I am located in Los Angeles, CA and have just graduated college. I am liquid 100k cash. My best bud from childhood is in the same boat with 100k cash. Together we are looking to start our real estate empire with 200k working capital.
I really love the Brrrr strategy and maximizing cash flow. Although a flip is also appetizing for the short term profit.
The market is pretty high in Los Angeles although we are extremely connected and have access to lot of off market deals for when we have more money and are smarter.
The next market where I am most connected is Dallas, Texas and it appears the price for property is much cheaper and in our range.
What type of advice would you give a young entrepreneur in these shoes ?
And what type of real estate strategy would you start with first to initiate the empire?
I am located in Los Angeles, CA and have just graduated college. I am liquid 100k cash. My best bud from childhood is in the same boat with 100k cash. Together we are looking to start our real estate empire with 200k working capital.
I really love the Brrrr strategy and maximizing cash flow. Although a flip is also appetizing for the short term profit.
The market is pretty high in Los Angeles although we are extremely connected and have access to lot of off market deals for when we have more money and are smarter.
The next market where I am most connected is Dallas, Texas and it appears the price for property is much cheaper and in our range.
What type of advice would you give a young entrepreneur in these shoes ?
And what type of real estate strategy would you start with first to initiate the empire?
Welcome to the site Ryan. BRRRR is a great strategy but best done locally. That may not be in the cards for you given the cost of your market. Good news is that you aren't alone. There are tons of investors who live in expensive markets who invest out of state. The majority flock to the turnkey markets. There are tons of turnkey markets out there. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
Cleveland, Ohio
Dayton, Ohio
Toledo, Ohio
Youngstown, Ohio
Cincinnati, Ohio
Memphis, Tennessee
Birmingham, Alabama
Huntsville, Alabama
Kansas City, Missouri
Saint Louis, Missouri
Indianapolis, Indiana
Detroit, Michigan
Erie, Pennsylvania
Louisville, Kentucky
Milwaukee, Wisconsin
Jackson, Mississippi
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
Make sure your property manager is a licensed real estate brokerage.
Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
I am located in Los Angeles, CA and have just graduated college. I am liquid 100k cash. My best bud from childhood is in the same boat with 100k cash. Together we are looking to start our real estate empire with 200k working capital.
I really love the Brrrr strategy and maximizing cash flow. Although a flip is also appetizing for the short term profit.
The market is pretty high in Los Angeles although we are extremely connected and have access to lot of off market deals for when we have more money and are smarter.
The next market where I am most connected is Dallas, Texas and it appears the price for property is much cheaper and in our range.
What type of advice would you give a young entrepreneur in these shoes ?
And what type of real estate strategy would you start with first to initiate the empire?
Welcome to the site Ryan. BRRRR is a great strategy but best done locally. That may not be in the cards for you given the cost of your market. Good news is that you aren't alone. There are tons of investors who live in expensive markets who invest out of state. The majority flock to the turnkey markets. There are tons of turnkey markets out there. Many of these markets are very well represented by sellers & turnkey operators here on BiggerPockets. In no particular order I have listed some of the most popular markets for out of state investors
Cleveland, Ohio
Dayton, Ohio
Toledo, Ohio
Youngstown, Ohio
Cincinnati, Ohio
Memphis, Tennessee
Birmingham, Alabama
Huntsville, Alabama
Kansas City, Missouri
Saint Louis, Missouri
Indianapolis, Indiana
Detroit, Michigan
Erie, Pennsylvania
Louisville, Kentucky
Milwaukee, Wisconsin
Jackson, Mississippi
Each of these markets is popular with turnkey investors because of the low barrier to entry, high rental demand & high rent to price ratio. I recommend setting up keyword alerts for each area as they are discussed in the forums daily with advertisements posted in the BiggerPockets marketplace hourly.
One thing to note when looking at the individual markets, you can make or loose money in any market. Don't think that one particular out of state market will shoot you to success or abject failure. It's not really that complicated to buy out of state. It only becomes complicated when investors try to over complicate or over think everything. Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
Make sure your property manager is a licensed real estate brokerage.
Understand you can not eliminate all risk, only mitigate it. If you are risk adverse real estate, (especially out of state) is not for you.
First post and first upvote, NICE!! Welcome to the fa-mi-ly Ryan!! Great to have you! I would locate a mentor to shorten a learning curve. It doesn't have to be a paid mentor but someone that you can trust. I'm not big on mentors though I'm planning to join Vinney's "Smiles" Chopra's multifamily team to further my education regarding apartment syndication.
If you can, one of you should move to Dallas. Get boots on the ground so you can keep an eye on things. My recommendation is that you get started. Do one property, maybe a house hack or live-in flip. Show that you can do it, learn the ropes, and keep growing.
I'm not a baseball guy, but here comes a baseball analogy: go for base hits right now. Learn the process, how to analyze deals, repair costs, build your network & contact list, things like that.
Thank you for the informational post! I am eager to get started. It sounds like those markets will be bigger bang for the buck! I really appreciate the thorough breakdown and strategy regarding turnkey markets. I am going to look into it right now.
Thank you!! I am very excited. I worked as commercial real estate agent for last few years part time while in school so I have some good people around but have never really had mentor to look at deals with.
I will definitely check out some mentorship.
It is cool to come across such a cool community like BiggerPockets!
Congrats on graduating college with money to spare! I’m a 21-year-old broker also based out of California.
Definitely look into using a FHA loan to purchase 2-4 units (the more the better).
LA is very difficult to get into as a first time investor - it’s very hard to make the numbers work especially with the new rent control regulations.
If you’re considering a project out of state, I might suggest purchasing a value-add property that you and your buddy could live in for some time as you improve the other unit(s).
Always happy to be a resource. Good luck on your first deal.
I am located in Los Angeles, CA and have just graduated college. I am liquid 100k cash. My best bud from childhood is in the same boat with 100k cash. Together we are looking to start our real estate empire with 200k working capital.
I really love the Brrrr strategy and maximizing cash flow. Although a flip is also appetizing for the short term profit.
The market is pretty high in Los Angeles although we are extremely connected and have access to lot of off market deals for when we have more money and are smarter.
The next market where I am most connected is Dallas, Texas and it appears the price for property is much cheaper and in our range.
What type of advice would you give a young entrepreneur in these shoes ?
And what type of real estate strategy would you start with first to initiate the empire?
Ryan, I hope all is well. Congratulations on graduating and having some capital.
I would say look into purchasing Apartments complex's and after you start to build your capital then start to invest in bigger properties.
I am 24, a syndicator, and invest in large multi-family. I would highly recommend reading books, start listening to podcasts, and attending local meetups for multi-family.
I hope this helps. Let me know if you have any questions. Looking forward to your success.
@Ryan Verbist With 200k cash you can still flip some homes in LA county or the IE to build working capital. Or if you find a deal good enough to be a flip you could do the BRRR strategy on it. It's great to hit home run investments in LA.
I am located in Los Angeles, CA and have just graduated college. I am liquid 100k cash. My best bud from childhood is in the same boat with 100k cash. Together we are looking to start our real estate empire with 200k working capital.
I really love the Brrrr strategy and maximizing cash flow. Although a flip is also appetizing for the short term profit.
The market is pretty high in Los Angeles although we are extremely connected and have access to lot of off market deals for when we have more money and are smarter.
The next market where I am most connected is Dallas, Texas and it appears the price for property is much cheaper and in our range.
What type of advice would you give a young entrepreneur in these shoes ?
And what type of real estate strategy would you start with first to initiate the empire?
Ryan,
I've acquired over $100 MILLION worth of real estate and I started with a lot less money than you and your partner (I started with $1,000 in 1999). Given my experience I don't recommend investing out of state specially for your first deal. However, you can still invest out of state if you have a trusted "boots-on-the-ground" team in that city & state.
So if that is the route you want to take, here are the steps I recommend:
Step 1 - Decide first which city and state you want to focus on. Of course, real estate agents will veer you to invest/buy in their city/state. You need to do your due diligence. Here's a study showing that in the next 20 years, 8 states will contain 50% of the US population:
Are these states necessarily good states to invest in? Most likely -but you need to narrow it down to the city level (market) and even down to the neighborhood level (submarket). I invest mainly in apartment buildings and hotels, and one of the things that have helped me is look at studies done by LENDERS (not real estate agents/brokers). Lenders are NOT biased. Here's an example of a Multi-family lender's Market Study for the Cincinnati market (1st quarter 2019):
You can also use websites like city-data.com, zillow.com, rentometer.com to study the city's crime rate, schools, etc.
Step 2 - Once you decide on the city, then you need to identify your Boots-on-the-ground TEAM.
Your team should be comprised of the following:
1. Wholesalers 2. and/or investor-friendly real estate agents to help you find good deals 3. Property manager 4. General contractor 5. Handyman/maintenance personnel
You also need a good title company and lender
How do you do Step 2? Research online, make phone calls and then actually fly out to the city/state you want to invest in and meet your prospective team members.
Step 3 - understand and choose specific sub-markets in the city you are going to invest in - and decide the best sub-markets you want deals in
You do this by actually walking/driving around those neighborhoods and asking several wholesalers, real estate agents and the locals about the area and how hot/cold or how good/bad it is. If you can, you can also talk to city officials and ask to see the city's Master Plan to see where the future developments are planned.
Step 4 - you define your buying criteria based on the sub-market and what's selling there. For example, you mentioned about BRRR - well, that does not work in all areas of the US. To maximize your chances of success, you need to know your real estate sub-market and find out the opportunities in that sub-market. If it's flip, then do flipping. If it's Multi family, then do that. Worst thing you can do is do a strategy that does not work in a market.
Step 5 - through your wholesalers and real estate agents (you identified in Step 2) and using your defined buying criteria (in Step 4), go through property leads and identify the few worth digging into. It's a numbers game. You have to look at 100 deals on paper to identify 2-5 potential deals and I suggest, you make offers on all those potential deals.
It's a lot of work but if you do them diligently, you will multiply your $100K initial capital 100-fold.
Thank you for your advice. Since posting I have had lot of good feedback and this FHA loan is looking like great opportunity to get feet wet using house hack method.
Thank you! Very curious about your experience as 21 year old investor. Impressive!
Thank you for the input Brett! I did not realize that there are some deals within our price range in the greater Los Angeles area. I am starting to learn about all the different ways to structure deals whether it be a flip, BRRRR, or house hack regarding my budget and how much money to leave in the deal to keep doing more. The thread has me thinking about all the different options.
Thank you Michael for such a comprehensive plan of action. I really want to hit this Dallas, Tx market because my best friend from childhood's father has just expanded his industrial construction company from Los Angeles to Dallas, Tx. I feel that with a hands-on approach and tenacious work ethic that I will be able to BRRRR that market well. I also have access to some of the best residential and commercial agents in the area. I have two champions between construction and agents, however, I will need to find my lending champion and property management champion hopefully through my agent.
One thing that worries me is high income tax in California combined with high property tax in Texas! It sounds like a lot of money, but I am fortunate enough to move their and be the boots on the ground if that means more money.
Thanks again for such an informative post. Congratulations on your real estate empire! It is incredibly motivating and comforting to be able to interact with players on your level and learn from people like you that have really done it!
Thanks again. Time to assemble the team and break down some deals !
Thank you Michael for such a comprehensive plan of action. I really want to hit this Dallas, Tx market because my best friend from childhood's father has just expanded his industrial construction company from Los Angeles to Dallas, Tx. I feel that with a hands-on approach and tenacious work ethic that I will be able to BRRRR that market well. I also have access to some of the best residential and commercial agents in the area. I have two champions between construction and agents, however, I will need to find my lending champion and property management champion hopefully through my agent.
One thing that worries me is high income tax in California combined with high property tax in Texas! It sounds like a lot of money, but I am fortunate enough to move their and be the boots on the ground if that means more money.
Thanks again for such an informative post. Congratulations on your real estate empire! It is incredibly motivating and comforting to be able to interact with players on your level and learn from people like you that have really done it!
Thanks again. Time to assemble the team and break down some deals !
Warm regards,
Ryan
If you move to Dallas, then your primary residence becomes in TX and you will not have any CA income tax to pay, just the higher prop taxes in TX. For cash flow, TX is certainly a better place than CA, but for appreciation, very tough to beat CA. Ultimately you need to decide what type of investor you want to be and that may very well change over the years. Start with your education, then build your team, then go after it.
Thank you for the informational post! Much appreciated and definitely need to figure out what type of real estate investor I will want to be given the pros and cons of different strategies and markets.
One other piece of advice. While most here have good intentions and operate with moral integrity, some may not so announcing on a public website that you have $200k between you may result in some people trying to make contact with you and selling you on something. So keep that in mind and take any advice with a grain of salt as there may exist some ulterior motives. There are many crooks and gurus out there looking to separate you from your hard earned capital. Be careful.
Hi @Ryan Verbist! Congrats on graduating. Big deal! Whatever you do don't invest that 100k without getting a solid foundation first and foremost. That would be your education in whatever niche you decide to participate in.
Knowing what I now know, I would jump straight into multifamily. Maybe even a syndication which will allow you to achieve your financial goals much quicker. Invest passively in a deal 1st. Be sure to invest with an operator who has morals and a track record. If the operator doesn't have a track record, then vet the team who he is aligned with. The team is key. Learn the ropes of what to do and what not to do while investing passively, then move onto syndicating your own deals.
Thank you again for that last piece of advice. Looking back that was not the brightest idea. Just really excited about the subject matter. Will make sure to remember that in the future.
Thank you again for that last piece of advice. Looking back that was not the brightest idea. Just really excited about the subject matter. Will make sure to remember that in the future.
Ryan
Perfectly understandable as real estate is very exciting to us. It is good to be excited and passionate, just be sure to keep emotions out of purchase decisions and other big decisions like partnerships, etc. Now find out what type of investor you want to be and get at it.
Hi @Ryan Verbist! Congrats on graduating. Big deal! Whatever you do don't invest that 100k without getting a solid foundation first and foremost. That would be your education in whatever niche you decide to participate in.
Knowing what I now know, I would jump straight into multifamily. Maybe even a syndication which will allow you to achieve your financial goals much quicker. Invest passively in a deal 1st. Be sure to invest with an operator who has morals and a track record. If the operator doesn't have a track record, then vet the team who he is aligned with. The team is key. Learn the ropes of what to do and what not to do while investing passively, then move onto syndicating your own deals.
@Tj Hines
Thank you for taking time to write me. I really appreciate that and will make sure to educate myself thoroughly on the market I choose to enter. I also like what you aid about the team playing a huge roll and being key. I am eager to jump into a deal and challenge myself. I appreciate the advice.
Thank you again for that last piece of advice. Looking back that was not the brightest idea. Just really excited about the subject matter. Will make sure to remember that in the future.
Ryan
Perfectly understandable as real estate is very exciting to us. It is good to be excited and passionate, just be sure to keep emotions out of purchase decisions and other big decisions like partnerships, etc. Now find out what type of investor you want to be and get at it.
Love it! Thanks again Will. And I appreciate the bit on emotional intelligence. Wise words.
@Lamont Marable I would love for you to be my mentor if at all possible? I’m new to real estate and I have no guidance
I'm thankful you would consider me as your mentor Brittany. Unfortunately, I'm not in a position to offer such services. Super duper sorry about that. I would find a coach through here or on Youtube. Find someone that you can connect with and then reach out.
