Best ways to leverage
Hi there BP community!
I am a public educator turned software engineer/real estate investor currently living in Oakland, CA.
I am an owner-occupant of a duplex in north Oakland where I've accumulated a good amount of equity (~400k) and I'm curious of people's opinions on good ways to leverage it.
I apologize in advance if this question has been answered many times previously. I couldn't find posts that fit my situation precisely, which is why I'm posting here.
My goal with REI
I hope to build a portfolio over the next ~5 years that will allow me to return to public sector employment without facing a significant hit on my salary. This would translate to making an extra ~$70-80k/yr in (mostly) passive income. Quite a lofty goal, but I think that's why we're all here.
Legwork so far
For the past year, I've been looking for properties to BRRRR in the bay or Sacramento but have had a predictably hard time finding deals. The best options I've found are occupied properties in C/D neighborhoods in Sacramento that would generate around 12% COC, but where I likely wouldn't be able to recoup significant capex and where tenants *might not* consider rent their top budgeting priority.
Thoughts I've had
It has been mentioned repeatedly in these forums that the midwest/south are probably the best places for ROI. With that being the case, I am considering permanently moving as far away as Denver so that I can be within a couple hours of most of these midwest cities. I have been looking at properties listed for <$75k in many of these places, and the numbers look promising (15-20% caps). Of course this is with *zero* insight as to how things actually look on the ground. I don't have many connections in these cities, and don't expect they will be easy to make (though BP certainly helps!), but I would fortunately be able to work my full-time job remotely for a period of a 2-3 months in order to build a network and start a project.
My questions
- I plan to estimate median rent to selling price for a number of cities within 2hrs of Denver (through copious internet browsing and scripting). I'll then reach out to BP agents/investors in those areas to talk about the market (cap rates, crime, neighborhoods, schools, population growth, etc). What are peoples' other recommendations on selecting a location?
- Is the sub-75k market where I want to be, or should I be looking at more expensive properties? In the long-term, I expect I would hit my 10 loan limit before reaching my income goal if I buy cheap, but the percentages obviously look much better for those properties in the short term. The options I see are: (1) buying cheap and eventually finding portfolio lending once I hit 10 loans, (2) buy more expensive properties but make sure to always hit my desired COC percent, 1031 when necessary, and hope to find 10 high performing properties that cash flow at ~$6,500/month, (3) sell the bulk of my assets and find an apartment building once I've gotten enough equity/experience to qualify for a commercial loan. Other options for avoiding the 10 loan limit? This is obviously a "best case" long term question, but given my timeline, I'm hoping to get as much figured out in advance as I can.
Thanks in advance! I've already gained so much knowledge and insight from this community and look forward to hearing what you might have to say.
Best regards,
Peter