If you had $50k cash and lived in LA, what would you do?

32 Replies

Heres my situation: 

I'm house hacking my condo in Santa Monica, owe $346k and its worth about $460k. 

I have about $50k in cash outside of retirement to use toward another property. The ultimate goal is to create some passive income. The problem I'm having is LA is so incredibly expensive, $50K won't do much out here. 

I've thought about:

a) Continuing to save another $50k and use $100k total as a 20% downpayment toward a $500k property in the next 2 years

b) Buying a rental long distance in my college town back in the midwest

c) Trying to pick the next "hot neighborhood" in LA, buying a house here in LA that barely cashflows and pray it goes up in value. (Sounds dumb as I'm typing it out)

d) Another option

Thoughts?

@Julian L. LOL on what you wrote for Option C. Hello from another LA investor. You're certainly not alone in asking this. I've been leaning towards looking out-of-state. Additionally, I've been learning more about the world of note investing which may be something you might be interested in. Check out BP Podcast #28 with Dave Van Horn for an introduction. Hope this helps.

Originally posted by @Julian L. :

Heres my situation: 

I'm house hacking my condo in Santa Monica, owe $346k and its worth about $460k. 

I have about $50k in cash outside of retirement to use toward another property. The ultimate goal is to create some passive income. The problem I'm having is LA is so incredibly expensive, $50K won't do much out here. 

I've thought about:

a) Continuing to save another $50k and use $100k total as a 20% downpayment toward a $500k property in the next 2 years

b) Buying a rental long distance in my college town back in the midwest

c) Trying to pick the next "hot neighborhood" in LA, buying a house here in LA that barely cashflows and pray it goes up in value. (Sounds dumb as I'm typing it out)

d) Another option

Thoughts?

 You might want to go 50-50 with Logan (i forgot the last name) someone from Santa Clarita, he is also house hacking and have 45k in his Roth, maybe you could achieve the 100k and find something before the end of the year, rather than 2 years.

Originally posted by @Mike J. :

@Julian L. LOL on what you wrote for Option C. Hello from another LA investor. You're certainly not alone in asking this. I've been leaning towards looking out-of-state. Additionally, I've been learning more about the world of note investing which may be something you might be interested in. Check out BP Podcast #28 with Dave Van Horn for an introduction. Hope this helps.

 Hi guys

Come on out to the Inland Empire every deal I have done this year I have done with 1/2 the amount your talking about.  We made 10 separate investments all way under $50,000 and used private "hard money" for the rest and profited handsomely.  Flipping is alive and well in Riverside, and San Bernardino County I can recommend the MEET UP at the Mission Inn the 3rd Wednesday of the month,  I'm there and 75 others talking about flipping homes in the area.

Good Luck

Jim

I'm also in LA and looking for opportunities with about 50k to put in. I'd love to partner with someone to make something bigger happen, but cash flow opportunities do seem scarce and I'm hoping for more than just appreciation. I'm therefore researching turnkey, etc. out of state, perhaps in a city I can picture actually moving to. I'll look into notes as well. 

Originally posted by @Jim Keller :
Originally posted by @Mike J.:

@Julian L. LOL on what you wrote for Option C. Hello from another LA investor. You're certainly not alone in asking this. I've been leaning towards looking out-of-state. Additionally, I've been learning more about the world of note investing which may be something you might be interested in. Check out BP Podcast #28 with Dave Van Horn for an introduction. Hope this helps.

 Hi guys

Come on out to the Inland Empire every deal I have done this year I have done with 1/2 the amount your talking about.  We made 10 separate investments all way under $50,000 and used private "hard money" for the rest and profited handsomely.  Flipping is alive and well in Riverside, and San Bernardino County I can recommend the MEET UP at the Mission Inn the 3rd Wednesday of the month,  I'm there and 75 others talking about flipping homes in the area.

Good Luck

Jim

Jim, what are the 3 zip codes in the IE you would recommend to buy and hold? I'm looking for desirable areas, near restaurants, bars, etc... 

As a new investor in the IE (Riverside and san bernadoo....) I am excited to jump into an affordable market. I have my direct mail going out, online presence is being worked on and trying to network as much as I can. With that said, I would still love the opportunity to JV with someone local in a situation where numbers are good and we both have some skin in the game.

What's the difference between buying a $75k pig in Hemet or San Jacinto or buying one in Memphis, Indy or Toledo? The difference is that in CA that $75k pig can be a $125k entry level home to a retail buyer where the pigs out of state don't have any upside.

Originally posted by @Julian L. :
Originally posted by @Jim Keller:
Originally posted by @Mike J.:

@Julian L. LOL on what you wrote for Option C. Hello from another LA investor. You're certainly not alone in asking this. I've been leaning towards looking out-of-state. Additionally, I've been learning more about the world of note investing which may be something you might be interested in. Check out BP Podcast #28 with Dave Van Horn for an introduction. Hope this helps.

 Hi guys

Come on out to the Inland Empire every deal I have done this year I have done with 1/2 the amount your talking about.  We made 10 separate investments all way under $50,000 and used private "hard money" for the rest and profited handsomely.  Flipping is alive and well in Riverside, and San Bernardino County I can recommend the MEET UP at the Mission Inn the 3rd Wednesday of the month,  I'm there and 75 others talking about flipping homes in the area.

Good Luck

Jim

Jim, what are the 3 zip codes in the IE you would recommend to buy and hold? I'm looking for desirable areas, near restaurants, bars, etc... 

The down town vib is good in the 92506 and even the 92504 there you pick up a little bit of collage rent from Cal Baptist Collage Also look at 92507 it has UC Riverside in the middle of it.

Call me anytime

Jim

Originally posted by @Joe Bertolino :

What's the difference between buying a $75k pig in Hemet or San Jacinto or buying one in Memphis, Indy or Toledo? The difference is that in CA that $75k pig can be a $125k entry level home to a retail buyer where the pigs out of state don't have any upside.

 Very true Joe

I have an associate that bought over 75 of those PIG'S in Hemet/ San Jacinto and paid on average 50 K for them.  He fixed and held on to them and has a very well thought out escape plan.  I have seen a few of his property's sell for as much as 185K in the last few months.  He will make over 5 million by the time he is done.  Timing is everything, and he had about 500k to start with but there is no doubt he cashed in.

If it were me I would go with option b as my first choice.  I wouldn't buy a pig.  With 50k you should be able to get a pretty decent  home with significant  equity or two decent homes depending on where you are from.

My second choice would be option a.  Put the 50k into something like Realty Shares or another similar program with a term that should be completed prior to when you expect to need it.  If that is something you are uncomfortable with then find another investment you would be comfortable with until you have the down payment you need.

I`m also in the same situation and looking for property not only in the US and my own country but everywhere where is possible to invest. So have you ever thought to invest in overseas property somewhere in Europe, for instance in Spain, Portuguese, Greece... Just look at an example what you could buy for $50K there https://tranio.com/spain/adt/1427591/

I think it`s quite interesting. But there is some additional cost for arranging and huge investigation work. 

@Manolo D. , thanks for remembering me and connecting me with another young guy in SoCal who's pretty much in the same boat as me.

@Julian L. , do you want to talk?  I'm househacking a fourplex in Santa Clarita and work my day job in Downtown LA.  I currently have 45 bullets in my Roth and 50-75 in non-retirement accounts.  I'd like to keep the 50-75 for potential flip deals in the Antelope Valley (I've been sending out mailers), but I'm trying to figure out what to do with the 45k in my Roth.  Would love to partner with someone with the same passive income goals that I have.

I've been thinking about picking up property in Riverside as I grew up there and my family is still there, and they are always looking for ways to make extra money since times are tight for them.  And since I help them out a bit financially, I'm sure they would be willing to manage the property for less than the going rate of a property manager, and they'd do it with pride knowing that this property is in the family (at least partially).

Originally posted by Logan A.:

@Manolo D., thanks for remembering me and connecting me with another young guy in SoCal who's pretty much in the same boat as me.

@Julian L. , do you want to talk?  I'm househacking a fourplex in Santa Clarita and work my day job in Downtown LA.  I currently have 45 bullets in my Roth and 50-75 in non-retirement accounts.  I'd like to keep the 50-75 for potential flip deals in the Antelope Valley (I've been sending out mailers), but I'm trying to figure out what to do with the 45k in my Roth.  Would love to partner with someone with the same passive income goals that I have.

I've been thinking about picking up property in Riverside as I grew up there and my family is still there, and they are always looking for ways to make extra money since times are tight for them.  And since I help them out a bit financially, I'm sure they would be willing to manage the property for less than the going rate of a property manager, and they'd do it with pride knowing that this property is in the family (at least partially).

 Logan, I have an uncle that lives in your area, I'm interested in MFs, can we have coffee next week? I'm a newbie in money investments but more than a veteran in construction, I love the idea on relying on rental and not personal credit. I have a credit issue so that will help a bit. Maybe I'll bring some value, if not construction advice when you and Julian partner up.

Hi Julian

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If you need any advice about investing in Spain, don't hesitate to ask.

Kind regards

Robert Edwards

Hi Julian, all those options involve investing yourself in a single property. If you do that in your own area, you can be more hands-on, which is an advantage to making sure you don't lose money. If you go with an out-of-town property, you will have to do a turnkey investment. This means hiring another company to rehab and manage it, which means giving up some control, and that means a little more risk.

Another option is to  pool your money with other investors into multiple properties. That way if a single property goes bad, it won't take out all your money. The disadvantage is that again, this requires trusting someone else to manage the property. So you have to find someone that you can trust.

A very good way to do that is to use a real estate crowdfunding site. However, they are currently limited to accredited investors only. That means you have to make $200,000 a year for the last two years, or have $1 million in assets. If that doesn't describe you, then unfortunately it isn't an option.

It really comes down to what your goals are @Julian L. If you are looking for cash-flow then yes out-of-state maybe a good option for you. As @Ian Ippolito mentioned going that route it is key in finding a trusted provider to manage the investment for you. 

My goals involve double digit returns in cash-flow so I buy&hold in the Midwest specifically Indianapolis. Its more of a linear market with decent appreciation, but when there's a downturn we don't get hit like most of the volatile markets. 

If you are investing on appreciation then option C. could work, but then you are playing the guessing game in that aspect

@Julian L. – We are in the same boat. I live in Santa Monica and am looking at expanding more into REI. I pulled some extra cash out of the stock market and want to diversify into real estate. I'm looking for long term buy and hold and it's tough in the LA market. Especially when you don't have a large amount of cash to put down.

What @Sterling White said is 100% correct. If you are flipping then LA and surrounding areas has potential. If you are looking for long term buy and holds, then LA could be tougher then out of state markets. I’ve pretty much ruled out LA for myself for 3 reasons:

  • 1.Low cash on cash return for buy and hold investors
  • 2.The high cost of properties means I would have to sink my cash into one property versus multiple smaller ones.
  • 3.The places that can cash flow are in high crime areas (Compton, Huntington Park, etc.) and I prefer to minimize evictions and turnover.

The cheaper CA cities I’ve looked at (Fresno, Bakersfield, etc.) have high unemployment and crime rates. I’m hoping to buy in CA, but out of state looks more and more likely. I’m searching looking around CA and any insights would be appreciated.

More about my thoughts and where I am: https://www.biggerpockets.com/forums/55/topics/237637-your-help-needed-analyze-my-getting-started-plan

I'm also rolling over my IRA (and maybe my Roth) into a Self Directed IRA (SDIRA). This allows you to invest in real estate, notes or tax liens. Lots of potential with a SDIRA but also a lot more complexity and risk.

@Julian L. @Manolo D. @Mike J. @Vanessa Vandervalk @Brad Srutowski Logan A.  - There is a BP meetup on 10/31. Hopefully you guys can make it. It would be great to network and make some deals happen.

https://www.biggerpockets.com/forums/521/topics/237617-los-angeles-meetup---october-31st-2015?page=1#p1565424