Sensible investing in California Real Estate?

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Sensible investing in California Real Estate?

Steven Davis
Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes

After 30 years of working my *** off to get an extra percent or two in the stock market, I've finally realized that I should be investing in real estate.

Better late than never.

First of all, Thank You to all the posters, formum-ers, podcasters, and writers on this site. You've helped jump start my education in real estate investing.

Who I am...

  • 50 years old. 
  • Wonderful wife and 2 small children.
  • Decades in the high tech field (IT security).
  • Self-employed for the past 15+ years with my own business with an excellent partner.
  • Lots of experience on large projects in the software / IT world... and had enough of it.

What I've learned so far...

  • I'm not a flipper or wholesaler or other exciting things. I'm pretty much what I was with stocks - a long term, buy-and-hold investor.... Woo Hoo, income and long term capital appreciation!
  • I am interested in solid cash flow plus reasonable appreciation (aren't we all?).
  • I am mostly interested in multi-unit residential and commercial properties.
  • I will probably be "hands off" - using property managers for properties.
  • I'm not interested in "turn key" deals unless I do the key-turning.

My challenges...

  • I live in the San Francisco Bay area. I don't own my house and, given the market here, that isn't happening any time soon.
  • California real estate is (cough) rather fully priced as a whole. 
  • I would like to be able to visit the properties that I buy, especially at first. Without getting on a plane, a train, or spending a day or more driving.

Where I'm at....

  • I've found my initial market here in California with what I consider reasonable cash flow and appreciation.
  • I am (initially) looking at 4-plexes and more-plexes as well as smaller mixed commercial/residential properties. These properties seem the most inefficiently priced as they are too big for residential purchasers and too small for big money dudes...  more on this later.
  • I have several properties in my target market that I like. I am getting pre-approved so I can write an offer.
  • I am also going to set up an IRA LLC (Roth) soon to purchase properties as well (I've been a good boy an put money aside for years and done pretty well in stocks)... more on this later as well.

Observations...

  • This stuff is fun. It is like researching stocks but not having thousands of other people doing the same thing you are. Less competition = more opportunity.
  • You start saying you are investing in real estate and all of a sudden, people want to talk to you about it... hello syndication at some point.
  • Finding small commercial loan providers seems to be a challenge (also more on this later). Everybody wants to help me finance a 150 unit deal. I look forward to that too!

Glad to meet you all. Happy hunting.

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Michael Boyer
Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
10y

Great opening post Steven! Sounds like a sound plan that fits your lifestyle...That is a neat area of the country. And you get some wild swings in real estate valley in just a few hours drive.. Probably what you are on to already--but I would use a "drive East" strategy till you find well situated properties that pencil out well.....Be it out past East Bay, even into the Central Valley.... In fact, I ended up living in one of the commuter I-80/ I-5 tract home subdivisions, and all the people got up like 4AM or 5AM to commute into the Bay Area (so the bedroom community may be one niche, those like you who commute to find affordable housing, them as renters and you as owner/landlord).... On a long weekend you could even tackle a turn around or get some oversight....Of course, the best management possible and right property are key. Also, in the 2-4 unit property, you should be able to get some of the best financing out there (with commercial kicking in at 5+ units). Best of luck! 

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  • Chris Erwin
    Investor · Draper, UT · Member since 2015 · 193 posts · 48 votes
    10y

    Hello @Steven Davis welcome to the world of real estate investing. I am involved in the stock market as well as real estate investing. I can tell you I enjoy real estate investing more. In my eyes real estate investing is a better calculated risk. I hope you find tremendous value on this site and networking with likeminded people. Happy investing!

    1Reply
  • Michael Boyer
    Investor · Juneau, AK · Member since 2015 · 980 posts · 741 votes
    10y

    Great opening post Steven! Sounds like a sound plan that fits your lifestyle...That is a neat area of the country. And you get some wild swings in real estate valley in just a few hours drive.. Probably what you are on to already--but I would use a "drive East" strategy till you find well situated properties that pencil out well.....Be it out past East Bay, even into the Central Valley.... In fact, I ended up living in one of the commuter I-80/ I-5 tract home subdivisions, and all the people got up like 4AM or 5AM to commute into the Bay Area (so the bedroom community may be one niche, those like you who commute to find affordable housing, them as renters and you as owner/landlord).... On a long weekend you could even tackle a turn around or get some oversight....Of course, the best management possible and right property are key. Also, in the 2-4 unit property, you should be able to get some of the best financing out there (with commercial kicking in at 5+ units). Best of luck! 

    2Reply
  • Ryan Hopkins
    Architect · Raleigh-Durham, NC · Member since 2016 · 76 posts · 47 votes
    10y

    Hi @Steven Davis and welcome to the world of REI. Based of the comments you have made I feel the excitement in your voice. The opportunities truly are limitless and again, based off your more conservative sounding approach, you will find yourself in a pinch less often. Keep updating on your successes, start and stay active with your local clubs and feel free to reach out any time. I am also in the Bay Area and understand your struggles on cash flow. If you are in need of real estate help (my partner writes a mean offer) or future partners, send a message! Would love to hear more about your strategies and criteria!

    2Reply
  • Michael K.
    San Francisco, CA · Member since 2015 · 1 post · 1 vote
    10y

    Welcome to BP, Steven.

    Like you, I'm in the Bay Area. In my case, Craziness Central i.e. San Francisco.

    I'm still in the learning phase, but I'll be following your real estate journey with interest. 

    Best of Luck!

    1Reply
  • Jill DeWitPro Member
    Investor · Scottsdale AZ · Member since 2015 · 1k+ posts · 423 votes
    10y

    Hello @Steven Davis and welcome to Bigger Pockets. BP is the place to be for real estate investing. At BP, not only can you network with investors from around the world, you can get the information you need to succeed in real estate investing. BP has free online videos and courses for you to watch and learn from. You came to the right place and I wish you best of luck. 

    1Reply
  • Judy Rae
    Lender · Sherman Oaks, CA · Member since 2014 · 68 posts · 80 votes
    10y

    Hi Steven,

    As you said...The Bay area is not touchable.  I have a lot of investors coming to me who are buying properties in and around Sacramento and surrounding areas.  Still affordable and if the loan is structured properly will be cash flow positive or at least break even. And they can be purchased via your retirement plans.

    1Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y

    Thanks, Judy. The Central Valley does seem to be the one place where California real estate is not just a dream. 

    I am a bit ambitious (cautious) and want that cash flow! 

    0Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    10y

    @Steven Davis

    Full-timers in expensive markets (like you and I) get a lot of value out of investing in syndications. If you're finding it tough to get in the market and manage something out of state, a good partner or sponsor is a great place to park some capital.

    I have a whole spiel on it, but I'll save that for now. Happy hunting.

    1Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Chris Erwin:

    ...  In my eyes real estate investing is a better calculated risk. I hope you find tremendous value on this site and networking with likeminded people. Happy investing!

     Thanks,@Chris Irwin, I agree... I probably should have figured out out in 2008 and again in the oil collapse in 2014. 

    The only "good" part was I did my Roth conversion before the market recovered. 

    0Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Michael Boyer:

    ...  in the 2-4 unit property, you should be able to get some of the best financing out there (with commercial kicking in at 5+ units). Best of luck! 

    Michael, thanks. I'm on the Peninsula, otherwise I'd be able to use an FHA loan to get a nice triplex in Hayward . As it is, in San Mateo, I'm keeping my eyes peeled for a triplex or four-plex.

    But, I'm not hopeful. 

    The Central Valley does seem to be the only place nearby that offers some opportunities. 

    0Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Ryan Hopkins:

    ..., start and stay active with your local clubs and feel free to reach out any time. I am also in the Bay Area and understand your struggles on cash flow. If you are in need of real estate help (my partner writes a mean offer) or future partners, send a message! Would love to hear more about your strategies and criteria! 

     Ryan, thanks! I'd definitely like to talk. 

    0Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Michael K.:

    .... Craziness Central i.e. San Francisco.

    I'm still in the learning phase, but I'll be following your real estate journey with interest. 

    Best of Luck!

     Good luck to you as well, Michael. The Peninsula may be crazier than San Francisco. At least you have some building going on and public transit. 

    Not a contest I want to win! 

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

    @Steven Davis Welcome to BP. It's always good to see someone from the Bay Area.

    1Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Trevor Ewen:

    @Steven Davis

    Full-timers in expensive markets (like you and I) get a lot of value out of investing in syndications. If you're finding it tough to get in the market and manage something out of state, a good partner or sponsor is a great place to park some capital.

    I have a whole spiel on it, but I'll save that for now. Happy hunting.

     Trevor, I totally agree. It is extra scary thinking about doing an out of state project first. It will come. If nothing else for a bit of risk management. 

    Getting "eyes on the ground" you can trust is the problem for me. I'd love to hear your thoughts. 

    0Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Mike D'Arrigo:
    ...  It's always good to see someone from the Bay Area.

     Yep, there are some of us not playing the start-up game. 

    0Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    10y

    @Steven Davis

    They say it's a relationship business. Didn't really understand what that meant till I started it. I primarily invest in people over places and properties.

    Going out, giving face time. Booking a flight, that's the only way I know. Keep your ears peeled on the Bigger Pockets podcast as well. There are a lot of people on the show who raise funds and don't explicitly advertise because of the SEC guidelines. 

    Making 12% on a good partner is a hell a lot better than losing 8% with the potential upside of 20% on a shaky deal. I have been on both sides, and I have definitely adjusted accordingly.

    1Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Trevor Ewen:

    @Steven Davis

    ...Going out, giving face time. Booking a flight, that's the only way I know. Keep your ears peeled on the Bigger Pockets podcast as well. There are a lot of people on the show who raise funds and don't explicitly advertise because of the SEC guidelines. 

    Making 12% on a good partner is a hell a lot better than losing 8% with the potential upside of 20% on a shaky deal. I have been on both sides, and I have definitely adjusted accordingly.

    Crap, Trevor, I was hoping for a magic bullet ;) 

    You still have the challenge of getting to know those other investors for that 12%.

    My other problem is... I like the game. I picked my own stocks. I like doing the research and the work.

    I'm not sure I want to be "just" an investor (though I can be convinced if the numbers and the people are right!).

    0Reply
  • Leslie Pappas
    Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
    10y
    Originally posted by @Steven Davis:
    • You start saying you are investing in real estate and all of a sudden, people want to talk to you about it... hello syndication at some point.

     Welcome Steven! Regarding syndications, if you are an accredited investor, you can buy into institutional grade $50-125M projects with as little as $100,000 and diversify. Professionals with decades of experience and very impressive track records do all the heavy lifting for you. You get potential cash flow, tax shelter and appreciation. Loans are non-recourse. This is the world of Delaware Statutory Trusts. I wrote a book on this that was released in January called Cashing In Tax Free. If this interests you, you can start to learn more at my website. Please let me know if I can help. Leslie

    1Reply
  • Ryan Landis
    Residential Real Estate Broker · San Mateo, CA · Member since 2013 · 585 posts · 264 votes
    10y

    @Steven Davis welcome to BP! Glad you really enjoy the forums. Try to make it out to one of the local BP Meetups if you can. There are quite a number of us that get together monthly and a large chunk are in the same boat as you!

    1Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Leslie Pappas:
    Originally posted by @Steven Davis:
    • You start saying you are investing in real estate and all of a sudden, people want to talk to you about it... hello syndication at some point.

     ..Regarding syndications, if you are an accredited investor, you can buy into institutional grade $50-125M projects with as little as $100,000 and diversify...

     Leslie. Thanks. I'm not ready for these opportunities yet, but I hope to be soon. Please keep in touch.

    All my best.

    Steve

    0Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Ryan Landis:

    @Steven Davis welcome to BP! Glad you really enjoy the forums. Try to make it out to one of the local BP Meetups if you can. 

     Ryan - great to talk to another San Mateo resident. A great place to live, a crazy place to try to buy into!

    Please PM me about any local meet up opportunities.

    All my best.

    Steve

    0Reply
  • Nicholas Lohr
    Investor · San Francisco, CA · Member since 2015 · 302 posts · 206 votes
    10y

    Hi Steven,

    I also live here in SF but I make the drive to Sacramento to invest.  Highly recommend it for cash flow compared to anywhere in or near the Bay Area.  Less than a 2 hours drive, not bad. Also the prices are MUCH lower so I feel like the pressure to not make a mistake is much lower. 

    Looking to buy my third property out there soon. 

    Also been investing in stocks myself for a much longer time compared to real estate.  So far it feels like this: With stocks you're putting your faith in them, with real estate you're putting your faith in yourself.  I like that.

    2Reply
  • Edward Chan
    San Francisco, CA · Member since 2016 · 6 posts · 4 votes
    10y
    Nicholas Lohr Do you invest in SFR? I'm looking at Cental CA as a not-too-far alternative to the Bay Area, but I'd be interested in Sacramento too, and would love to hear about your experiences.
    1Reply
  • Debbie Eto
    Real Estate Agent · Sacramento, CA · Member since 2016 · 11 posts · 4 votes
    10y

    I'm a real estate agent and I live in Sacramento.  I have done 2 investments, one a condo and the other a sfr.  Both sold after 1 day with multiple offers.  Location is super important.  There are a couple of zip codes that really hold their value.  

    1Reply
  • Steven Davis
    OP
    Investor · San Mateo, CA · Member since 2016 · 49 posts · 12 votes
    10y
    Originally posted by @Nicholas Lohr:

     With stocks you're putting your faith in them, with real estate you're putting your faith in yourself.  I like that.

     Totally, agree, Nicholas. I think the drive scares off some  potential  investors,  good for us! 

    0Reply
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