New investor looking at some options for my first investment

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New investor looking at some options for my first investment

Miles Yang
Member since 2020 · 3 posts · 0 votes

This is my first time posting here so any help/advice is really appreciated. I'm currently living in LA and looking to get my first investment property, here's my current situation:

- I have 300k available for down payment

- I have a somewhat decent credit score (in the mid-high 700)

- My household income is around 240k annually combined with my SO

My main goal for now is cash flow, and even though I would very much prefer to invest locally, I understand that Socal is not the most friendly place for landlords, through some research I can hardly find anything with a decent CAP rate reasonably close to where I live. But at the same time, investing out of state definitely kind of scares me too.

Now my options are pretty much between:

1) Investing in LA for cash flow, which would be preferable, but I'm not sure if it's possible

2) Investing in SoCal but outside of the city (thinking Riverside, San Bernardino, etc.) It seems like properties in these areas have much better CAP rates and I can visit and manage by myself in a reasonable capacity

3) Investing in cash flow friendly areas such as Mid west or South east. These properties seem way more profitable than those in Socal but investing out of state and the fact that I can't check out and manage the place really worries me(not to mention my complete lack of knowledge of the areas in general)

So here's it goes, I'm not really sure what I should do at this moment especially when covid adds another set of uncertainty to all of this. I'm super grateful for any help/advice, thanks!

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Jody Sperling
Omaha, NE · Member since 2020 · 612 posts · 666 votes
5y

With the amount of capital you have to invest immediately, you could make a big impact by partnering with someone you trust out of state whether in multi-family or single-family.

In my market, with your annual income and the savings you have, you could immediately purchase six single-family homes off Zillow that would rent for twelve to fourteen hundred a month and cost about six to seven hundred in mortgage payments with taxes and insurance escrowed on thirty-year loans.

And that's if you buy at market prices.

If you're scared of building a partnership, research a few turnkey companies. REI Nation is one I see talked about on here all the time. As I see it, the one way you could get the least return on your money is to buy rentals in Southern California.

It seems like a greater risk to buy something you know won't perform just because you can see and touch it than to buy something you know will perform even though you can't see and touch it.

Best of luck to you, regardless of what direction you go!

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  • Jody Sperling
    Omaha, NE · Member since 2020 · 612 posts · 666 votes
    5y

    With the amount of capital you have to invest immediately, you could make a big impact by partnering with someone you trust out of state whether in multi-family or single-family.

    In my market, with your annual income and the savings you have, you could immediately purchase six single-family homes off Zillow that would rent for twelve to fourteen hundred a month and cost about six to seven hundred in mortgage payments with taxes and insurance escrowed on thirty-year loans.

    And that's if you buy at market prices.

    If you're scared of building a partnership, research a few turnkey companies. REI Nation is one I see talked about on here all the time. As I see it, the one way you could get the least return on your money is to buy rentals in Southern California.

    It seems like a greater risk to buy something you know won't perform just because you can see and touch it than to buy something you know will perform even though you can't see and touch it.

    Best of luck to you, regardless of what direction you go!

    1Reply
  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    5y

    @Miles Yang Have you tried to explore turnkeys out of state? I recently purchased a turnkey in Cleveland, OH and a Single Family Home in Memphis, TN using Roofstock. Let me know if you want to know more about the purchase process. 

    1Reply
  • Miles Yang
    OP
    Member since 2020 · 3 posts · 0 votes
    5y

    @Jody Sperling Thanks for the reply! I would love to explore partnering and investing out of state, but I'm uncertain how should I proceed and start my search without finding someone that would completely screw me over. Same for turnkey, it's hard to find a company that I feel comfortable trusting especially when they're out of state.

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  • Aj Parikh
    Rental Property Investor · Centreville, VA · Member since 2019 · 1k+ posts · 799 votes
    5y

    @Miles Yang I understand out of state investing can be tough so it becomes extremely important that you choose the right turnkey company along with the right property management. Martel Turnkey provides that solution and it has worked for me and this was my 1st out of state investment. Let me know if you want to connect and chat about it. I would be happy to answer any questions you might have. 

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  • Aaron K.
    Specialist · Riverside, CA · Member since 2015 · 6k+ posts · 3k+ votes
    5y

    @Miles Yang I've done both CA and OOS, it all depends on what you want to do, thus far both have returned about the same total when you account for appreciation and rental appreciation.  If it is cash flow you want OOS is the way to go, but if you want total return you'll probably be ok investing in most places with enough knowledge and research.

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  • Timothy Lewis
    Investor · Miami, FL · Member since 2013 · 377 posts · 258 votes
    5y

    Your answer ultimately lies in the question: What are your goals for RE investing? Is cashflow important to you now or do you want to bank on appreciation? I could tell you what I would do if I was in your situation but that may not be what's important to you. You are in a very fortunate situation to have access to that kind of capital and the security of a great annual income so you have a lot of options. Aka: Good problems

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    5y

    You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities and City of Detroit Neighborhoods:

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

    [email protected]248-209-6824
    Logical Property Management4.9469 Reviews
    WebsiteView Page
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  • Elizabeth Rose
    Flipper/Rehabber · Cleveland, OH · Member since 2020 · 12 posts · 6 votes
    5y

    Hey Miles!  Congrats on putting yourself in a great position and opening up so many options!  If your main goal is cash flow, then I would definitely suggest looking outside of SoCal, where the returns are found more in appreciation.  Your starting capital could get you multiple properties in a lot of Midwest markets that will cash flow well.  If you're worried about not being able to drive and check up on the place, then you will need to build a strong team that you trust in the area you want to invest in.  If you're not sure who you would need, I would suggest reading this article first.

    I started investing in earnest about a year ago in a suburb of Cleveland, OH.  If you have any questions that I can help with, feel free to send me a DM!

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  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    5y

    As far as the options you propose... #1 and #2 aren't going to offer you cash flow. Nothing in SoCal is really going to do that, unless you're putting enough of that cash down so that it will. But then your return isn't actually that great. If you want to get your feet wet owning property, you could use the $300k to buy something small in the outskirts (San Bernardino, etc.) and then change it up later. But that's really the only way you'll get cash flow.

    Out-of-state only has to be scary if you let it. There are several ways to do it, ranging from the riskiest to the less risky. Like if you want to BRRRR out-of-state, that will be riskier. But turnkeys, like others have mentioned, don't have to be as risky. There's still things you need to learn, but the load is a lot less, and you can have cash flow. With $300k, you could buy a significantly sized portfolio out-of-state.

    I live in Venice, so I'm right there with you. I do have a property local here, but otherwise all of my properties have been out-of-state turnkeys.

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