San Jose, CA · Member since 2016 · 10 posts · 4 votes
I've been lurking on BP for about a month, after my friend and prospective business partner introduced me to the site, and suggested that we look into partnering in REI. Providentially, he did so just after I'd read Rich Dad Poor Dad, and began to read RDPD Cashflow Quadrant and RDPD Tax Free Wealth, so once I dug into what BP offers I quickly became excited to move forward.
Since there, I've watched a few of Brandon's webinars (excellent material), started reading more books (currently Gary Keller's Millionaire REI, but will be moving onto What Every Investor Needs to Know about Cashflow), done some sample analyses, and listened to a ton of BP podcast episodes. I'm also planning on attending the next BP meetup in the Bay Area in order to get some networking / facetime.
A bit about me: I'm a software engineer at Google, working in Mountain View. Married with an elementary aged child. I was a homeowner back in Madison, WI, where I lived for close to 20 years, through college and beyond, but we sold when we moved out here, just breaking even. In my spare time I love hanging out with my family, travelling, I occasionally like to fly small airplanes, and most recently I've been tinkering with home automation (Smartthings).
Once my business partner and I have worked out exactly what we want to do (current thinking is buy and hold back in Wisconsin, where we have contacts on the ground and prices are more reasonable), we'll begin to look for opportunities and pull the trigger. I'll likely be asking some questions along the way in these forums.
Glad to have discovered BP, and look forward to making some great connections here!
Real Estate Agent · San Jose, CA · Member since 2015 · 172 posts · 66 votes
10y
Hi Peter,
Have you considered investing in Stockton, Sacramento, or Vallejo? There are advantages to having the property local and those cities are still very affordable. I have 5 properties in Sacramento and 4 in Elk Grove and it has worked out great for me.
Real Estate Agent · San Jose, CA · Member since 2015 · 172 posts · 66 votes
10y
Hi Peter,
Have you considered investing in Stockton, Sacramento, or Vallejo? There are advantages to having the property local and those cities are still very affordable. I have 5 properties in Sacramento and 4 in Elk Grove and it has worked out great for me.
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
10y
@Peter Mateja welcome to BP and congrats on moving forward in the REI world. You came at the right time. There is huge REI summit that is coming up in August. It will be hosted by @J. Martin. The first one he held was a great source of information. I am sure that this one will blow the doors off! There won't be any hard sales pitches from guru type of guys. Just a bunch of people, from BP that will be sharing their knowledge and experiences.
Come check it out and meet a bunch of local investors at the same time!
San Jose, CA · Member since 2016 · 10 posts · 4 votes
10y
@Gloria Mirza I've been curious about local investment outside of the Bay Area, and am not totally against it. My primary concern there is that I simply don't have a strong familiarity with those areas, since I've only lived in CA for the past 5 years. Even though it's far away, I have connections in Wisconsin, and I'm very familiar with the neighborhoods and market in Madison. But... I'm not against exploring more locally if the numbers make sense and I can find good resources to connect with. Thanks for the question!
@Arlen Chou I will definitely check out that summit. It looks like a fantastic opportunity to find some local connections and share ideas. Thanks for the heads up!
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
You were a homeowner in Madison, WI for 20 years and just barely broke even, and now you want to invest there remotely?!? I would've thought that Google engineers were better at math :) You currently live in one of the most profitable REI markets in the nation. Before you go seeking greener pastures out of state, I'd advise talking with a few successful local investors and see how they operate ... perhaps they can open your mind to the possibilities all around you in your own backyard. At least try to buy yourself a primary residence first if you haven't already. @Account Closed can you please help this guy to see the light?
Welcome your profession should be the source of all the private money you will need.
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
San Jose, CA · Member since 2016 · 10 posts · 4 votes
10y
@Lane Kawaoka Ouch! Misunderstanding there. I lived in Madison for almost 20 years, but was mostly a renter, and only a homeowner for 8 years, basically buying high and selling low. My wife and I bought our home (and did a terrible job of negotiating) on the upswing in that area in 2003. It was a fixer upper that we paid a non-fixer upper price for because it was a sellers market. It also wasn't in a very hot location. We proceeded to put tons of money into the place (roof, siding, insulation, bathroom rehab, upstairs tear down to the studs and rehab, etc. We put it on the market in ~2009 in hopes of trading up... got no hits, and lowered the price several times... still no hits. Then we took it off. When I got my job in CA and relocated in 2011, we put the place on the market again, and priced it to sell. The result: in 8 years we basically broke even.. but that was a result of some poor, uninformed choices on our part, as well as horrible market timing. Madison is just one of the areas we're considering in WI... primarily for the chance at better (positive) cash flows and lower cost of entry. The Bay Area seems to be too frothy (and expensive) of a market for a pair of newbies to play effectively.. though I'm certainly open to ideas and insight. @Paul Timmins Thanks for the advice and book recommendations! I'm definitely going to be networking locally, and I'll check out those books.
Cheers and thanks for the great questions and comments!
Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
10y
Just joking with you Peter ... in all seriousness, though, if you were a homeowner in San Jose over those same eight years (and most other 8 year periods you could choose), even if you bought retail and made some poor choices, you would do much better than break even. I agree that prices are a bit frothy at the moment in CA and many, many other RE markets (not sure about WI), and caution is warranted. However, there are still deals out there if you are willing to work to find them and are disciplined enough to pass on anything that isn't a deal. If anything, if you don't find a deal you will educate yourself on the local market and be ready when a correction occurs ... this is exactly what happened to me in 2006 and it took me until 2009 to buy, but my patience was rewarded. Not saying that the next correction is going to go down like 2006. That is all the next few years, though, which is the short term in the grand scheme of things ... real estate investment is a long term game, and I'd advise keeping your eye on the long term, while still ensuring that your investment will get through short term ups and downs to make it to the long term. And over the long term, I think you'd be hard pressed to find a market that performs as well as the one you are in now. Markets with high appreciation rates are expensive and have low initial cash flow... that comes with the territory of having persistent limited supply and high demand ... this does NOT mean that you can't make boatloads of money, and it certainly does not mean you need to be a speculator to do it as many would imply. With high price appreciation also comes high rates of rent increases, so it is also not true that they don't cash flow well over the long term. Couple that with a considerable home court advantage that every local investor has over out of state investors, and your choice looks fairly clear to me. Not trying to bash you or WI either, certainly money can be made there by local investors and if you lived in WI, then it would be a different story.
Welcome to BP. You have found an incredible RE resource. Some people feel information overload when they join. Just look at it like a buffet. You absorb what you can. The rest of it may not be applicable now. Learning is process. It builds on itself step by step. By the time you realized it, you have mastered all trades of real estate.
Did it shock you when David said you're in one of the most profitable housing markets? I used to think this market was stupidly expensive until I cracked the code. Now, it's always a great time to buy and always a great time to sell regardless of where we are in the cycle of the market. You're a GOOG engineer. You should have no problem cracking the Bay Area Housing code and reap the rewards. If you're comfortable with your Madison market, invest there. When you're bored of making pennies and ready to make dollars, give the Bay Area a chance. You might get addicted. :>)
San Jose, CA · Member since 2016 · 10 posts · 4 votes
10y
@David Faulkner No problem... I can take a good ribbing, especially in the name of learning! ;)
And, @Account Closed, (David too), I'm intrigued by your assertions. Any pointers / tips as to strategies I should be investigating? I'm more interested in buy/hold or perhaps brrrr than I am in flipping, wholesaling, etc, but I'm definitely open to info!
Sounds like I've got some more homework and conversations to have.
@Gloria Mirza I've been curious about local investment outside of the Bay Area, and am not totally against it. My primary concern there is that I simply don't have a strong familiarity with those areas, since I've only lived in CA for the past 5 years. Even though it's far away, I have connections in Wisconsin, and I'm very familiar with the neighborhoods and market in Madison. But... I'm not against exploring more locally if the numbers make sense and I can find good resources to connect with. Thanks for the question!
@Arlen Chou I will definitely check out that summit. It looks like a fantastic opportunity to find some local connections and share ideas. Thanks for the heads up!
Hi Peter, I'm traveling around the US right now and will be back next month, or I would sit down and have some coffee with you ;) But feel free to give me a ring or tag me on the forums. I own properties in the East Bay in Richmond and Oakland. Folks like @Andrew Fingado are buying in Stockton right now, although I think @Erin A. might be doing something else out that way..
@Al Williamson and @David Oldenburg run meetup groups in the Sacramento / Roseville area, which is another popular "out of bay area" investment. And there are still people snagging deals up there (and here, but harder - talk to Arlen and Minh!!)
If you're talking more about Wisconsin, @Dawn Anastasi knows Milwaukee really well..
The kicker is that all these people will either be speaking or attending the Summit, so you can talk to them all in one weekend!! ;) Glad you're excited about it too!! Really looking forward to it!! :)
Gloria, have you been out to @Johnson H. or @Jeff Pollack 's meetups in San Jose? Hope you can make it out for some networking with the rest of us!! :)
@David Faulkner No problem... I can take a good ribbing, especially in the name of learning! ;)
And, @Account Closed, (David too), I'm intrigued by your assertions. Any pointers / tips as to strategies I should be investigating? I'm more interested in buy/hold or perhaps brrrr than I am in flipping, wholesaling, etc, but I'm definitely open to info!
Sounds like I've got some more homework and conversations to have.
Cheers,
Peter Mateja
I made some fairly strong assertions, so let me try to add some detail to back them up. Even if you do not plan on doing wholesaling and flipping, consider learning how they operate and apply those same techniques to your buy and hold acquisitions. Selling at break even or a loss should not be an option that is acceptable to an investor at any and every point in time during the life of an investment, from the day after you close escrow to the day after you finish rehab to after 10+ years of holding. It is the equity from operating in this manner that allows you to invest without depending solely on cash flow or the market going up to make your profits and insulates you (to some degree) to the market going down. To illustrate this point, I know of some investors in SoCal that were profitably flipping 2007-2012, during a declining RE market. How did they do this? They bought at 50 cents on the dollar, rehabbed, and sold at 80 cents; in and out in under 90 days. Now that the market has recovered and is going up, they are still making money by buying at 70 cents on the dollar and either wholesaling it at 75-80 cents or fixing and selling it retail at 95 cents-$1. If during one of their flips the market turns on them, they will fix and sell for 80-90 cents on the dollar (again, in under 90 days) like they did the last downturn and still make money.
As a buy and hold operator working in this fashion, you get the tax benefits that these guys don't get but you have to deal with tenants and you still have multiple exit strategies to mitigate market and other risks ... you could wholesale it for profit, you could fix and flip it for profit, you could hold it as a rental for profit (and being in at 70 cents on the dollar will certainly help your cash flow), and sell or cash out refinance at any point in time in the future, and you can change your mind at any point in time if you want or need to. If you operate this way, then you are not as dependent on short term market cycles and as Mihn says it is always a good time to buy and always a good time to sell. To geek out on you a bit, what you are doing is engineering the transaction to create a positive expected value ... with more ways to make money and fewer ways to lose money, you tilt the odds in your favor. Heads you win big, and tails you win small, but the house always wins, and you are the house. If you can't stack the deck in your favor in this way, then you are not ready to play the game yet ... find somebody who can and watch carefully how they shuffle. If you can, then you don't depend on luck to make your returns but you can consistently and conservatively put yourself in luck's way ... then the world is your oyster and you can make money in REI in any market in the US, even (and especially) San Jose. The catch is for all practical purposes, unless you are highly experienced and have huge scale to support your own full time investment team, you will need to be local and active to pull this off ... good luck finding and executing these kind of deals as a newbie buying, rehabbing, and renting in WI from CA. However, the easiest way to do it is likely starting with your primary residence, but operating with this mindset, and not like a typical retail buyer.
There could be volumes written on how you find and execute such deals, and volumes have been written here on BP, but from my point of view, these are the keys to the castle I've just handed you ... it is up to you and your hard work and study to now find the front door, turn the lock, open the door, and let yourself in. Have fun storming the castle!
Welcome to the forum. This website is truly a great resource. I think you will find that there are a lot of folks in the bay area doing different things with real estate. @J. Martin has done a great job of investing these last few years, and he's a great guy to know (see you at the summit J!). I am currently investing in Stockton myself. I think it's a great value if you know where to look. See you around!
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
10y
^^ @David Faulkner, you hit it out of the park with the above post. Thanks for spending the time to spell it out.
@Peter Mateja, if you want to call yourself an investor, I suggest you learn it from the best investor of all times Mr. Warren Buffett. WB likes to buy assets at a discount, or as he calls it buy it with a margin-of-safety. Buying right gives you multiple exit strategies. Paying retail almost guarantees a lost if you change your mind tomorrow. Would you call someone buying in San Jose at 75% FMV an investor or a speculator? How about someone paying retail prices in Madison, WI?
If one is a flipper and targets a 20% ROI on each flip, that's a $30k net profit for each $150k flip in Madison. In the Silicon Valley, we just add an extra zero behind it. That's a $300k profit/flip on a $1.5M property. How many of these do you need to flip/year? Wouldn't it be cool to be able to do a couple deals a year and take the rest of the year off? Same effort with 10x the result? Does it beat working for GOOG? Probably not. :>)
Here's the million dollar question: What would it take for someone to consistently getting deals at a discount in this market or any market? Why would someone bring you the deals instead of others? What can you offer that others can't?
Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
10y
Welcome @Peter Mateja! Best of luck finding the right investments that fit your needs. I specialize in helping accredited investors move into $50-125M institutional grade 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, please let me know if I can help. Leslie