How to start with $70k in Los Angeles while living with in laws?
Member since 2020 · 4 posts · 0 votes
How to start with $70k in Los Angeles while living with in laws?
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Investor · Newport Beach, CA · Member since 2018 · 74 posts · 35 votes
6yHello @Julio Mendoza,
We're actually practically neighbors, I reside in the LA area as well and work from Newport Beach. I personally don't invest in LA or in California, only in rare exceptions where there happens to be a good flip that comes our way. Since the California market is so expensive and over priced with very little opportunities to obtain a cash flowing rental, we focus on the midwest states such as Cleveland, and at times Columbus.
I recommend that you start looking into out of state investing and begin vetting possible markets to jump into. For example, properties in the midwest markets are priced lower than those here on the coast, we usually find a distressed property in a C+ and above neighborhood for about 70-120k, sometimes more, depending on whether its in a C,B or A neighborhood. Rehab can vary on how distressed the property is, we've had rehabs for flips around 40-80k and at times even lower or higher and rehabs for rentals ranging from nothing needed or 10k to up to 50k due to the amount of work needed or if there was an issue with the contractor. You can even find way cheaper properties in these markets if you decide to venture in to D grade neighborhoods.
Your best bet as a California investor would be to look into out of state honestly. It takes a lot less money to be put upfront, and you have a higher chance of obtaining a cash flowing property out there than here in California. If you use a hard money lender, you can possibly spread your 70k between 2-3 properties and possibly even more if you aim for D grade neighborhood properties.
If you're anxious and a bit afraid of investing out of state, look for a partner that has experience in a market you're interested in. If you have capital and no experience, find a partner with experience, a track record, boots on the ground and who might need extra capital (such as your 70k). Although make sure to ask as many questions, vet them properly, get it in writing/contract and to verify the info they tell you with other experienced investors.
If you have any other questions feel free to reach out at anytime. Hope this helped!
5 Replies
- Lender · Frisco, TX · Member since 2019 · 546 posts · 270 votes6y
@Julio Mendoza - Have you considered purchasing a non owner occupied property in a cheaper area? You could put between 20-20% down on a cheaper property (say something priced around 50-80K) in a state like North Carolina. The condition of the home and what you are able to command for rent will likely be a determining factor in how much cash you want to keep on hand. If you buy something and have super cheap rent, you may want to be wary of how good of care the tenants will take of the home. If you have concerns that they will destroy the property, then you may be better off to keep some cash in hand. Additionally, if you buy something super cheap, there's a good chance it may need a new roof or plumbing etc.
- Investor · Newport Beach, CA · Member since 2018 · 74 posts · 35 votes6y
Hello @Julio Mendoza,
We're actually practically neighbors, I reside in the LA area as well and work from Newport Beach. I personally don't invest in LA or in California, only in rare exceptions where there happens to be a good flip that comes our way. Since the California market is so expensive and over priced with very little opportunities to obtain a cash flowing rental, we focus on the midwest states such as Cleveland, and at times Columbus.
I recommend that you start looking into out of state investing and begin vetting possible markets to jump into. For example, properties in the midwest markets are priced lower than those here on the coast, we usually find a distressed property in a C+ and above neighborhood for about 70-120k, sometimes more, depending on whether its in a C,B or A neighborhood. Rehab can vary on how distressed the property is, we've had rehabs for flips around 40-80k and at times even lower or higher and rehabs for rentals ranging from nothing needed or 10k to up to 50k due to the amount of work needed or if there was an issue with the contractor. You can even find way cheaper properties in these markets if you decide to venture in to D grade neighborhoods.
Your best bet as a California investor would be to look into out of state honestly. It takes a lot less money to be put upfront, and you have a higher chance of obtaining a cash flowing property out there than here in California. If you use a hard money lender, you can possibly spread your 70k between 2-3 properties and possibly even more if you aim for D grade neighborhood properties.
If you're anxious and a bit afraid of investing out of state, look for a partner that has experience in a market you're interested in. If you have capital and no experience, find a partner with experience, a track record, boots on the ground and who might need extra capital (such as your 70k). Although make sure to ask as many questions, vet them properly, get it in writing/contract and to verify the info they tell you with other experienced investors.
If you have any other questions feel free to reach out at anytime. Hope this helped!
- Member since 2020 · 4 posts · 0 votes6y
I'm starting to consider the FHA loan and live in the property for a year to qualify for the loan. That might be the best thing to start out.
- Developer · Los Angeles, CA · Member since 2020 · 90 posts · 50 votes6y
Step1: FHA with FHA203k on a primary duplex with the ability to rehab.
Step2: Once stabilized, cashout existing equity and conserve capital on the side
Step3: If existing duplex allows you to build another unit, find another lender who could lend you based on ARV. If not, use your capital to build another unit per zoning
Step4: If the above land does not allow you to build, look for another one using your own capital.
The trick here is using the potential rental income from the duplex to increase your gross income so you could borrow larger amount of debt. FHA has a hard cap of $980,325 loan amount on duplex and $1,184,926 on triplex.
- 6yTwana RasoulBusiness MemberReal Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
@Julio Mendoza House hack a 2 unit property using FHA loan for 3.5% or you can do 15% conventional as well which is still less than 20% down. I would not advise going out of state for your first property.
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