Embracing an expensive market

12 Replies

I've been trying to figure out how to become a legit investor again in my own market outside of the most common ways (big banks, traditional loans, etc.) and have been reading and listening (for quite some time now) to the many other ways to enter the market. I invested a little before and it was all traditional and very tough because there was no Bigger Pockets and I was on my own trying to figure it out. Figure it out I did, but at the worst possible time. Just as I was gaining traction, the market started crashing and I lost everything within a short period of time. I mean everything. Not enough time, not enough resources, not enough savings, you name it. It was me running everything (buying, rehabbing, budgeting, hiring, etc.) with one assistant and none of the online resources we have here. Toughest experience ever but best lesson ever.

I've been on Bigger Pockets for awhile and have been unbelievably afraid to jump in again. I'm in a pretty good position now, have reestablished myself, great credit, you name it--but moving past the fear of losing it all again has been paralyzing at times. I've worked so hard to get back up so I'm trying to be smart about my moves but I've listened to enough podcasts and read enough to admit that I definitely succumb to the affliction of "analysis paralysis" at times.

After finally using the calculators here, I literally wanted to cry because of how the BP calculators can help you avoid a whole lot of grief just by knowing if a deal is worth pursuing at all. So many details I overlooked when I bought properties before. I was younger, eager, and bent on winning. But it sure did cost me. These calculators alone would have changed my entire trajectory.

My market is Southern California, one of the most expensive, as many know. But it's my market and it's where I live and it will always be my main home. So expensive or not, this is what I got. And I know people are winning here in spite of the cost of real estate. So I finally said, "Why not me?" I had considered going out of market but it's too challenging at this point. Maybe later when I've acquired some properties and get better at this. And I was reminded that we can all win wherever we're at. I'm nervous as hell but I'm finally taking the baby steps. I'm learning more about my own market again, current landscape, all the nuances, and there is so much here. And sure the properties are higher than many markets but I'm learning more and more all the time on BP of all the ways I can get into them whether it be seller-financing, partnerships, syndication, or something else. I don't feel so limited anymore. And I am so grateful that I am no so alone anymore. I feel like I have thousands of friends here I can go to anytime. And one of the things that helped my mindset was a great tiny little book called "Acres of Diamonds". We can all find acres of diamonds in our own backyard. So, onward I go.

And I am MORE than open to any feedback and advice about any of this. Thank you in advance.

Investing in your area simply means you must be wealthier to start out. You need higher reserves and must depend much more on speculating on appreciation as opposed to cash flow. You need deeper pockets. Higher risk/higher potential rewards.

Word of advice to all new investors.....if you are not prepared to lose it all you are not yet ready to invest. You must over come your fear of losing it all. 

Thomas:

Thank you for your input. At the end of the day, it’s for me to say whether I’m ready to invest or not. I have quite a bit of life and business experience and I just had to work it out for myself when and how to jump back in. I actually am ready and am just out there searching for deals and marketing. I apologize if it didn’t come across clear in my post that it was more about the learning and wanting to continue to learn.

And actually you don’t need to be wealthy to invest in my market. You just have to be creative. And that’s part of what I’m working on.

Hey Gina! Good for you for not letting the losses get you down! Perseverance, and learning lessons from mistakes, are truly the only way to succeed as a real estate investor.

Just a couple two cents:

  • If you stick to your local market, where everything is significantly higher priced, you are at risk for significantly higher losses. While that can be okay, I'd hate to see you try one property with a huge investment into it and it not work and it's a huge chunk lost. So just be cautious of what you dive into when you're dealing with the big bucks to start.
  • What have you found challenging about the idea of going out-of-state for investing? I live in LA and all I do is out-of-state.
  • MOST IMPORTANT, way more than the other two: make sure in your journey that you really focus on learning exactly what risk factors are involved with any kind of investment strategy you are considering, and what mitigations for those would be. There is an endless scale of risk levels out there and available, and it's fine if people want to stay on the riskier side of the scale (in hope of bigger rewards), but more often than not people have NO idea what the specific risk factors are. If you know those specifically, then do your thing. But if you don't know them, that is the fastest way to lose your money.

Not sure that's a huge help, but reach out anytime if I can be of any help with anything!

Originally posted by @Thomas S. :

Investing in your area simply means you must be wealthier to start out. You need higher reserves and must depend much more on speculating on appreciation as opposed to cash flow. You need deeper pockets. Higher risk/higher potential rewards.

Word of advice to all new investors.....if you are not prepared to lose it all you are not yet ready to invest. You must over come your fear of losing it all. 

 This last sentence hit home for me. 

To OP Gina you are absolutely correct! Embrace an expensive market by diversifying your options.

Originally posted by @Ali Boone :

Hey Gina! Good for you for not letting the losses get you down! Perseverance, and learning lessons from mistakes, are truly the only way to succeed as a real estate investor.

Just a couple two cents:

  • If you stick to your local market, where everything is significantly higher priced, you are at risk for significantly higher losses. While that can be okay, I'd hate to see you try one property with a huge investment into it and it not work and it's a huge chunk lost. So just be cautious of what you dive into when you're dealing with the big bucks to start.
  • What have you found challenging about the idea of going out-of-state for investing? I live in LA and all I do is out-of-state.
  • MOST IMPORTANT, way more than the other two: make sure in your journey that you really focus on learning exactly what risk factors are involved with any kind of investment strategy you are considering, and what mitigations for those would be. There is an endless scale of risk levels out there and available, and it's fine if people want to stay on the riskier side of the scale (in hope of bigger rewards), but more often than not people have NO idea what the specific risk factors are. If you know those specifically, then do your thing. But if you don't know them, that is the fastest way to lose your money.

Not sure that's a huge help, but reach out anytime if I can be of any help with anything!

Ali, thank you for all of this. I am cautious about my market and definitely know that a bigger risk can result in bigger losses. I've owned a few properties in Orange and Riverside counties (SFR). I've also done a couple flips and had good and things happen there because of risk factors. It's been awhile but I am going back in eyes wide open and doing my necessary due diligence. I don't have a lot of capital yet so my focus is: wholesaling, JV's, and OPM (accessing capital through other investors—I used to work for an investment group—angels, VC's, boutique, and traditional banks—some have interest outside of their typical business deals and are open to RE deals). Although I want to get to the place of owning several with my own $$.

Out-of-state challenges for me:  I just want to be closer to manage and be hands-on and learn. But out-of-state is definitely in my plan. I just don’t see it happening immediately. Send me a message though. I am open and interested in seeing how we can benefit each other. I would love to talk more.

Originally posted by @Gina Tavizon :
Originally posted by @Ali Boone:

Hey Gina! Good for you for not letting the losses get you down! Perseverance, and learning lessons from mistakes, are truly the only way to succeed as a real estate investor.

Just a couple two cents:

  • If you stick to your local market, where everything is significantly higher priced, you are at risk for significantly higher losses. While that can be okay, I'd hate to see you try one property with a huge investment into it and it not work and it's a huge chunk lost. So just be cautious of what you dive into when you're dealing with the big bucks to start.
  • What have you found challenging about the idea of going out-of-state for investing? I live in LA and all I do is out-of-state.
  • MOST IMPORTANT, way more than the other two: make sure in your journey that you really focus on learning exactly what risk factors are involved with any kind of investment strategy you are considering, and what mitigations for those would be. There is an endless scale of risk levels out there and available, and it's fine if people want to stay on the riskier side of the scale (in hope of bigger rewards), but more often than not people have NO idea what the specific risk factors are. If you know those specifically, then do your thing. But if you don't know them, that is the fastest way to lose your money.

Not sure that's a huge help, but reach out anytime if I can be of any help with anything!

Ali, thank you for all of this. I am cautious about my market and definitely know that a bigger risk can result in bigger losses. I've owned a few properties in Orange and Riverside counties (SFR). I've also done a couple flips and had good and things happen there because of risk factors. It's been awhile but I am going back in eyes wide open and doing my necessary due diligence. I don't have a lot of capital yet so my focus is: wholesaling, JV's, and OPM (accessing capital through other investors—I used to work for an investment group—angels, VC's, boutique, and traditional banks—some have interest outside of their typical business deals and are open to RE deals). Although I want to get to the place of owning several with my own $$.

Out-of-state challenges for me:  I just want to be closer to manage and be hands-on and learn. But out-of-state is definitely in my plan. I just don’t see it happening immediately. Send me a message though. I am open and interested in seeing how we can benefit each other. I would love to talk more.

All that sounds good! And I definitely see the motivation to be hands-on, so definitely see what you can do around here! If you're ever up in West LA/Santa Monica, there's a really good meet up led by @Jeff Greenberg on the 2nd Saturday of each month (one coming up this Saturday). It's set up so that there's no sales pitches, it's literally just people interested in and doing various things in REI, and there's always plenty of people doing stuff around LA that might be good to network with. Talk to you soon! Good luck!

I'd consider looking in Kern County, it's only 2 hours North of Los Angeles and it's very inexpensive and has some good rental markets. Message me if you have any questions about the market here.

Max Gradowitz, Attorney

@Gina Tavizon I agree that you don't have to be wealthy to invest in our market. But if you invest out of state, people will think that you are wealthy and you will pay the price.

I made the mistake of investing out of state before investing in our market.

Good luck!

@Gina Tavizon

Welcome. SoCal can be a tough nut to crack for us newbies.

A couple years ago I mailed out lots of letters to homeowners in LA County with no luck.

Then I tried rural Kern County and got a deal from a distressed homeowner in California City.

The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.

Have you considered an owner-occupied small multifamily for your first deal?

You only need to put 3.5% down, so cashwise it won't get in the way of other real estate goals you may have.

My first deal was a 4-unit up I bought with FHA 3.5% in Santa Clarita.

I lived for free (as opposed to paying rent) + enjoyed cash flow + built equity so it definitely didn't compromise my cash reserves.

Good luck!

@Gina Tavizon , given the positive outlook and projected appreciation for California in 2018, as well as the continuing limited housing supply for Orange County, have you considered purchasing a home needing TLC that you can live in for the next 2 years and then sell for potential tax-free gain?

Bryan Zuetel, Attorney in California (#258836)
949-421-7097

First GREAT post @Gina Tavizon ! And great feedback from so many people. @Ali Boone always providing get feedback and @Max Gradowitz I actually work my W2 job in bakersfield so I will need to hit you up. 

@Gina Tavizon, I am in a similar situation as you. I didnt have the same learnings early on but am looking to give my local market a try before I decide to go OOS. I do think a National and even Global approach is the best way to build a massive business but I am not even close to that (still only one rental...but looking to get more in 2018). I think you have the right spirit and the great personal learnings from before to MAKE IT! Please keep me in the loop!

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