Californian New to Investing

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Californian New to Investing

Jon Quijas
San Jose, CA · Member since 2016 · 33 posts · 5 votes

Hey All,

My name is Jonathan. I am born and raised in the Bay Area. My wife is a teacher and I am a Trainer/Teacher. As long as I was in grade school, I can remember being interested in real estate. My dad and mom were blue collar workers with 5 children, trying to support us, so my dad did flips before "flipping" was even popular.

I currently have two Bay Area properties (thank God for the crash, as we are both middle class), one of which I rent. Prices are currently over-inflated in the Bay so I am looking at places to invest outside of the Bay Area/California, mentorship, training, and learning to get that 3rd, 4th, etc. place. . I am extremely interested in Buying and Holding, with the hopes of building a nest egg.

Anyone have any advice for a new investor wanting to build a nest egg for my family (wife and two little girls I adore) please let me know. I love being around people smarter than me!

Kindest Regards,

Jonathan

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  • Jeff Rightmyer
    Manassas, VA · Member since 2015 · 65 posts · 34 votes
    10y

    unless you can afford bay area housing, I'd recommend looking far out of that area and state to start building the nest egg without breaking the bank. Welcome to BP though! Great place to learn from peoples experience in both successes and failures! 

    0Reply
  • Penny ClarkPro Member
    Sacramento, CA · Member since 2014 · 513 posts · 319 votes
    10y

    @Jon Quijas, Welcome to the BP Community! I would start by becoming familiar with all the resources here online - podcasts, blogs, investing guides, etc. Then I would define your investment goals - types of rentals, your " investment zones" or areas you want to invest in, if you want to do turnkeys or be a hands on landlord type, etc.

    Decide also how you will finance your rentals - tap into home equity, pay cash, partner up with someone or do a little of both. You should have answers to these questions before you search for additional properties because it will save you time, force your focus, and help you plan with intention. 

    You may find investing in your area is cost prohibitive. Many members here are in the same boat and have had success investing in other markets either within their state or outside of it. If you go that route you'll want to vet the area well - research everything about it and connect with other BPers already investing in those areas.

    Good luck!

    0Reply
  • Jon Quijas
    OP
    San Jose, CA · Member since 2016 · 33 posts · 5 votes
    10y

    Hey All, thanks for the advice!

    I couldn't agree more that the Bay is not a good place to invest for someone like me. However, it has been good. This is my situation:

    1. My Condo being rented was bought for 235K, being rented for about 7K/year cash flow. Prices have sky rocketed and the property is worth 475K. It was a good buy.

    2. Used 30K HELOC to buy a second place in the Bay for 442K. A year after we bought it, prices went up to about 520K.

    3. We are tapped out as far as being able to afford anything else around here. Anyone have any suggestions on affordable places we can buy outside of CA? What areas do you like for Buy and Hold?

    0Reply
  • Jon Quijas
    OP
    San Jose, CA · Member since 2016 · 33 posts · 5 votes
    10y

    @Penny Clark Great advice! One of the areas we were looking at was the Sac area. I realize its probably a little late. I have seen some pretty good deals. Any areas you can recommend in Sac, Roseville, etc. for buy, hold and rent out? Which areas should we stay away from?

    1Reply
  • Jon Quijas
    OP
    San Jose, CA · Member since 2016 · 33 posts · 5 votes
    10y

    @Jeff Rightmyer Where would you invest? Thanks for the feedback. I really appreciate it.

    0Reply
  • Johnathan Alesso
    Investor · San Diego, CA · Member since 2015 · 111 posts · 34 votes
    10y

    Welcome!  Have you considered Arizona and/or inland Oregon?  I think you could find a realtor in these areas who works with out of state investors (there are a lot of CA investors who look out of state).  The prices are so much lower that your overall financial risk is lower, too, allowing for perhaps more risk-taking at first.  What is your ultimate goal?  Monthly cash flow?

    0Reply
  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    10y

    Look closer to home Elk Grove, Stockton, Hanford and Sacramento. There are many b and c properties that need some t l c that are perfect for a value add. I hope this helps

    [email protected]
    0Reply
  • Penny ClarkPro Member
    Sacramento, CA · Member since 2014 · 513 posts · 319 votes
    10y

    @Jon Quijas, There are some starter home areas in Sacramento that can still bring some cash flow. They are generally older homes that require some cosmetic work. Condos in some areas can be found for under $80,000.  This is probably your most affordable option in Elk Grove, one of the communities @Jo-Ann Lapin mentioned. This can be a good start, however, some condo associations restrict the number of rental properties they will allow and of course, you have to consider the fees that go along with purchasing this type of property. I've been looking at Stockton and Thornton areas and have seen some multi-family and SFH in the $75000-$125,000 range. A realtor in your target area can set you up to receive automatic emails for properties that fit your investment parameters as soon as they hit the MLS. Feel free to PM me if you have any questions about this.

    If you are considering investing out of the state, there's always the option of purchasing a turnkey property. On the one hand, you'll have the rehab and tenant placement done for you, but you will pay a higher price than you would for a home you purchase, rehab and lease out yourself.

    Hope this helps!

    0Reply
  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    10y

    The downtown area of Elk Grove is a great area to look in. Be carfeul with the condos there as they built many.

    [email protected]
    0Reply
  • Jon Quijas
    OP
    San Jose, CA · Member since 2016 · 33 posts · 5 votes
    10y

    Thank you @Jo-Ann Lapin. I have heard good things about Elk Grove. Currently looking it up.

    0Reply
  • Gordon CuffePro Member
    Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
    10y

    @Jon QuijasYou purchased your bay area condo at the perfect time. It gives you options like doing a 1031 exchange so that you sell and defer your capital gains taxes to buy in more affordable places like Sacramento or the Midwest like St Louis or Kansas City. You can still find 4plexs in Sacramento for around 340k that get 3200 to 3600 per month in rents. You can find single family homes in the Kansas City or St Louis markets for 60k to 80k that get 800 or more in rents. Do the math and you can see that if you don't need the cash flow ,you can get these properties with 15 year loans and have your rental income pay for the mortgages, taxes, insurance, property management, etc.

    0Reply
  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
    10y

    My pleasure

    [email protected]
    0Reply
  • Paul Timmins
    Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
    10y

    @Jon Quijas

    Welcome. Time to build the legacy. Fill in the foundation below.

    Check out the Start Here page http://www.biggerpockets.com/starthere

    Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.

    Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having over 100 past ones to catch up on.

    Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers (cash buyers). Find them through Google and meetup.com

    Two Great reads, I bought both J. Scott The Book on Flipping Houses, The Book on Estimating ReHab Costs http://www.biggerpockets.com/flippingbook

    You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it. This can work in CA

    Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over

    http://www.biggerpockets.com/files/user/brandonatbp/file/real-estate-rewind-a-biggerpockets-community-book

    Good Luck

    Paul 

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    10y

    @Jon Quijas I'm in San Jose too so I know all too well the problems you're finding trying to invest here. Personally, I like the Midwest , Indianapolis and Kansas City in particular, for cash flow. We sell turn key properties there. I'd be happy to share more insight if you'd like to contact me.

    0Reply
  • Jon Quijas
    OP
    San Jose, CA · Member since 2016 · 33 posts · 5 votes
    10y

    @Gordon Cuffe thanks for the feedback. This was a primary residence 2 of the last 5 years (which I believe means we don't have to pay capital gains if we sell). We bought it and fixed it up. Here are the numbers: 

    1. Bought 2bed/2bath for 235k and we currently owe about 215k. Net income (after mortgage, HOA, taxes, and everything) is $571/month.

    2. A recent comparable unit sold for 475k. Equity is roughly 260. 

    3. We did take a heloc (owe about 28k) to buy a second place (townhome style condo that's detached) in SJ for 442k (3bed/1.5bath). Wound up being a great deal being that a 2 bedroom in our complex just sold for 510. 

    4. Wanting to take that next step. Worried that I can lose this little income in the rental, but willing to take risks. Also, I know the Bay Area, but not other areas too well. Any advice or connections to knowledgable individuals in these markets would be greatly appreciated. Would love to connect. 

    Thanks again! 

    Jon

    0Reply
  • Robert Musallam
    Investor · San Jose, CA · Member since 2014 · 294 posts · 113 votes
    10y

    Hey @Jon Quijas Welcome to BP! 

    I always tell my clients, if you can invest here then you should. But based on your information, you'd need a property to truly cash flow right away in order for you to qualify for it financially. That may be tough to do locally in a 2-4 unit. 5+ isn't completely out of the question with 260k down but that's a step you must be willing to take. 

    Either way Jon, you're in an enviable position. And you've come to the best place to ensure you'll make the best, most informed decision for your future. Best of luck to you moving forward!

    Btw, I can vouch for @Mike D'Arrigo on the out of state investing. He's a good dude.

    0Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    10y

    Thanks @Robert Musallam. It's been a pleasure working with you and helping you with your investment journey.

    0Reply
  • Jon Quijas
    OP
    San Jose, CA · Member since 2016 · 33 posts · 5 votes
    10y

    thanks @Robert Musallam. Great feedback. It's refreshing to be around people that are smarter than me! I am planning on making a decision soon. 

    0Reply
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