Starting out in SoCal: Riverside

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Hey all, first time on the forums here and am trying to soak in everything I can.

So, I live in a city that's really expensive to buy single family residences or multi family. I want to get into my first deal, and was recommended to go the FHA route and wanted to house hack, but I can't find anything out here. Getting a duplex would be amazing, but I can't find anything that isn't in a bad area or just totally run down. Every place I've looked at doesn't nearly meet the 1% rule or give me any sort of break even on cash flow (even if I was just going to rent out!). The lowest prices for something decent come up around $350k, and there is no way in hell I could charge ~$3.5k for rent each month.

I've analyzed like 20 deals that are all negative cash flow and negative ROI. Super frustrating and makes me want to go back to watching dancing with the stars.

Any ideas for me? Should I just look in neighboring cities? Thanks so much for your time.

Evan

Hahaha...go back to watching Dancing with the Stars. Well, welcome to SoCal and the real estate investing world here. There's just not cash flow here. Neighboring cities aren't going to help you much...it's just the way of the land here.

I'm in LA/Venice, and I've always bought out-of-state because of it. A lot of other people do too. Or people just settle for negative cash flow thinking they are getting a deal.

It's a bummer.

@Evan Snyder the 1% rule does not work in this area, period end of story, all the stories you heard from the midwest don't work here, so accept that and reformulate your strategy or move.  Harsh I know but it is better than wasting your time looking for a unicorn wearing a top hat that is the 1% rule in a decent area of Socal in 2019.

You have two options here really. You can either stick to your strategy, which sounds like buy and hold for cash flow, and invest in a market where that works. Or you can stick to your market, and choose a strategy that works. Not every investment strategy is going to work in every market. There are good investments to be made in SoCal, for example you can flip, or look in to short term rentals. But you aren’t going to buy and hold and meet the 1% rule. You won’t do that anywhere West of Texas really. 

Dang that’s nuts. So I essentially gotta learn to invest out of state. How did you start this? Just get on Zillow and look around at different states?

I would not start on Zillow. I think the best approach to choosing an out of state market is to start by researching market indicators such as population growth, job growth, median house costs, price/rent ratios, etc. Once you come up with a few potential markets, then you can dig deeper, look in to Zillow, talk to some realtors/managers, and so on. I would also recommend reading David Greene's book, Long Distance Real Estate Investing.

@Evan Snyder I just spent 4.5 years in Los angeles, the San Fernando Valley and call definitely relate to the price and cashflow hurdles of California. I would recommend looking at deals in the southeast where theres good population growth. Charlotte, Greensboro, Raliegh, are the big three in NC, plenty of universities here so college town student rentals are an angle. Would love to show you how numbers look here if you wanna see examples.

@Evan Snyder Thank you for this post.  My intrigue of the real estate investment world had sparked just over a month ago and I've been neck deep into absorbing as much as I can ever since.  I too live in SoCal (just down the 91 from you in Long Beach) and have been struggling with understanding how a buy/hold could reasonably apply in this area.  Most examples I hear of are affordable $80k-$150k properties, yet, when I go on Zillow or Redfin in our area, I can't help but get overwhelmed..  Like how the hell am I going to make $500k work.  Seems like a quick flip is really my only true option.

Anyway, I created an account on this website 30 minutes ago and this post helped bring a lot of clarity to a lot of confusion, so thank you.

Originally posted by @Evan Snyder :

@Ali Boone Dang that’s nuts. So I essentially gotta learn to invest out of state. How did you start this? Just get on Zillow and look around at different states?

It's not that hard once you get into it. Be careful with Zillow. First I'd pick how you want to do it-

https://www.biggerpockets.com/...

Once you pick a route, then you can dive deeper into it to learn it. Turnkeys, me and a bunch of people on here can help with those (that's what I buy out-of-state), and DIY, there's a book from David Greene a lot of people talk about on here that might be a good start.