Where to look in SoCal

Question

Hello,

Partner wants to start investing within driving distance from us, about 2-3 hours away from Los Angeles. Where is still a good place to look? Were looking for properties under $250K, turnkey or BRRR preferred.  I have checked some turnkey websites but only show out of state properties. Is there any that's here in Southern California?

Thanks in advance!!

Aaron Mazzrillo · Answer

Here's the challenge with your endeavor; all markets (especially CA) have cycles, and within those cycles there are good strategies that work, but the timing is crucial. The time to buy and hold was 2008-2011. You could have bought and flipped as well, but you'd have left $100K+ on the table if you could have just figured out how to hold for a few more years. You might still find a good buy and hold deal if you scratch enough dirt, but you'll be doing so much scratching, you'll miss the opportunity to make big money doing a different strategy that is more profitable in this part of the cycle.

Buying to rehab and flip, add sq/ft and flipping, developing, buying non-performing 2nds, etc. are all the best ways to make money in SoCal today. I wouldn't be driving out to Hemet from Los Angeles looking for a rental. I live in Riverside, own quite a few rentals in Hemet, and I hate driving out there. I'm halfway closer than you!

The only properties I'm keeping at this time are well located houses in B and better neighborhoods. No way I'd hold a new San Bernardino house unless I bought it subject to or got seller financing on it. The numbers and the headache make no sense. This is the time to harvest equity in San Bernardino and other C to F areas and move it to B and better inventory.

Aaron Mazzrillo · Answer

I have no idea if we are at a peak. Lots of investors keep telling me that, but they aren't the ones shopping for a new home to live in and none of them have PHDs in economics. Most actually have zero economics education with the exception of what "that other investor" told them.

What I think is most important, is that I don't know what the group mentality of the FHA first time home buyer/borrower is at the moment. I am getting multiple offers on entry level houses I'm putting on the market, even at these "peak" prices. I do know there are more millennials camping out at home and they are a bigger group of people than the baby boomer generation. Eventually, they will have to come to terms with the fact that they are not going to be internet billionaires and they need to move out of mommy's house and into their own place. I do know that my state is experiencing a serious housing shortage (at least that's what "they" say). I know that interest rates are absurdly low and it doesn't look like they are going up any time soon. I know that what a buyer will pay for these "peak" priced houses is still about even or sometimes less than what I will charge them to rent that same house.

Finally, my calculator, not my research tells me that things are pretty expensive for buy and hold strategies. I bought D to C houses pre-bust with conventional financing and got stuck with them for 8-10 years before they had any equity. Those houses caused me lots of pain both mentally and financially. I don't want to do that again. When it comes to investing in real estate, there is nothing worse than having no exit strategy and being forced to babysit loser tenants in crappy rentals for years... and years waiting for some equity so I could sell. I don't mind being stuck with a nice 3 bed, 2 bath single story tract house in a good school district.

Guy Olds · Answer

@Steevee Reroma I wholesale properties in the Inland Empire and I find cash flow rentals in Hemet (in Riverside County) and Yucca Valley which is in San Bernardino County.

Aaron Mazzrillo · Answer

I appreciate the kind words, but I don't think I ever have the best advice. I just relay what my experiences have been for my investing style and criteria. I'm by no means the most successful investor on this board, in my market, or even in the circles I run in. If I can offer a different perspective that someone might not have thought about and help that person to make a better, different, or even the same decision, but with more info, that is all I am hoping to do.

Chris Latham · Answer

@Aaron Mazzrillo  You always have the best advice!  I can tell that you have a lot of experience.  My wife and I primarily invest in the California desert and we have seen some great appreciation and we are also seeing our cash flow go up as we have been able to raise rents.  However, as you indicated, it's a long drive.  @Steevee Reroma Always take the drive into consideration.  You may have to make a drive out somewhere during the week.  If you shop for houses on the weekend be prepared to double your drive time during the work week.

Sanjeev Advani · Answer

@Steevee Reroma There are definitely properties which you can invest in, in the So Cal area.  BRRR is a great strategy in my opinion because it opens you up to a larger possibility or profit.

We work heavily with investors in the Southern CA and Central CA markets and have the ability to provide you with such deals.

We are also in property management so we can give you current market rents with certainty which will increase the probability of your investment being a success.

I would like to speak with you further, if yourself and your partner are interested.

Good luck in your investing ventures!

Steevee Reroma · Answer

thanks Jeff!

Jeff B. · Answer

@Steevee Reroma  Yes. MFU == Multifamily units

area is highly variable - - timing and inventories are the issue.  What you see this week will be different that next week.  We ended up in Redlands because we could not find profits any closer ('97).

I must also add that we had friends in the area and when the local market (highly desirable ) failed to produce cash-flow, we didn't take a methodical approach of ever widening circles - - we jumped directly to where we could gain support.

Steevee Reroma · Answer

I have seen prices here in the Valley go up very quickly, last year SFR's were at high 300's, now its at mid 500's, same prices where it was in 2006-2007.

@Jeff B. is MFU, Multifamily units?  which areas?

Jeff B. · Answer

Which is why I invested in MFUs.  Within a week I had a bid and that became a bidding war.  Why? the MFU inventory was ZERO before the listing was placed.  Primary difference in SFR vs MFU is selling the appreciation vs the income producing cash-flow.

Where to look in SoCal

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