Opinions/Direction for fresh California Real Estate Investor

5 Replies

Hi all,

I've been listening to the podcasts and reading forum posts in order to figure out the direction I would like to take. Sometimes I get that feeling like I missed the boat for deals as the ideal time to buy would have been a few years back. I read all these rules of thumb and realize they do not apply at all for California real estate (specifically Greater Los Angeles).

I find it frustrating that it seems the general opinion is to invest in your home state first and then branch out across borders however with the overinflation of real estate prices in my area I don't see it feasible to pay such a great deal of money for so little of a property/no cash flow especially since its not my objective to speculate on appreciation.

So far from my reading and learning I have decided I would like to focus on SFR/Multi-family. Ideally I want to get out of renting as soon as realistically possible and use my money towards an investment so here are the options I have come up with:

Option A:

Find a multi-family property in non-warzone area of SoCal

At the minimum, covers the mortgage, expenses, etc. via the tenants rents

Live in for a year or however long it takes to make my next move on a personal SFR or condo.

Expand my portfolio to more affordable real estate out of state or in state if possible.

Option B:

Keep renting and find a SFR/Multi out of state but close to Los Angeles area (Phoenix/Vegas).

Expand portfolio.

Starting small is key but I would love to one day grow to a point where I was making $5000/mo passive income or more in addition to the property values. Interested in long term wealth, not the get rich quick dream.

Lastly, so I don't sound like a whiner ;) some things I'm doing to help my situation are:

Obtaining my RE license here in California.

Paying down bad debt; credit cards, student loans, car loan (As quick as possible).

Reading and listening to a lot here on the BP website.

Opinions welcome, trying to see if my goals are realistic or if I need to rethink some things. I'm 28 and looking to have myself set in the future so I can enjoy some of my other passions in life. BP has been a huge help so far, but even with some questions answered, I'm just discovering the tip of the iceberg. Thanks all!

I'm not asking the following question to be argumentative, only asking out of curiousity.  What benefit does having a real estate license bring to your investing career?

Knowledge and options

Bryan, knowledge is definitely power.  If you know the law, nobody can bluff you and you can be confident in your negotiations.

I think you should consider that CA is a huge state, and LA and SF are but a tiny part of the state.  There are many places within the state that have affordable rental properties and a demand for housing.

In my opinion, the benefit many investors overlook, is that CA property taxes basically stay the same from the day you buy the property, because of Prop 13, which was approved by voters back in the 70's.  Property taxes can only go up by something like 1.5% a year, no matter what the property ends up being worth.  In other words, you buy it today for $200,000, taxes only go up by around 1.5% each year - even if it ends up being worth 2 million.  Taxes stay based on the original sales price.  This is a huge benefit to buying in CA that so many people overlook.  Everyone wants to believe CA is overtaxed and overpriced.

And, I think you should consider eventually looking into the senor apartment rental market.  If you get approved as a senior building, particularly a 62+ building, as opposed to 55+, you only have to rent to people 62+.  Way less tenant issues, in my experience as a senior now in 55+ housing.  55+ does allow a percentage of younger people, and there can be more issues there.

And with all of the baby boomers looking for housing, I would also advise you to learn about subsidized senior housing.  You could do Section 8 - but for 62+ seniors only, in a 62+ building.  These people have a regular govt check, and are generally quiet tenants.  

At any rate, look at other markets in CA.  Look at smaller towns that are low on rentals.  And look into senior subsidized housing.  From my experience, retiring about a year and a half ago, no matter where you build a senior subsidized community (whether an existing building or a new build), they not only will come, but you will have a waiting list.

Another thought - with your license, you could manage properties.  Look into that.  But, I think you just need to be affiliated with a broker, then you could do PM on your own.  If you were to offer a flat rate, as others on this forum do, landlords would love you to manage their properties, if you are otherwise trustworthy and find them good tenants.  You could start out as a manager, perhaps, if you can't find capital right away to buy your own.

For what it's worth.

Thank you for the depth response. I will certainly take a look at those options as well!

@Bryan Glaser

If I were you I would purchase a multi-family owner occupied to start out. There are many tax advantages to owning versus renting and you will build equity.... Rather than helping your landlord build equity. You can get in with FHA at only 3.5% down. After your primary residence if locally won't work for you, than search out of state.

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