New Member from San Francisco - Interested in Buy & Hold

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New Member from San Francisco - Interested in Buy & Hold

Steve Cook
Real Estate Investor · San Francisco, CA · Member since 2013 · 60 posts · 28 votes

Hi Everyone,

I've been lurking for a month or two now and have been picking up a lot of knowledge from BP in addition to reading some great books.

The Millionaire Real Estate Investor

Rich Dad Poor Dad

The Real Estate Investors Tax Strategy Guide

The Richest Man in Babylon

Buy it, Rent it, Profit

A little about myself, I'm 28 and work at a large technology company in San Francisco where I do financial modeling. I was saving for a house here, but realized after doing more research that I would rather put my money to work in an investment property. As a result, I have about $20K to invest, but I'm currently planning to wait until June, at which point I'll have another $15K worth of options that vest and will have a total of $35K.

My current strategy is focused on buy & hold. My immediate goal is to pick up least two properties a year for the next 3 years that produce a positive cashflow of at least $250 month. I'll be reinvesting all the cashflow as well as $30K per year of my own money which will be the minimum I'm amount to save in any given year. I'm open to both SFH and MFH.

My current challenges are evaluating my target markets, after reading article after article, some markets I've identified are Houston, Indianapolis, Kansas City, Dallas & Fresno. They all seem to have properties that will cash flow for the amount of money I'm able to invest. Fresno might stand out as an oddball from the others, but I like that I have the ability to drive there in a couple of hours and see things for myself.

For the other markets I've stumbled onto a lot of 'turnkey' providers which seem to be a great option for out of state investors. Obviously, any deal I'm involved with will be subject to my own due diligence and research, I'm not scared of spreadsheets or rolling up my sleeves to do some analysis. I just don't know who the reliable turnkey providers are and in which markets, this is part of my ongoing research.

Apologies for the lengthy write-up, but I would love to connect with any experienced investors in the Bay Area who would like to serve as a mentor, I'm like a sponge right now and soaking up all the information I can. :)

Love the community you guys have created here and looking forward to quitting my job in a couple of years. :)

All the best,

Steve

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Erin A.
Investor · Antioch, CA · Member since 2013 · 79 posts · 58 votes
12y

Hey, Steve!

I just sent you a colleague request via BP. I'm in the Bay Area as well (Oakland) and would love to connect.

My name is Erin Allard and I'm a recent grad. I earned my BA in economics and my MS in international real estate. I've kept a decent job throughout college, saved my pennies and am now in escrow (FHA) on my very first property, a recently renovated triplex in Stockton.

Just curious... why are you looking at markets so far away for your first investments? True, the Bay Area is expensive, but there are definitely some more affordable areas where you can still find lovely homes.

My own short- and mid-term strategy is to serially owner-occupy multifamilies with FHA financing and live in one unit while renting out the others. Perhaps multifamilies are an idea you might consider, especially if you find a property in the suburbs but near the BART line that could take you into work every day.

Anyway, would enjoy hearing from you. Good luck!

Best,

Erin

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  • Adam Roberts
    Investor · Fort Worth, TX · Member since 2012 · 209 posts · 37 votes
    12y
    Steve Cook welcome to the team. Great tools and people here, check out the podcasts as well. Ask questions, the people here are great. Adam
    0Reply
  • Erin A.
    Investor · Antioch, CA · Member since 2013 · 79 posts · 58 votes
    12y

    Hey, Steve!

    I just sent you a colleague request via BP. I'm in the Bay Area as well (Oakland) and would love to connect.

    My name is Erin Allard and I'm a recent grad. I earned my BA in economics and my MS in international real estate. I've kept a decent job throughout college, saved my pennies and am now in escrow (FHA) on my very first property, a recently renovated triplex in Stockton.

    Just curious... why are you looking at markets so far away for your first investments? True, the Bay Area is expensive, but there are definitely some more affordable areas where you can still find lovely homes.

    My own short- and mid-term strategy is to serially owner-occupy multifamilies with FHA financing and live in one unit while renting out the others. Perhaps multifamilies are an idea you might consider, especially if you find a property in the suburbs but near the BART line that could take you into work every day.

    Anyway, would enjoy hearing from you. Good luck!

    Best,

    Erin

    1Reply
  • Melvin Yuen
    Rental Property Investor · San Francisco, CA · Member since 2013 · 59 posts · 14 votes
    12y
    Steve Cook welcome to BP! Not an experienced investor, but am from SF. I think it's really beneficial for us at this point to network like crazy with our local RE investing groups as well as just participate here in the forums. Hopefully we can meet at the next meet up!
    0Reply
  • Steve Cook
    OP
    Real Estate Investor · San Francisco, CA · Member since 2013 · 60 posts · 28 votes
    12y

    @erin allard. Thank you for the PM, I will follow-up through e-mail.

    @melvin yuen. Definitely would love to connect at the next meet-up. There is a thread going, but I don't think they have chosen the next date yet.

    0Reply
  • Shawn Holsapple
    Residential Real Estate Broker · Indianapolis, IN · Member since 2010 · 1k+ posts · 557 votes
    12y

    Welcome @Steve Cook !

    It sounds like you are on the right track with the books you are ready and the markets you are evaluating. May I suggest looking strongly at Indianapolis? I think [along with thousands of other out of State investors] it's one of the best markets on the planet!

    Let me know if you have any questions about the mid-west.

    In the mean time, here is my favorite list of books & pod-casts to check out:

    if you haven’t already, please read/listen to these books ASAP!

    Rich Dad Poor Dad

    Rich Dads Cash Flow Quadrant

    Rich Dads Increase your financial IQ

    The Real Book of Real Estate

    The ABC’s of RE Investing

    The ABC’s of PM

    Rich Dad RE Tax Advantages

    The E-Myth

    The 4 Hour Work Week

    http://flip2freedomacademy.com/ - free e-book

    Flip2freedom episode 77 - podcast

    BiggerPocketsPodCast

    Wholesaling101 You Tube Channel

    Kent Clothier - Memphis Invest channel

    0Reply
  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    12y

    don't forget about Memphis!!! One of the top cash flow markets and still going strong !

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
    0Reply
  • Mehran K.
    Investor · Wichita Falls, TX · Member since 2010 · 3k+ posts · 603 votes
    12y

    Welcome to BiggerPockets @Steve Cook! I can tell you've been doing your homework. You have a solid plan laid out and I'm sure if you continue to do what you're doing, you'll have no problem executing it.

    You're more likely to hit a true cash flow of $250/month with a 2-4 unit property + using conventional financing(25% down). But there are great SFH deals out there, maybe you'll find one.

    Can't wait to hear about your first deal! I do all my investing out of state so if you have any questions, I'll try to help out. See you around.

    0Reply
  • Dean Letfus
    Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
    12y

    In fact last RealtyTrac survey I saw we were back at Numero Uno here in Memphis. And rightly so :-)

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    @Steve Cook Welcome to BP. It's great that you are very focused and have a clear plan. I'm from the SanFrancisco Bay Area also but I do a lot in Indianapolis and Kansas City. Those are two great cash flow markets. I work with a lot of California investors that want cash flow and wrote a report titled "How to Invest in the Best Markets and Live Where You Want" . I'm happy to send it to you if you'd like.

    Let me know if I can help you in any way.

    Best wishes,

    Mike

    0Reply
  • Haim Mamane Palman
    Investor · San Francisco, CA · Member since 2013 · 147 posts · 97 votes
    12y

    @steve cook. Welcome to the team. I'm also from San Francisco and invest in out-of-state markets, primarily in Memphis.

    You are on the right track and feel free to connect.

    Haim

    0Reply
  • Steve Cook
    OP
    Real Estate Investor · San Francisco, CA · Member since 2013 · 60 posts · 28 votes
    12y

    @Haim Mamane Palman Thanks Haim, shot you a PM.

    @Mehran K. Appreciate the feedback. I've read a lot of your posts and have always them insightful! Thank you.

    @Dean Letfus @Curt Davis Thank you both, I'll add Memphis to the research list.

    1Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    Welcome @Steve Cook , from over in the East Bay! You sound a lot like me when I was 28.. Financial industry job, saved a little scratch, realized I'm better off buying cash flow properties (then probably renting) in the Bay, rather than try to buy at the elevated price points in SF.. Oh wait,I was 28 last year! lol Was on the prowl for years, then finally pulled the trigger when prices bottomed out. Have you considered buying a 4plex with an FHA loan to leverage that capital? (It will probably up your purchase price by multiples, although you won't get good cash flow unless you move to a periphery areas you might not want to live - like Richmond, Pitssburgh/Bay Point, etc). Btw, I organized the last East Bay meetup, and will be posting the next date soon. Monitor the topic below if you're not already.. I had the pleasure of meeting @Melvin at the last one

    Many folks around here have gone out of state, although I just don't quite have the chutzpah yet.. Maybe @Johnson H. can give you some tips too, if he doesn't mind the competition..

    @Erin A. , love your strategy! I bought a 4plex FHA in Richmond (near BART just like you said! LOL) to really maximize the usage of my capital. Best thing I ever did! Hopefully you're aware of the restrictions regarding multiple FHA loans. You have to pay off/re-fi the previous FHA loan to conventional (or at least non-FHA) to get another FHA loan on a new purchase unless you move more than 50 miles from your last, or a few other exceptions. I've run my broker up and down on a way to do this, but my FHA 30yr fixed is at 3.25% due to fortunate timing, so it would kill me to have to refi out.. Let me know if you figure it out a way!! But I think it is extremely difficult/nearly impossible unless you meet the exception(s). Check out this forum on the topic. In there, I include a link to the HUD/FHA guidelines on the exceptions. Ultimately, the loan agent/broker will have to answer your questions. FHA/HUD does not do it. PS Moving to STOCKTON from Oak?!?

    http://www.biggerpockets.com/forums/49/topics/106608-fha-vs-conventional

    ..and monitor the following topic for the next East Bay meetup. I'll most likely post the next date for a January meetup before the end of this week. I will also post any SF meetups on this forum.. Looking forward to seeing you all there!

    http://www.biggerpockets.com/forums/86/topics/106912-east-bay-meetup---dec-10-in-oakland

    0Reply
  • Erin A.
    Investor · Antioch, CA · Member since 2013 · 79 posts · 58 votes
    12y

    @J. Martin Sent you a PM addressing most of your post. Yes, I'm fresh out of grad school and so eager to get started investing that I'm willing to take on a huge commute from Stockton to Oakland to do it. It's nuts. I'll probably hate myself Monday through Friday, but on the weekends I'll love that I'm a real estate investor!

    I was able to find an immaculate triplex in a good part of Stockton for less than a multifamily in a so-so neighborhood in Pittsburg or Richmond. I'm a happy camper right now. I'll breathe a sigh of relief when we close (hoping by the end of the month).

    Will keep an eye out for the Meetup info. Thanks!

    Erin

    0Reply
  • Thomas Hart
    Investor · Windsor, CA · Member since 2013 · 22 posts · 6 votes
    12y

    @Steve Cook Welcome. I live up in Sonoma county and I have been looking for some remote out of market investing options as well. I've found some of the pricing in the Bay Area to be a challenge as well. Memphis Atlanta Indianapolis Austin all seem to be good areas. I looked in places like Fresno as well as I like you appreciate the ability to drive there on a weekend. Sending you a connect request maybe we can chat at the next meet up.

    0Reply
  • Melvin Yuen
    Rental Property Investor · San Francisco, CA · Member since 2013 · 59 posts · 14 votes
    12y
    Mike D'Arrigo would love to connect with you and learn about out of state opportunities!
    0Reply
  • Johnson H.Pro Member
    Investor · San Francisco, CA · Member since 2010 · 910 posts · 889 votes
    12y

    When you invest out of state, the best tip I can give you is that you need to thoroughly vet the people working for you, your agent, property manager and contractor. They will be your eyes and ears while you're not in town. Most agents want to do is sell you something, most are not investors and do not want to deal with lower price points. Most contractors won't care about your property unless its a referral or you bring them constant business. A bad property manager will stick any tenant they can find and you have to evict them in a few months after no rent is being paid. A bad tenant can damage your property and leave you footing a bill in the thousands. The right team understands business is relational and when they do good work, they will get repeat or referral business.

    It takes a lot of work finding the right team, I went through five agents in Phoenix before I found the right one and have done multiple deals with him since. In Houston, I am still searching for the right agent after contacting over 30 of them. It is hard work initially, but you will reap the fruits of your labor afterwards.

    0Reply
  • Kyle J.
    Rental Property Investor · Northern, CA · Member since 2012 · 5k+ posts · 5k+ votes
    12y

    Hi @Steve Cook and welcome to BP. I've read almost all the same books you mentioned (just not the tax strategy one). Good stuff.

    Best of luck in identifying your target market and all your future endeavors.

    Also a shout out to @Erin A. I also invest in the Stockton area. Congrats on your pending triplex purchase there. How exciting. What part of town is it in?

    0Reply
  • Steve Cook
    OP
    Real Estate Investor · San Francisco, CA · Member since 2013 · 60 posts · 28 votes
    12y

    J. Martin

    @Johnson H. I couldn't agree me. This is probably my biggest challenge at the moment and ties into why I'm thinking about turnkey providers. I'd love to connect at the next meet-up and pick your brain about Houston & Pheonix.

    @Thomas Hart Definitely would love to connect at the next meet-up, we need to get one on the books.

    0Reply
  • Steve Cook
    OP
    Real Estate Investor · San Francisco, CA · Member since 2013 · 60 posts · 28 votes
    12y

    Hey guys,

    I found this listing and it's a perfectly good example of the type of investment I'll be targeting. Duplex in Indianapolis that should produce right around $250 a month of positive cash flow. This is how I ran the numbers, anything that I'm completely neglecting here?

    0Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    Steve, I'll be nailing down the meetup date before the end of the week. Good luck on the out-of-state. I'll leave you to those investors..

    listen to Johnson.. Good guy (I'm sure the rest are great too, I just don't know as well..)

    Erin, wow! That's a commute! But I know people who have gone further.. Traffic is much lighter in early morning I've heard from many. Hope u like waking up at 5am!!! But I really love your determination!! Ps I'll be staying in Stockton for a few weeks for a job in January, so we can meet up here or there!

    0Reply
  • Leng Thao
    Investor · Clovis, CA · Member since 2012 · 44 posts · 11 votes
    12y

    Steve,
    Welcome to BP.
    For out of state investments, one of the most important thing to consider is the team you have in place. That team will make or break you regardless of how well your numbers crunch out. As the saying goes, I'd rather have a good team in a decent market than a decent team in a great market. Many times, investors may pass on a good market due to a lack of a strong and trustworthy team in place. I hope the info was helpful. Welcome on board!

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    12y

    @Steve Cook Welcome to BP. It's great that you are very focused and have a clear plan. I'm from the SanFrancisco Bay Area also but I do a lot in Indianapolis and Kansas City. Those are two great cash flow markets. I work with a lot of California investors that want cash flow and wrote a report titled "How to Invest in the Best Markets and Live Where You Want" . I'm happy to send it to you if you'd like.

    Let me know if I can help you in any way.

    Best wishes,

    Mike

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    12y
    Originally posted by @Steve Cook:
    I've been lurking for a month or two now . . . but I would love to connect with any experienced investors in the Bay Area who would like to serve as a mentor,

    Welcome to BP Steve, Coincidentally my mentor is named Steve Cook. Thanks for posting your photo as there are several Steve Cooks on the site. - Ned

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    Hi Steve! New San Fran folks certainly seem to get the most attention around here!

    I'm not too far from you, just down in LA. I have only bought turnkeys out-of-state myself and have learned a ton about what to look for with turnkey providers. The good news is that a lot of the 'not-so-hot' providers that gave turnkeys a bit of a bad name are mostly either out of business now or they changed their models and do something different now. Not to say everyone out there is fantastic, but there seem to be a lot more good ones than bad ones.

    As far as your question on that Indy duplex... two things that would jump out at me immediately: 1. there is no estimate for vacancy and repairs which will impact your estimated cash flow and should be included on all potential buys and 2. based on the price, I'm going to go with this duplex is older and not in one of the better areas. That's not necessarily a deal-breaker (well it is for me because I don't want the headaches but a lot of people would succeed with it fine) but it should put you on alert that a) your repairs estimate needs to be higher than normal and b) that your risk of shotty tenants increases dramatically and if I've learned nothing else from my properties, bad tenants can cost you a huge fortune.

    Can't remember if you said that one is turnkey or not? If it's turnkey, I'd feel a little better about it but if it's not, that in itself increases your risk tenfold.

    Remember with out-of-state buying, you are far away from the property. For me, that means the less headaches the better.

    Definitely search for the SF BP group that does monthly get-togethers. Sarah Lam helps head it up. I may try to make it up to one in the next couple months.

    0Reply
  • Erin A.
    Investor · Antioch, CA · Member since 2013 · 79 posts · 58 votes
    12y

    Steve,

    I'm really picky about expenses. I want to know as accurately as possible what my expenses are going to be so I can have an accurate sense of cash flow. I know many folks are fond of the 50% calculation but I prefer more certainty.

    1. Go on the county's website and find out what the recent tax bill was. Figure out the monthly total.

    2. Look up water, sewer and trash rates on the city's website or call the city if you will be covering these expenses for tenants.

    3. Home warranty quote?

    4. Homeowner's insurance quote for sure. Also an umbrella policy if you're super risk-averse like I am.

    5. As @Ali Boone said, make sure you include a vacancy loss that is appropriate for your market. If you don't know, call around to apartment complexes or agents. Or use 10%.

    You're off to a good start!

    Erin

    0Reply
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