Rental Property Investor · Costa Mesa, CA · Member since 2018 · 84 posts · 52 votes
Hello people,
I am a new investor and looking to buy a property within the next 90 days in southern California. I have about 20k saved up and have a pre approval up to 450k using FHA.
I am finding it hard to find cash flow positive properties in these areas, i havent seen any properties fit the 1% rule and in general they all lose money, esp considering pmi and 3.5% down. I would like your expert opinion on this matter? thanks
Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
8y
Hey Vincent,
You’ll find hundreds of threads on here about how us southern Californians have to look out of state to find 1% deals.
Someone will probably disagree with me on that, so I should add that It might possible with some hustle to find them here.
I’m just not sure how. Even if you make a job out of it and do direct mail and all of that I’d be surprised if you found anything in a reasonably safe area. Maybe out in the high desert area or Joshua tree area would work?
I’m assuming you’d be doing multi family and living in one of the units since you said fha. I’m less familiar with that market. I found a 4 unit in my area that’s a complete gut inside but otherwise structurally sound. It’s listed for 750 I believe. After a full renovation it could probably rent for 6k. That’s the best deal I’ve found out here and it’s not good in my opinion
That’s off the mls. If you get creative and figure out a way to find deals, you could probably pull it off.
I’m not trying to discourage you at all. I bet you can do it. It’s just going to take some doing. Best of luck, and hopefully someone else can give you some great advice on making it happen!
@Trevor Lohman thanks for the response. I figured, it seems like people are doing more cash down and are happy with less of a return, so they are pushing us out of the market. I want to do two FHA with my name and my buddy (partner) and then plan on looking for properties in the south (Georgia) where my sister lives. The property you are talking about is at 0.8% if the expenses are low and you can put 30% it might cash flow , but a bad roi fa sure
I am gonna keep looking for another month or so. thanks again
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
8y
@Vince Rodriguez You're not dreaming....that's just the reality of SoCal. That's why so many people invest out-of-state. 1% would be a dream here. You'd be lucky to find something with positive cash flow at all, much less hit the 1% rule.
Investor · Redlands, CA · Member since 2013 · 177 posts · 76 votes
8y
Well it’s not really .8% because it needs a full remodel to achieve those rents.
So no I think it’s a ways off unfortunately. Otherwise I’d be interested.
Georgia on the other hand, you could definitely make that work.
Best of luck!
Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
8y
Still lots of niches in socal that can get you to 1% rule. Student housing, parolee housing, senior living facilities, drug rehab related, military housing.......
Bakersfield, CA · Member since 2016 · 378 posts · 307 votes
8y
In real SoCal (everything LA County and South of that), you probably wont find a cash cow. Although, there is something to be said about appreciation. Anyway, Central California is the way to go if you want to stay in state. Cheap, cash flowing, good appreciation, etc. Otherwise, go Midwest.
Real Estate Agent · Rolling Hills Estates, CA · Member since 2017 · 9 posts · 6 votes
8y
There won't be many cash flow opportunities with PMI and properties in that price range unfortunately.
I found some cash flowing properties in Long Beach area which I think has a good upside in the future but the margins are pretty slim and post renovation you would be looking at 750-800k range.
Specialist · Branford, CT · Member since 2018 · 222 posts · 121 votes
8y
@Vince Rodriguez You might consider mailing to Seniors with Low Financial Stability Scores. These folks are often ready to downsize or transition to assistance. They are off-market and can really benefit from not having to fix things up before putting on the market.
Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
8y
I'll say again, still tons of opportunities well north of the 1% rule in in SOCAL in student housing, parolee housing, senior living facilities, drug rehab related, military housing, and related. And of course vacation rentals, my niche. Too many people get pigeon-holed into thinking about conventional long-term rentals only. Build knowledge, and later an expertise in one or more of these or a related niche, assuming you have the time and desire.
Real Estate Agent · Pasadena, CA · Member since 2015 · 93 posts · 12 votes
7y
@Max Gradowitz, what Cities in Central CA, do you think are good investing areas where prices are not beyond reach? What are your thoughts on Fresno? I don't know that area, but I have a friend who lives there and could drive there to visit and look for cash flow properties.
Realtor · Coronado, CA · Member since 2013 · 43 posts · 39 votes
7y
@Vince Rodriguez - I think, like @John D. says - it depends on the niche. If you're talking a coastal SoCal duplex, the answer is probably no...it will probably not be cash flow positive (assuming a mortgage on the property).
In addition to looking at non-traditional types of property, there are also some lesser populated areas of SoCal. If you're willing to open the aperture, the area around Joshua Tree Nat'l Park ("Morongo Basin") has cash flowing, mortgaged properties.
Rental Property Investor · La Quinta, CA · Member since 2014 · 1k+ posts · 779 votes
7y
I agree Morongo area is worth looking at, especially if you are willing to consider a home that serves multiple military personnel, or a vacation rental. With that said, most people seem to want great numbers from easy solutions that don't require effort or expertise that may take time. Ain't gonna happen in socal.
Real Estate Agent · Pasadena, CA · Member since 2015 · 93 posts · 12 votes
7y
@Tom Murray, Who is renting in Morongo Basin? Are you getting 1 year leases there from casino workers or other industry? Are rents high enough and prices low enough for the cash flow? Are employees buying there and commuting? I'm not too far to get there and buy property, so I'm intrigued.
Investor · Morongo Valley, CA · Member since 2013 · 53 posts · 48 votes
7y
I rent and cashflow )~250/mo. I have found dual income younger families or older folks on fixed income pensions/S.S. to be the best in the area. (military isn't bad, but new leases every year or so from what I've heard and very few casino workers as the closest one to yucca valley is 29 palms)
I have found the area to be very misunderstood - as people driving by assume meth labs, sex offenders and neonazis --- when instead you find millionaire horse/animal lovers, older retirees who feel like they have found shangri-la, and an increasing amount of younger LGBT creative folks re-creating identity in the serenity of the desert.
also, $15/hr minimum wage law is underway - going up $1 a year until $15 in 2020. this means, 2 mcdonald workers living together in yucca valley could easily pay $1200/mo for a quality rental.
my homes have all increased 10-20% a year for 3 yrs straight - as the few quality inexpensive rentable homes that come up are fought over by investors, new home buyers, airbnb.
a sewer assessment going into effect will add 100-150 to the monthly tax burden (along with a few other assessments in the works - school,fire)
Bob Armstrong (a realtor in the area) creates a nice email newsletter each month with data/commentary.
Real Estate Agent · Pasadena, CA · Member since 2015 · 93 posts · 12 votes
7y
@David Jarvi, great answer! Thank you!. If you cashflow $250/,o, isn't that new sewer tax goint to wipe out much of that? Is that a concern? Also, are you cashflowing $250 with only a little down or are you having to put a lot down?
Realtor · Coronado, CA · Member since 2013 · 43 posts · 39 votes
7y
@David Jarvi I assume the sewer tax you're referring to is for Yucca Valley? Twentynine Palms does not yet have plans for city-wide sewer (although it would be nice).
@Joe Yobaccio, my renters are a mix of military and non-military. We are signing 12 month leases (although military can break leases if they have to move sooner...haven't had that happen yet, but we know it's a possibility). And yes, the combination of rents, price points, expenses has yielded positive cash flow.
Investor · Morongo Valley, CA · Member since 2013 · 53 posts · 48 votes
7y
yes - the sewer assessment applies to yucca valley. A 1% sales tax was put in place by voters to lessen the overall burden - and so each year the 180million tax is supposedly recalculated and then reduced based on this sales tax. There are 3 phases to the implementation and phase 2,3 have only been assessed around 5k so far. Anyway its somewhat complicated - so buyer beware - but overall a sewer system should be great for the area as in-n-out, trader joes, etc.. will be able to do traditional builds rather then complicated septic system/environmental reviews etc.
Investor · Morongo Valley, CA · Member since 2013 · 53 posts · 48 votes
7y
@Joe Yobaccio definitely a concern — but making 20k a year in appreciation and 5k in principal paydown/tax helps that concern
20%down.
But ive locked in interest rates from a few years ago.
And ive bought All cash at auction (or direct) for 60-120, fix for 6-20, rent and refi
Hope that helps.
P.s. going forward Im starting to look into building "ADU's" then i can buy retail (with larger lot) and then "force" cashflow with a second smaller unit. (Google adu governer brown)
Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes
7y
@Joe Yobaccio what's up Joe. Most of the central valley has pretty good prices. Sticking around the larger cities may be better due to water issues in some smaller cities, specifically on the west side of the valley. Visalia is a great place as it was voted one of the best places to live in the valley. I work and invest in Fresno and have had good luck here. I've head good things about bakersfield too. Good luck! If I can ever answer anything specific for you about Fresno let me know!
Real Estate Agent · Pasadena, CA · Member since 2015 · 93 posts · 12 votes
7y
@Jeff Zimmerman. Thank you! I have a friend on the outskirts of Fresno. He indicated there may be good and bad parts of Fresno. Are there any geo borders that you go by, such as East of the City, etc? I know some places where people will use a freeway and say north of a certain freeway is good and south of it, no.
Real Estate Agent · Fresno, CA · Member since 2014 · 367 posts · 174 votes
7y
@Joe Yobaccio Yeah definitely. Stay out of 93706. The farther north the better the city gets. Clovis school district as well as Sanger Unified are the most highly sought after districts. Tower has really high rents per unit as it's the center of fresno for nightlife and artists. Lowel District downtown is up and coming. Downtown proper is also a great place to look. Fresno High area is great to look in as well as Fig Garden which is just north of tower. Old town clovis as well.
As always there are good pockets in area's that most investors haven't discovered yet (like Lowell) but these area's are where I would look if I were you. I own in Lowell right now and have been really happy. Let me know if there is anything more specific I can talk about.