So much for out-of-state cash flow... I just bought locally in LA

25 Replies

Oh yes, it happened. This "out-of-state only, I only want cash flow, and I never want to landlord" investor just bought a negative cash flow property in Los Angeles (Venice) and I'm now a landlord.

You've heard me talk all these years... Did you ever think it would happen? I didn't! But here I sit coordinating handymen, contractors, to-do lists, and beginning the search for tenants. I also have to be up stupidly early tomorrow to meet the termite tenting guy. 

This is a far-cry from my usual sleeping in, hanging at the beach, and only thinking about my properties if my property manager emails me about something.

Not sure the point in my post, other than to make the announcement that my usual preaching of cash flow outside of California has a twist in the plot now. I will say I'm super-stoked about the property, the negative cash flow isn't that bad considering it's a [nearly] rent-ready property in Venice of all places, and I think it has a lot of potential.

I could justify my reasons for the buy on here, or I could give you the numbers or details on the property, or I can just post this with a quiet mouth and see what the responses are. Don't worry, I can take it :)

But don't get me wrong... I'm not off my stance about out-of-state cash flow being the way to go! Just had to throw a little diversification into the mix. 

Sidenote- buying in LA is a process like I've never experienced! Especially considering I'm a licensed agent... geez, I had to learn a ton in this process!

@Ali Boone Congrats? I worry about prices peaking but you know your area so time will tell. Important that we all try to keep learning especially when against our usual comfort zones. Hope all works out. Keep us posted!!!

Nothing wrong with out of state cash flow and some CA appreciation thrown in the mix. I'd still recommend most investors be wary on getting into a deal that would put them in long term negative cash flow. 

If you bought a negative cash flowing property in LA with a vacancy then you bought well, because vacancies are money!

Doing the inverse - have the property in Southern California, now trying to get into the cash flow side of things out-of-state. Good luck with the local property and would love a recap of the process when all is done and rented.

Originally posted by @Dylan Vargas :

@Ali Boone Congrats? I worry about prices peaking but you know your area so time will tell. Important that we all try to keep learning especially when against our usual comfort zones. Hope all works out. Keep us posted!!!

Will do, and for sure there is always the worry about peaked prices. Luckily we got it a bit under appraisal and given where it is in Venice...if anywhere has an awesome appreciation potential, it's there. Time will tell though!

Originally posted by @Brett Goldsmith :

Nothing wrong with out of state cash flow and some CA appreciation thrown in the mix. I'd still recommend most investors be wary on getting into a deal that would put them in long term negative cash flow. 

Oh, so would I. ;) I don't recommend this buying scenario for most people by any means. With my case, there is a lot behind it that makes the longer-term investment of it much more feasible and the profit potential actually be there. And hopefully it's not cash flow negative for long. It's not far below break-even now so it won't take much in rent increases to at least get that far with it. The long-term numbers are excellent over the hold time, but it's a long hold time. So I'm still all for out-of-state cash flow and recommend it for most folks.

Originally posted by @Seth Borman :

If you bought a negative cash flowing property in LA with a vacancy then you bought well, because vacancies are money!

Ooh...tell me more! You mean just because I can set the rents and not be stuck with a rent-controlled amount, or what specifically are you meaning?

Originally posted by @Kirk Shaffer :

Doing the inverse - have the property in Southern California, now trying to get into the cash flow side of things out-of-state. Good luck with the local property and would love a recap of the process when all is done and rented.

For sure! Will do. And if you need any help with out-of-state stuff, that's still most of what I work with and have bought for myself so happy to help if I can in any way. And we're neighbors! :) Well, distance-wise. Maybe not with traffic...

Originally posted by @Ali Boone :
Originally posted by @Seth Borman:

If you bought a negative cash flowing property in LA with a vacancy then you bought well, because vacancies are money!

Ooh...tell me more! You mean just because I can set the rents and not be stuck with a rent-controlled amount, or what specifically are you meaning?

 Yes. I'm assuming that you bought an apartment. It is still rent controlled but you can renovate to max out the rents and really increase the value. 

@Seth Borman Nope, it's a freestanding duplex with a finished 2-car garage (has a half bath in it). And it's already fully renovated. Will be able to max out rents without doing any renos.

@Ali Boone   Congrats! I think you know what you need to do with that garage with half bath (but I won't say it). Ha! Regardless, its awesome. I am happy with my Mar Vista property that I will NEVER sell, and my midwest cashflow. Why not have the best of both worlds?

Stop the presses ...   She has drank the cool aid.  What is next?   Is Swanny going to start buying in So Cal again?   Is Ben going to buy $30K pigs?  Is Diane(?) going to stop claiming the sky is falling on the San Fran market?

@Michael Swan   @Ben Leybovich

If it plays out as it has historically you will be a die hard convert to So Cal in 5 years or less.

Congrats and good luck.

Originally posted by @Dan Heuschele :

Stop the presses ...   She has drank the cool aid.  What is next?   Is Swanny going to start buying in So Cal again?   Is Ben going to buy $30K pigs?  Is Diane(?) going to stop claiming the sky is falling on the San Fran market?

@Michael Swan   @Ben Leybovich

If it plays out as it has historically you will be a die hard convert to So Cal in 5 years or less.

Congrats and good luck.

 Not a chance in hell. Last offer I made was for about $50,000/door with $16,000/door of rehab. I didn't get it. I think I we are offering on one on Monday at $100,000/door. No $30,000 pigs :)

You got it!!  The stock market is scary too!!

Swanny

hello. Question off topic. I am a new investor looking to chase probate leads in Los Angeles. I have done a ton of research and know the commitment and somewhat familiar with marketing.  Is this a good place for someone to start ?  Is there a ton of competition. Is there anyone actually making deals doing this ? 

Originally posted by @Ali Boone :

@Seth Borman Nope, it's a freestanding duplex with a finished 2-car garage (has a half bath in it). And it's already fully renovated. Will be able to max out rents without doing any renos.

 everyone who lives in CA should start there and get a CA property under there belt because history has shown if U own it 20 plus years your going to be smiling even if that's the ONLY property you ever buy.

then look else where ..

Originally posted by @Jon Huber :

@Ali Boone  Congrats! I think you know what you need to do with that garage with half bath (but I won't say it). Ha! Regardless, its awesome. I am happy with my Mar Vista property that I will NEVER sell, and my midwest cashflow. Why not have the best of both worlds?

Haha. I love it! (I'm pretty sure I know what you're thinking but tell me anyway so I can confirm. And if it's what I'm thinking and something you have some experience with, I may pick your brain some! ;) as she whispers in a quiet voice...)

Originally posted by @Dan Heuschele :

Stop the presses ...   She has drank the cool aid.  What is next?   Is Swanny going to start buying in So Cal again?   Is Ben going to buy $30K pigs?  Is Diane(?) going to stop claiming the sky is falling on the San Fran market?

@Michael Swan   @Ben Leybovich

If it plays out as it has historically you will be a die hard convert to So Cal in 5 years or less.

Congrats and good luck.

Haha! This one is funny. And hey, I'd love to become a convert in that timeframe because that means my investment is panning out much faster than planned! I'll certainly never complain about that happening. We shall see, we shall see.

Originally posted by @Jay Hinrichs :
Originally posted by @Ali Boone:

@Seth Borman Nope, it's a freestanding duplex with a finished 2-car garage (has a half bath in it). And it's already fully renovated. Will be able to max out rents without doing any renos.

 everyone who lives in CA should start there and get a CA property under there belt because history has shown if U own it 20 plus years your going to be smiling even if that's the ONLY property you ever buy.

then look else where ..

The 20- and 30-year forecasts definitely look purty ;)

We should have met up and discussed. My experience is the opposite and I’m doing very well out of state. I only flip in LA - I’ll never own a rental here.

@Dan Heuschele and @Ali Boone ,

Let me explain.  When this all comes crashing down in the next 5 years is what I assumed Dan was saying, yes.  I will be a total convert and buy back in San Diego.  Right now, my little 3/1 with 1040 square feet and I have to walk out side to get to the two car garage is now valued at over $540,000.  That is downright absurd.  This same house went down in value to $370,000 in the last market crash.  You better believe it when it happens again, I will be buying at the lows for cash flow.  Buy low and sell high.  It is a pretty simple concept, that people don't follow very often.  That includes the inflated stock market too.  When everybody is soooooooooo excited and the flippers come out in droves, I begin to run for the hills. The end is not too far after that.  Maybe we get a few more summers of this low inventory and hyper appreciation.

Swanny

Ali, sounds like this property could give you some tax benefits (lower your overall tax bill, since your other properties are in the black), especially once you factor in depreciation!

Originally posted by @Michael Swan :

@Dan Heuschele and @Ali Boone,

Let me explain.  When this all comes crashing down in the next 5 years is what I assumed Dan was saying, yes.  I will be a total convert and buy back in San Diego.  Right now, my little 3/1 with 1040 square feet and I have to walk out side to get to the two car garage is now valued at over $540,000.  That is downright absurd.  This same house went down in value to $370,000 in the last market crash.  You better believe it when it happens again, I will be buying at the lows for cash flow.  Buy low and sell high.  It is a pretty simple concept, that people don't follow very often.  That includes the inflated stock market too.  When everybody is soooooooooo excited and the flippers come out in droves, I begin to run for the hills. The end is not too far after that.  Maybe we get a few more summers of this low inventory and hyper appreciation.

Swanny

I toootally agree. I love crashes! I start property shopping immediately!

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