New Member from Glendora, CA (Los Angeles)

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New Member from Glendora, CA (Los Angeles)

Jonathan Watson
Investor · Glendora, CA · Member since 2016 · 41 posts · 72 votes

Hi BP people!

My name's Jonathan, and I'm a father of 3 kids (6, 4, 2) with 1 more due this October. Yes, they're cute (and of course, I'm biased :) ):

I'm also a co-owner in a design/web/strategy business that's been going strong for 16 years--and we've also branched out to work with smaller scale web projects recently.

My business has allowed us to let my wife be a stay-at-home mom, and live in a great city outside of LA with one of the best local school systems.

Currently, our net worth is tied up in a pretty big chunk of equity in our Glendora home (bought it 10 years ago, and have it on a 15 yr fixed now), and a large of amount of stocks (that have done very well for us) we invested while my wife worked in Starbucks corporate for 10 years.

So, now I'm looking to diversify and increase cash flow by purchasing 1 or 2 SFH rentals this year.

But not here in Glendora. Or within 40 miles of my home. The ROI on buying a SFH around here just doesn't make sense to me--on larger MFH, you might be able to find something, but I don't have _that_ much to invest.

So, I'm looking out of state for my first investment to purchase in cash and see a small start to additional monthly cash flow, rather than letting the equity in my primary residence sit and do nothing for me.

I've spent the last couple months listening to BP podcasts, reading a couple books, picking the brain of a realtor friend, talking to a mortgage broker, discussing investment accounting practices with my CPA (which, once again, confirmed to me how absolutely stupid and suffocating California's tax code is), and talked to a couple turnkey providers.

I'm getting close to feeling comfortable in purchasing my first investment. But I'm going to wait for the best opportunity... I just hope it comes before I have to pay for my 3 year old's preschool bill! :)

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Most Popular Reply

Max Gradowitz
Bakersfield, CA · Member since 2016 · 378 posts · 307 votes
10y

Bakersfield has great cash flow, likely some of the best in the state. My investor clients are pretty much all from Los Angeles, San Diego, or San Francisco areas where the high costs to purchase simply do not justify the comparative rent values, so they buy rental properties here in Bakersfield. The reason is that it's very inexpensive to purchase SFRs and multi-units here, yet the rental values are relatively high compared to what it costs to buy. This combo obviously makes for a great cash flow investment. If you are 100% set on buying an SFR, go for it. But, I'd highly consider a multi-unit like a triplex or fourplex. There are several B-class neighborhoods here in Bakersfield that you can get a SFR for $100 a sq ft, yet you can buy a triplex that is literally next door for $80 a sq ft. Not only is it cheaper "per square foot" to buy a multi-unit in any given neighborhood, you are also making three separate rents so the overall cash flow (after you pay your mortgage payment and other expenses) is always much higher on a multi-unit. Other areas may vary, but that's how it is here in Bakersfield...

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  • Yoochul C.
    Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
    10y

    Hey @Jonathan Watson,  i've already bought in San Antonio and Atlanta,  I'm branching out to memphis next year.   I'm in glendora too.  Let me know if you want to hook up.  My friends and I buy all over the U.S.   I think I may be able to help out.  Our kids might be in the same schools. haha.

    Yooch

    1Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y
    Originally posted by @Jonathan Watson:

    Hi BP people!

    My name's Jonathan, and I'm a father of 3 kids (6, 4, 2) with 1 more due this October. Yes, they're cute (and of course, I'm biased :) ):

    I'm also a co-owner in a design/web/strategy business that's been going strong for 16 years--and we've also branched out to work with smaller scale web projects recently.

    My business has allowed us to let my wife be a stay-at-home mom, and live in a great city outside of LA with one of the best local school systems.

    Currently, our net worth is tied up in a pretty big chunk of equity in our Glendora home (bought it 10 years ago, and have it on a 15 yr fixed now), and a large of amount of stocks (that have done very well for us) we invested while my wife worked in Starbucks corporate for 10 years.

    So, now I'm looking to diversify and increase cash flow by purchasing 1 or 2 SFH rentals this year.

    But not here in Glendora. Or within 40 miles of my home. The ROI on buying a SFH around here just doesn't make sense to me--on larger MFH, you might be able to find something, but I don't have _that_ much to invest.

    So, I'm looking out of state for my first investment to purchase in cash and see a small start to additional monthly cash flow, rather than letting the equity in my primary residence sit and do nothing for me.

    I've spent the last couple months listening to BP podcasts, reading a couple books, picking the brain of a realtor friend, talking to a mortgage broker, discussing investment accounting practices with my CPA (which, once again, confirmed to me how absolutely stupid and suffocating California's tax code is), and talked to a couple turnkey providers.

    I'm getting close to feeling comfortable in purchasing my first investment. But I'm going to wait for the best opportunity... I just hope it comes before I have to pay for my 3 year old's preschool bill! :)

     Welcome to BP. Cali has many straight up cash flow areas and maybe more than any state. Cali property taxes are lower than national average normally. Keep in mind you could still pay CA income tax even if you invest outside of state. I see many confuse initial cash flow and the relationship to total profits. If you think investing outside Cali is wiser or offers better diversication for you awesome. For total profitabilty this has not been the case for SFRs historically in the prime Cali locations or is it even close. Good luck with your search!

    1Reply
  • James WachobBusiness Member
    Real Estate Broker · Memphis, TN · Member since 2015 · 1k+ posts · 887 votes
    10y

    @Yoochul C. when you decide to come to Memphis... I will be happy to show you around, grab some famous BBQ and see some awesome properties!

    Jw 

    1Reply
  • Jonathan Watson
    OP
    Investor · Glendora, CA · Member since 2016 · 41 posts · 72 votes
    10y
    Originally posted by @Matt R.:

     Welcome to BP. Cali has many straight up cash flow areas and maybe more than any state. Cali property taxes are lower than national average normally. Keep in mind you could still pay CA income tax even if you invest outside of state. I see many confuse initial cash flow and the relationship to total profits. If you think investing outside Cali is wiser or offers better diversication for you awesome. For total profitabilty this has not been the case for SFRs historically in the prime Cali locations or is it even close. Good luck with your search!

    I would much rather invest closer to my local area than go somewhere I can't experience first hand regularly.  What are some places to research that would be good to become familiar with here in CA? 

    0Reply
  • Jonathan Watson
    OP
    Investor · Glendora, CA · Member since 2016 · 41 posts · 72 votes
    10y
    Originally posted by @Yoochul C.:

    Hey @Jonathan Watson,  i've already bought in San Antonio and Atlanta,  I'm branching out to memphis next year.   I'm in glendora too.  Let me know if you want to hook up.  My friends and I buy all over the U.S.   I think I may be able to help out.  Our kids might be in the same schools. haha.

    Yooch

    Hey Yooch!  My son just finished Kindergarten at La Fetra last month--I'll send you a colleague request to discuss connecting more in the future!

    0Reply
  • Devin Davis
    Rental Property Investor · Memphis, TN · Member since 2014 · 114 posts · 40 votes
    10y
    Memphis is a very good city to invest in. I believe we have some of the most affordable and most bang for for your the bucks houses in the country. I'm a realtor by the way.
    1Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y
    Originally posted by @Jonathan Watson:
    Originally posted by @Yoochul C.:

    Hey @Jonathan Watson,  i've already bought in San Antonio and Atlanta,  I'm branching out to memphis next year.   I'm in glendora too.  Let me know if you want to hook up.  My friends and I buy all over the U.S.   I think I may be able to help out.  Our kids might be in the same schools. haha.

    Yooch

    Hey Yooch!  My son just finished Kindergarten at La Fetra last month--I'll send you a colleague request to discuss connecting more in the future!

    Perhaps the Palm Springs or Big Bear area and add vacation rental to the mix. Or even short term furnished rentals corporate style nearest you could be worth investigating for better initial flow. IDK how far you want to drive but inland San Diego county or Bakersfield might have higher initial flow as well. You might be interested in LA, OceanDevelopment dot Com as well. You are pretty much surrounded locally in SoCal and it would take many lifetimes to exhaust the REI opportunities within a couple hours drive.

    1Reply
  • Ayodeji Kuponiyi
    Investor · King of Prussia, PA · Member since 2014 · 1k+ posts · 339 votes
    10y

    @Jonathan Watson welcome to BP and thanks for sharing your family photo. Your family looks great! The best opportunities are usually off market. 

    0Reply
  • Kevin FoxPro Member
    Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
    10y

    Hey @Jonathan Watson

    Welcome to the site!

    I'd love to hear more about your web strategy business. What kind of services do you guys offer?

    As for REI, please don't hesitate to reach out with any questions or if you ever find yourself considering the San Diego market.

    Best of luck!

    1Reply
  • Hiren Madhavani
    Investor · Fremont, CA · Member since 2016 · 13 posts · 3 votes
    10y

    Hi Jonathan,

    Welcome to BP! 

    I am in the same boat as far as investing out of state is concerned. Cali is just insane RE wise. People paying mill $ for a house which probably gives then 3.5K to 4K in rent and purely banking on appreciation.

    Simply cannot afford a rental property here.

    Let me know if you find someone to help you out with your out of state investment.

    Typically, I would look at an area, say Decatur, TX in redfin and look at school ratings (above 7 is preferable) and then would hop on to padmapper or rentometer to check the rents in that area. Trulia/local will show the crime map. I would say for beginners, avoid anything which doesnt show green in the map.

    haven't pulled the trigger on out of state investment yet though.

    Hiren

    1Reply
  • Derrick Craig
    Memphis, TN · Member since 2013 · 969 posts · 524 votes
    10y

    @Jonathan Watson

    Welcome to Bigger Pockets!

    0Reply
  • Jonathan Watson
    OP
    Investor · Glendora, CA · Member since 2016 · 41 posts · 72 votes
    10y

    Hey @Kevin Fox ... thanks! We have 2 sides to our business--the high end, high strategy, fully custom site (http://www.enthusiastinc.com), and a turnkey (no pun intended :) ) service that allows folks to get a simpler custom site starting at less than $1000 (http://www.corecanvas.com). 

    @Hiren Madhavani Yeah, it's crazy here in CA.  I live in such a real estate bubble, I just didn't realize how affordable homes are in "normal" parts of the country!  For my first property, I'll likely go the turnkey route... Memphis? Indianapolis? Kansas City?  Maybe I should add Decatur into the mix...

    @Matt R. Thanks for the info!  Do you own in Bakersfield currently?

    1Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    Nada in Bakersfield. I might pick up something at the more mid point of Bake and LA though. There are a few bpers in Bakersfield hopefully they can chime in.

    0Reply
  • Max Gradowitz
    Bakersfield, CA · Member since 2016 · 378 posts · 307 votes
    10y

    Bakersfield has great cash flow, likely some of the best in the state. My investor clients are pretty much all from Los Angeles, San Diego, or San Francisco areas where the high costs to purchase simply do not justify the comparative rent values, so they buy rental properties here in Bakersfield. The reason is that it's very inexpensive to purchase SFRs and multi-units here, yet the rental values are relatively high compared to what it costs to buy. This combo obviously makes for a great cash flow investment. If you are 100% set on buying an SFR, go for it. But, I'd highly consider a multi-unit like a triplex or fourplex. There are several B-class neighborhoods here in Bakersfield that you can get a SFR for $100 a sq ft, yet you can buy a triplex that is literally next door for $80 a sq ft. Not only is it cheaper "per square foot" to buy a multi-unit in any given neighborhood, you are also making three separate rents so the overall cash flow (after you pay your mortgage payment and other expenses) is always much higher on a multi-unit. Other areas may vary, but that's how it is here in Bakersfield...

    2Reply
  • Ryan Landis
    Residential Real Estate Broker · San Mateo, CA · Member since 2013 · 585 posts · 264 votes
    10y

    @Jonathan Watson welcome to BP! Keep listening to all of the podcasts if you can. Also try talking to a few of the BPers that currently do exactly what you are trying to do (invest out of state, etc.) and ask them for the "real" story behind it. There is a steep learning curve that you will not realize until you bite the bullet and do it, but ideally, you are going to try and make it a bit easier.

    Ask them about managing their property manager, the kinds of statements they get, etc. Also, make sure you are asking people about the success they have had in comparison to what you are trying to do (IMO much easier to purchase have control over your manager when you have scale behind you).

    Wish you only the best of luck!

    0Reply
  • Kevin FoxPro Member
    Real Estate Agent · San Diego, CA · Member since 2014 · 1k+ posts · 635 votes
    10y
    Originally posted by @Jonathan Watson:

    Hey @Kevin Fox ... thanks! We have 2 sides to our business--the high end, high strategy, fully custom site (http://www.enthusiastinc.com), and a turnkey (no pun intended :) ) service that allows folks to get a simpler custom site starting at less than $1000 (http://www.corecanvas.com). 

    @Hiren Madhavani Yeah, it's crazy here in CA.  I live in such a real estate bubble, I just didn't realize how affordable homes are in "normal" parts of the country!  For my first property, I'll likely go the turnkey route... Memphis? Indianapolis? Kansas City?  Maybe I should add Decatur into the mix...

    @Matt R. Thanks for the info!  Do you own in Bakersfield currently?

     That's awesome, Jonathan!

    Shoot me a PM when you get a chance; I'd love to discuss potentially utilizing your services.

    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    10y

    Welcome to the site @Jonathan Watson

    Good luck to you & I'll see you around the forums.

    0Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    10y

    While I whole heartily agree with

    @Matt R. about the long term profitability of Cali RE, I will throw in a note of caution. The market is fairly high right now (not just CA, but most other RE markets too) and frankly I'd be amazed if we don't see a correction or at least a softening within the next couple of years. You can still make money, of course, I'd just be very careful wherever you go that you get a great deal and plan to hold for a long time. This advice is good in any market, but especially this one. And the surest way to get a great deal and hold for the long term is to search and buy local. If you do not find a great deal, stay put ... do NOT compromise on a mediocre/marginal deal. 

    And yes, factor in long term average appreciation rates and rent increase rates both in CA and out of state ... riddle me this, which one has better cash flow in the longterm?:

    0.75% rule (price to gross monthly rent) with 5% annual rent increases OR

    2% rule with 2% annual rent increases

    Speculation you say? What if those were the historical average rates of rental increases over the last 20 years ... is assuming the 20 year average rate going forward speculation? Similar story around appreciation rates. Of course, you'd want to independently verify all that before using those numbers for any markets you are comparing. Besides this realization, the trick is mostly getting in such that you can be very safe to make it to the longterm through the ups and downs that inevitably occur in between.

    I have invested both in state and out of state for the last 15 years, so I speak from personal experience on both counts and have nothing to sell you either way ... I've since sold all of my stuff out of state and kept all of my stuff in sate.

    0Reply
  • Larry Fried
    Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes
    10y

    Hi and welcome to BP! I too am an West Coast investor who got started investing out of state with a turnkey company, and have not regretted that start into REI. I have had nice ROI and seen substantial appreciation as well in the last few years. You have to be careful to pick a trustworthy company with a track record, and hopefully excellent property management in place.

    0Reply
  • Yoochul C.
    Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
    10y

    One big factor in your decision about investments in CA is that CA is probably top 2 of the most tenant friendly states in the country.  States like Texas, Arkansas and Georgia are the opposite.  

    1Reply
  • Deborah Hardin
    Attorney · Cabot, AR · Member since 2016 · 130 posts · 39 votes
    10y

    Arkansas is very landlord friendly.  Might be a good place to start looking.

    0Reply
  • Jonathan Watson
    OP
    Investor · Glendora, CA · Member since 2016 · 41 posts · 72 votes
    10y

    Yeah, @Yoochul C. -- I did some research on California tenant laws since I have a friend who is having a helluva evicting someone.  They're at their wits end since the law seems to be at odds with them in what seems an amazingly cut-and-dried situation.

    Thanks for the welcome, @Larry Fried! Good to see other folks who've found success going the turnkey route... Everyone seems to have a pretty strong opinion on whether to go turnkey or not. Trust is definitely a sticking point--definitely want to find someone who has integrity.

    0Reply
  • Sydney Hall
    Home Stager · San Luis Obispo, CA · Member since 2016 · 312 posts · 49 votes
    10y

    hi jonathan, welcome! fabulous photo inclusion. you have quite the brood to tend. newbie here too. just wished to introduce myself. formerly from washington, dc, i'm just getting started in the staging arena in california and i'm looking to make some connections as well. thanks and sincerely, sydney  (ps- what about bakersfield or fresno for other CA locations. or even sacramento...?? i've met a great realtor in chattanooga, tn who i could send info for if you do decide to go to another state.)

    0Reply
  • Marlon Wilson
    Houston, TX · Member since 2013 · 1k+ posts · 114 votes
    10y

    Hi and Welcome to Biggerpockets @Jonathan Watson. wish you all the best!

    0Reply
  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    10y
    Originally posted by @Jonathan Watson:

    Hi BP people!

    My name's Jonathan, and I'm a father of 3 kids (6, 4, 2) with 1 more due this October. Yes, they're cute (and of course, I'm biased :) ):

    I'm also a co-owner in a design/web/strategy business that's been going strong for 16 years--and we've also branched out to work with smaller scale web projects recently.

    My business has allowed us to let my wife be a stay-at-home mom, and live in a great city outside of LA with one of the best local school systems.

    Currently, our net worth is tied up in a pretty big chunk of equity in our Glendora home (bought it 10 years ago, and have it on a 15 yr fixed now), and a large of amount of stocks (that have done very well for us) we invested while my wife worked in Starbucks corporate for 10 years.

    So, now I'm looking to diversify and increase cash flow by purchasing 1 or 2 SFH rentals this year.

    But not here in Glendora. Or within 40 miles of my home. The ROI on buying a SFH around here just doesn't make sense to me--on larger MFH, you might be able to find something, but I don't have _that_ much to invest.

    So, I'm looking out of state for my first investment to purchase in cash and see a small start to additional monthly cash flow, rather than letting the equity in my primary residence sit and do nothing for me.

    I've spent the last couple months listening to BP podcasts, reading a couple books, picking the brain of a realtor friend, talking to a mortgage broker, discussing investment accounting practices with my CPA (which, once again, confirmed to me how absolutely stupid and suffocating California's tax code is), and talked to a couple turnkey providers.

    I'm getting close to feeling comfortable in purchasing my first investment. But I'm going to wait for the best opportunity... I just hope it comes before I have to pay for my 3 year old's preschool bill! :)

     Welcome Johnathan!

    It seems like you have a great idea of where to start! BP is a great place to learn from some of the best professionals out there! Feel free to send any of them messages to ask questions to get you started. It is a great place to connect.

    I look forward to hearing more from you.

    Send me a message if you would like to connect!

    0Reply
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