate the same way you would look at a stock or intellectual property. It is used as a vehicle to get you to your goals. Buying a property is part of your strategy and it is all math and numbers. I would not only buy stock becuase it is nearby where I live, and the same holds true with real estate. Both of those financial vehicles are bought and sold based on the numbers. With technology today and quality property management you are able to purchase investement properties that match your strategy to achieve your goals anywhere in the world. Use the value of leverage and do not try to make a square peg fit in a round hole if the numbers in your area do not fit.

50-60% of our clients do not live in Texas or in the country. I always wonder what do they know that others do not about buying out of state. After talking with many of my clients it was very clear that they think the same way I do as I expressed above. Purchase based on numbers not locale.

If you would like to chat more on my thoughts I am happy to help, if you are looking for a PM company here are some good tips and tools I suggest.

I would go to www.NARPM.org there a good sorting of property management companies there. I would also interview them as they are going to ultimately be responsible for your success or failure. Make sure they align with your goals and your business practices and can be a partner to help you grow to achieve your goals not just collect the rentHow many people work for your company ?

1st investment SOCAl or Out of State?

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