New investor Cali / SF Bay Area w/ $130k Multifamilies Sac, Fres

7 Replies

Hey All,

Here's the breakdown:

-I've been wanting to invest in multifamilies for 5+ years

-I didn't think I had enough money until this year

-I'm ready to invest, but people are telling me the Bay Area is at the top of the market and the only stuff on sale right now is what people want to get rid of before the next recession. I'm new and afraid to buy someone else's problem property by mistake

-Trying to figure out: Do I invest in a small 2-4 plex now, maybe in Sacramento and save the rest of my money or do I think about investing trying to build a team (PM, GC, Broker, etc) in Bakers Field, or even out of state.  Alternatively, should I just wait until 2020 when interest rates are higher and prices are lower to invest?  I feel like there are so many options that I'm paralyzed and not sure what to do.

-I know cashflow is king, but it's really hard to find stuff that cashflows around me right now. This is especially true since I have no experience, and I'm afraid to invest more than an hour or 2 away from my house... I listened to some of the pod casts on investing out of state, and it sounds like a great opportunity, but quite honestly the prospect sounds daunting

Your time and consideration is much appreciated all,


Originally posted by @Kevin Given :

-I'm ready to invest, but people are telling me the Bay Area is at the top of the market and the only stuff on sale right now is what people want to get rid of before the next recession. 

 FWIW I've been hearing "them" say that on a routine basis since 2015. Then when it wasn't 2015, "the next meltdown" was "definitely" going to happen in 2016. And so on.

Kevin, looks like we are in the same boat. I am a handyman here in the central valley and am always getting calls from bay area folks needing work on their rentals. Be sure to analyze your deals properly. Just because the houses in Sac are half the price than where you are at does not mean they are a good deal or cash flow. However any house will cash flow with a large enough payment. I am looking at 25% down and most everything from here to Sac will not cash flow with the rents. Currently I am seriously looking in Bakersfield area and down south where I may have a better chance of having positive cash flow without putting down 50%. 

I also thought about investing in OH very seriously and started a thread for some help. My wife and I's conclusion was that as beginners we rather start in CA even if 3 hours away than out of state where I cant drive in a day. Yes we will pay more, but it will get out feet wet. 3-5 years from now once we learn a little more then taking the risk out of state I feel is much smaller. 

Good luck!

@Kevin Given

I work with first time investors in your situation all the time. You're in the Bay Area, have great income and enough money for a down payment, but none of the deals locally make sense because the numbers simply don't work on paper.

You're a first time investor, so you aren't willing to take too big of a risk... that often rules out investing too far outside of state. You'd much rather prefer to invest somewhere nearby... somewhere you could always drive to the property quickly if something went wrong.

Does that all sounds about right? LOL if so then know you are not alone.

My general recommendation for beginner investors is to invest somewhere that's no more than 2 hours away from you, whether driving or flying. That way you can make a quick trip to the property whenever needed and spend no more than 4-5 hours traveling back and forth on a single day.

For Bay Area Investors, that basically leaves you with Sacramento and Stockton for driving distance (there are other options, but that's where you'll generally see the best returns) and either Las Vegas or Phoenix Metro for flying (less than 2 hours).

Wherever you decide to invest, here's the two main things you're going to need:

1) Knowledge of the Market: Just google "(name of area) real estate" and read every single news article on it from the last 3 years. It'll REALLY help bring you up to speed. A local expert can help you shortcut this process, but ultimately you should rely on your own knowledge and not just your agent's (in case you choose the wrong agent who only sounds like they know what they're talking about.

2) An agent who understands your goals: To be frank, most agents just help your everyday home buyer and seller. They're not used to working with investors and talking ROI, Cap Rates, Cash Flow, Cash on Cash Return or any other metric that might mean something to you. You need an agent who knows what they're doing and won't try to sell you crap just because it's more expensive or shows you deals where the numbers don't even work (because they should know how to calculate that once they know your down payment and interest rate -- if they can't get a new agent.)

Hope this helps. Feel free to reach out if you have any more specific questions about the Sacramento market or just buying your first investment property in general and I'll try to get you pointed in the right direction.

for me it was all about the budget, sure I wish I bought a place in the bay area instead of going out of state but it wasn't in the cards. I tried to get just 1 condo in Oakland..... didn't work so I bought a house in KC. Then I bought a duplex and now I just wait for the next purchase.... 

However, the appreciation of Oakland was much more then what I've made in KC... however the payments would of stretched me thin and at the end of the day it wasn't meant to be.

Hey @Kevin Given .  I am a fan of just getting started, timing the market is hard and we don't know what it will be like in 5 years.  Addtionally, RE is very forgiving.  Invest for cash flow as close to home as you can, sac, fresno, modesto, bakersfield, etc... and just do you best.  You will learn a ton of stuff after you get started.  In 5 years there will be a whole new set of reasons not to invest in real estate.  Feel free to message me if you want to chat more, I'm happy to tell you my story of getting started, failing, and getting back up. 

@Kevin Given I was just listening the the newest episode of the BP Podcast about the people in their 30’s and one of the comments that was made is that those people had learned how to purchase property in any type of market. Now, I cant say I completely agree with that philosophy, but they are definitely doing well and they definitely have a point in that waiting to invest is probably worse than investing at the current time.

Warren Buffett has said the Power of Compounding is one of the strongest benefits of investing.

That being said, I feel Bakersfield would be a great place for you to invest, and if you have some free time please feel free to look through my previous posts to give you my version of what I think will happen in Bakersfield in the future.

Just yesterday I found a cash flowing triplex that brought back around a 7%+ cap rate after expenses. These properties still exist but I think you just need the team to be able to help you out like you were saying.

If you have any questions or would like to chat further please feel free to PM me as well!