California OOS Newbie Looking to Expand His Network

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

Hi @Twana Rasoul !

I totally get where you're coming from, and I have considered it, but the starting point is so dang high here that I don't see myself investing in California for a looonnng while.

Please straighten me out if I'm totally off base here but, the way I see it, the financial risk is so much lower in, say, Alabama. With the home prices there... even if it has to sit vacant for a while... I could comfortably afford that cost.

I know it will be much harder, no doubt, but I'm ready to put in the work and I know it's possible.

Twana RasoulBusiness Member

Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes

6y

@Raul Carrillo If you are willing to house hack a duplex in your area, your overall risk is a lot lower purchasing a 700k+ duplex to house hack with fha 3.5% down payment than putting 20% down on something out of town for say around 150k. Your down payment on each property will be about the same.

Generally more expensive assets have less risk than cheaper assets.

I feel like I could change your mind in about 5 mins over the phone if I gave you an idea of what my house hack is like or the ones I'm currently in escrow on lol.

Work with an agent in your area who is an investor as well and they can help you make it work locally.

If we are doing this infomercial style...but wait there is more...right now there is an fha loan option that allows you to purchase with 3.5% down and they will give you a grant for the 3.5% down payment...no strings attached and no income limit.

Best of luck!

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OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Twana Rasoul

House hacking is definitely on top of my list for when I do decide to invest in California! No doubt.

Even a $150k property is actually much higher than the ones I've been analyzing using the calculators here... which have resulted in solid cash flows. (Cash flow is my main objective right now)

But hmmm... maybe I could find a partner to go in on a duplex with me using an FHA loan and me living in there. I'll definitely explore that as well.

Thanks for your input!

Podcast Guest on Show #373

Lee RipmaPro Member

Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes

6y

@Raul Carrillo

I often tell newer investors that it’s fine to network but the whole “building a team” when you don’t have a deal under contract and don’t own anything in a market makes no sense. Figure out the areas, get something under contract, and assemble the team then. You need to actually have something for the team to do before you can involve them. You’ll be able to walk people through the deal you have, get bids, etc. You’ll build your roster of folks you trust as you go along. Good luck!

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Lee Ripma

Hmm... interesting. I was under the impression you'd want to have at least a real estate agent to send you possible deals to begin with. Also maybe a lender that you know will work with you because you've shown them the type of deals you're looking to bring them (compliments of the PDF reports from the calcs).

I hadn't considered having something under contract before doing any of that.

Thanks for the input!

Podcast Guest on Show #373

Lee RipmaPro Member

Rental Property Investor · Prairie Village, KS · Member since 2015 · 2k+ posts · 2k+ votes

6y

@Raul Carrillo

Right, you need a realtor to get a deal. But no use meeting with contractors when you don’t have a project. You can line up financing once under contract but best to have folks to check with once you do have under contract.

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Lee Ripma

Ah okay, yeah that makes more sense now and contractors are at the bottom of my list for sure!

Thanks again!

Dan Portka

Real Estate Agent · San Pedro, CA · Member since 2019 · 253 posts · 128 votes

6y

I'm from socal as well and just closed on my 2nd property in Birmingham. Feel free to reach out if you'd like to chat!

Account Closed

remodeling contractor · Birmingham, AL · Member since 2015 · 69 posts · 49 votes

6y

Hey Raul,

You've picked a couple great cities to invest. I am a remodeling contractor here in Birmingham and would like to connect if i can help you out.

Best.

Mike

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Dan Portka - Awesome, congrats! Will do.

@Account Closed - Hey Mike thanks for reaching out, will do.

Lane Kawaoka

Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes

6y

I started as a 22 year old engineer in Seattle. I encourage you to get your SFH out of state. It won't make you rich right away but you will be in a very different place financially in 5-10 years. Let me know if you have any specific questions.

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Lane Kawaoka

Some encouraging words from a fellow engineer! I appreciate that. Yeah there's no doubt in my mind... I'll be doing the OOS SFH thing for a while.

Thanks, will do!

Ali Boone

Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes

6y

Welcome, Raul! I'm an OOS investor and also used to be an engineer... aerospace.

Lindsay DavisBusiness Member

Real Estate Broker · Birmingham, AL · Member since 2019 · 322 posts · 200 votes

6y

Hi @Raul Carrillo

Birmingham and Huntsville are both great options for OOS investors. Like many cities though, quality often varies not just from neighborhood to neighborhood, but from block to block. That’s why you’ll need a local team that’s knowledgeable and reliable. One of the biggest challenges of OOS investing is finding that team. Have you considered working with a full-service turn-key provider?

Turn-key providers can often simplify the process for OOS investors, since they come with an already established team. If you do go this route, you’ll want to find a turn-key provider that already has a relationship with a property manager. The success of your investment often relies on the quality of the PM, so the PM piece is huge.

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OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

Hi @Lindsay Davis

You know I haven't really looked into any turnkey provider but I could and probably should. Just to expand my options. Luckily an old college classmate also invests in Huntsville and recommended me some people already and so far so good.

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Ali Boone

Ah that's awesome! I actually ended up in the aerospace industry. Thanks for the welocome!

Ankit Garg

Investor · Redwood City · Member since 2017 · 37 posts · 27 votes

6y

@Raul Carrillo I am an OOS investor in North Cal and looking at Alabama market as well. I have an investment in Atlanta area but looking to also explore newer markets where BRRRR is more feasible. Happy to partner with you on finding the right people in that area and bounce of ideas. A fellow engineer in the software space as well.

Joseph Crunkilton

Rental Property Investor · Oregon City, OR · Member since 2020 · 324 posts · 780 votes

6y

You have the right idea looking OOS. Living in Portland, the properties aren't as high as you but still up there. The cash on cash returns is just not feasible.

I purchased a turnkey rental through Rent to Retirement and it's been a great experience. For my first deal, I wanted something low risk, affordable, and with good returns. Getting that first deal instantly put me into the investor mindset.

@Zach Lemaster and his team have property in Alabama that I think you'd be really interested in. Check out their Alabama inventory on their website.

renttoretirement.com

I'm happy to elaborate or answer any questions if you want to pm me.

5 Reply

Kam Olsen

Real Estate Agent · Los Angeles, CA · Member since 2020 · 34 posts · 18 votes

6y

@Raul Carrillo

Hi Raul, it seems like you have made up your mind on the OOS option vs investing locally. Im a realtor and investor here in Los Angeles and agree with Twana's advice. I own 3 rentals locally. You will not see such appreciation of your RE asset in the cities you mentioned as what we have here. I considered OOS and looked into buying a SFH in Huntsville. With cash flow at around $200-300/mo and slim chance of appreciation i decided against this plan.

If you can get FHA loan and buy locally I strongly advice to do so as a start. Your out of pocket will be similar to what you will spend for the 20% on OOS but you will have greater appreciation, zero vacancy, and regular rent increases and be able to "learn the ropes" first hand being a landlord :)

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

@Ankit Garg Although eventually I would like to BRRRR, this first time around I'm focusing on buy and hold!

@Joseph Crunkilton Thanks for the rec!

@Kam Olsen Yeah I agree, the appreciation will probably be low to non-existent even, especially when compared to California. However, right now I'm leaning much more towards cash flow. Even more towards red states due to all the threads regarding tenant laws nowadays!!

Thank you all for your inputs.

Account Closed

Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes

6y

@Raul Carrillo Birmingham is a good market, and you get a lot for your money that’s for sure. I was originally going to invest there, but I ended up finding a solid boots on the ground in Indiana. I’d reach out to @Jason Carter. He’s active in B-bam and also lives in LA.

3 Reply

Jason Carter

Rental Property Investor · Culver City, CA · Member since 2012 · 403 posts · 246 votes

6y

Thanks @Account Closed, an investor-friendly agent and all around good guy.

I'd just say be careful with the cheaper 30-60K properties that have returns that look amazing on paper. They rarely play out like that in real life. If you're looking long-term, and you're buying out of state, buy in the best neighborhood possible and don't worry so much about cash flow right now. You may want to consider properties a little over 100K. You're more likely to see appreciation, rental increases, higher tenant quality and less crime in better neighborhoods. It may not be as exciting as those imaginary returns from a cheap house, but trust me, you're not going to see those kind of returns on a cheap house. I know because I ignored this advice soon after starting out.

That said as someone else pointed out it's all about management. That is the single most important piece in my experience. I'd pick a crappier market with an excellent manager than a great market with mediocre management. You have to find the best. And it doesn't hurt to find some solid backups just in case. Otherwise you're going to have lots of headaches and losses.

As far as appreciation, I wouldn't sleep on the California advice especially if you qualify for FHA. Appreciation beats the pants off cash flow most any day. Could be a huge buying opportunity coming up soon if the economy tanks.

One last tip - if you get serious with AL take a trip down there and check out B'ham and Huntsville. Huntsville is on pace to outgrow Birmingham FYI. I think it's a little more competitive but I like its chances for appreciation. And always good to see what you're going to buy. They often look a lot different in reality than they do in the listing photo.

And I'd recommend buying a rental before trying to BRRRR just to get experience with all the processes.

Feel free to hit me up with any questions and good luck!

2 Reply

Todd Rasmussen

Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes

6y

Do you happen to be in aerospace like 4800 Oak Grove Dr aerospace? We have a couple people in our network that are looking into huntville and birmingham and are getting ready to look around there ourselves. We've been really happy with the BRRRR strategy out of state.

OP

Rental Property Investor · Los Angeles, CA · Member since 2020 · 26 posts · 19 votes

6y

Thanks @Account Closed

Witchcraft!... It's awesome how on point you @Jason Carter were to what I've been thinking and planning myself... down to the real estate agent and price range.

I definitely intend to house hack with an FHA loan in the future when I have landed on a more permanent location here in California!

I also intend to fly over to Alabama once everything settles a bit, in fact, I wasn't planning on starting a discussion until it got closer to that but then I realized, what the heck, why not.

About Huntsville, I completely agree! Being a techie in the aerospace industry myself is definitely pushing me even more in that direction!

Yeah, BRRRR is further down the horizon for me for sure.

Thanks for chiming in. Great stuff!