New member from Orange county, California
Westminster, CA · Member since 2015 · 7 posts · 2 votes
I'm Vincent, from Orange county, California. I'm here to learn about about REI.
I have set some extra cash for investing in buy-n-hold SFRs, and would like it to be as passive as possible. I have done extensive reading on BP in the past 2 weeks, and seem like turnkey route would be a great fit for time being.
My next step would be to identify some out of state markets that fit my criteria, and find a trust worthy and honest turnkey providers to do business with.
Happy to connect with other experts and not-so-expert in RE here :-)
@David Dye , @Sydney Hall , @Carlos Altamirano , and @David Faulkner
Thanks for your advises. The main reason I try to avoid California (especially my local) is the price just too high, I tried to plug in numbers many times, and it just seems not right. There just barely any cash-flow. If I was to bet on appreciation alone, it would seem a bit risky here, yah I may hit a jackpot, but rely on luck is a bad strategy (in my opinion) - since I don't have experience in RE, I would like to minimize my risk, and do investment instead of speculation.
Maybe I didn't look at enough in California, or just don't really know where and how to look for area that cash-flow (Fresno, Bakerfield?), and meet my requirements. It would be wonderful if you guys can provide me some pointers.
No luck needed. Here's a hint: I flipped every property I've ever purchased, I just flip them to the rental market instead of the sales market. So, I've already made my profits on forced appreciation, which also helps the cash flow, and don't depend on luck but am able to put myself in luck's path. In this way, I pick up the quick nickel (forced appreciation), the slow dime (cash flow), and the really slow dollar (market appreciation) all along the way, all with leveraged compounding nearly (or totally) tax free. If I buy right, at any point in time, from the day after I close escrow, to the day after I finish rehab, to the 10+ years after holding, I can sell at a profit if I need or choose to and am not solely dependent on cash flow or the market going up to make my money; no speculation needed. If there is cash flow or the market does go up, though, I still get to keep those profits too.
While we're at it, let's talk a bit about cash flow, appreciation, and speculation. Coastal SoCal has appreciation rates of around 6% depending ... that is not last year, that is not in a hot market only, that is the long term historic average, going back 40+ years. Do you think assuming the average 40 year historic appreciation rate is speculation? Sure, there is volatility there, which is why buying right is important to insulate you from short term market fluctuations, but if you hold for the longterm I believe it is perfectly reasonable to assume the long term average. You are doing this anyway when you buy in "high cash flow" areas and assume zero appreciation, which is the appropriate assumption in most cases but may be aggressive and speculative in itself for markets like Detroit that have been in decline for decades. If you put 20% down you have financial leverage of 5-to-1 on 6% average appreciation, which is 30% return, and that is before considering cash flow which is the "icing on the cake". That adds up to hundreds of thousands, then millions, real quick and you don't even need many units to get there ... how many units and how many years at $200/mo would it take to get to the same place on cash flow?
And what about cash flow? All my stuff in CA, whether inland or coastal, cash flows very well. How? Rent increases ... they go hand-and-hand with price appreciation and usually increase at a similar clip. This makes sense, since they are both driven by the same forces of persistently limited supply of housing and high demand for it. So, understand that when you say you are looking for cash flow, please understand that short term cash flow and long term cash flow are NOT necessarily the same thing.
See what I mean when I say it takes a shift of mind set? Hopefully see what I mean by no speculation needed? It is simple, but not easy. Once you crack the code, you'll never go back or consider investing anywhere else.
Good luck, whichever path you choose.
Hello @Vincent Van. Welcome to the site. Plenty to absorb here. Feel free to reach out to me or anyone else if you have any questions for us. I currently flip homes in LA and Orange Counties. Good luck!
Hi @Vincent Van,
Welcome to the BP Community. Glad to have you on here. All the best with your first investment!
Hello @Vincent Van, Welcome Aboard! There are plenty to learn, to connect with, and to do business with. The network support is tremendous. How you decide who to trust different turnkey providers depends in what honesty means to you and what outcome you are hoping for. Plenty from out of state turnkey providers who are BPers would be glad to show you around. Let us know your success story.
Welcome @Vincent Van. There are a few free local meetings every month in Orange County that investors frequent. One is in Yorba Linda - http://www.meetup.com/North-OC-REI-Network/events/... and the other is Lake Forest - http://www.meetup.com/Orange-County-Real-Estate-In....
Both are great. Best of luck!
hi vincent, welcome! sounds like you have a great plan. 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
Welcome to the site @Vincent Van
Welcome @Vincent Van and @Sydney Hall!
Welcome to BP. Lots of great information here.
I am a buy and hold investor from Los Angeles. One piece of advice: Don't be to quick to jump out of state just because you are from California. There are several little gems within driving distance that provide a nice ROI. Out of state investing can get quite costly.
Cheers!
David
@David Dye i completely agree with the out-of-state jumps; esp early on. (lots of unknowns added into mix.) despite being in california and all that entails (no need to mention) there are still great opportunities here. and yes, info aplenty on bp. was just reading about LLCs cali vs other locations. cali is still apparently going to sock you no matter how you slice it just for home-basing/residency here. ugh.
thanks and cheers back to you!
sydney
Welcome to bigger pockets. Make sure to check out the Bigger Pockets Blog: https://www.biggerpockets.com/renewsblog/
Hello and welcome! I am based in Orange, CA and basically show people how to use some of their savings to create streams of income so they can start building a better retirement portfolio. And of course, the way we do that is through REI! Happy to connect.
Thanks all!
Instead of fixated on doing out of state turnkey, I'm gonna step back and think hard about my requirements, and see what markets and strategy meet my objective/profile and go from there.
I'm sure I'm gonna ask many many questions soon :-)
Welcome to Bigger Pockets. BP is a great place to start if you're new to real estate investing. It has a ton of information including free online videos and educational courses. You came to the right place and I wish you all the best.
Welcome @Vincent Van and @Sydney Hall!
Welcome to BP. Lots of great information here.
I am a buy and hold investor from Los Angeles. One piece of advice: Don't be to quick to jump out of state just because you are from California. There are several little gems within driving distance that provide a nice ROI. Out of state investing can get quite costly.
Cheers!
David
This is very true and good advice. It is also true that there is plenty of money to be made without him driving hardly anywhere, in Westminster. I'm in Huntington Beach and have done very well investing buy and hold here for appreciation as well as inland to one of those little gems David Dye is likely referring to. Staying coastal and investing for appreciation requires a mind shift from what most outside of this area preach, but it can be highly profitable and without speculation if done properly.
@David Faulkner cheers to what you mentioned!! absolutely.
@David Dye , @Sydney Hall , @Carlos Altamirano , and @David Faulkner
Thanks for your advises. The main reason I try to avoid California (especially my local) is the price just too high, I tried to plug in numbers many times, and it just seems not right. There just barely any cash-flow. If I was to bet on appreciation alone, it would seem a bit risky here, yah I may hit a jackpot, but rely on luck is a bad strategy (in my opinion) - since I don't have experience in RE, I would like to minimize my risk, and do investment instead of speculation.
Maybe I didn't look at enough in California, or just don't really know where and how to look for area that cash-flow (Fresno, Bakerfield?), and meet my requirements. It would be wonderful if you guys can provide me some pointers.
@David Dye , @Sydney Hall , @Carlos Altamirano , and @David Faulkner
Thanks for your advises. The main reason I try to avoid California (especially my local) is the price just too high, I tried to plug in numbers many times, and it just seems not right. There just barely any cash-flow. If I was to bet on appreciation alone, it would seem a bit risky here, yah I may hit a jackpot, but rely on luck is a bad strategy (in my opinion) - since I don't have experience in RE, I would like to minimize my risk, and do investment instead of speculation.
Maybe I didn't look at enough in California, or just don't really know where and how to look for area that cash-flow (Fresno, Bakerfield?), and meet my requirements. It would be wonderful if you guys can provide me some pointers.
No luck needed. Here's a hint: I flipped every property I've ever purchased, I just flip them to the rental market instead of the sales market. So, I've already made my profits on forced appreciation, which also helps the cash flow, and don't depend on luck but am able to put myself in luck's path. In this way, I pick up the quick nickel (forced appreciation), the slow dime (cash flow), and the really slow dollar (market appreciation) all along the way, all with leveraged compounding nearly (or totally) tax free. If I buy right, at any point in time, from the day after I close escrow, to the day after I finish rehab, to the 10+ years after holding, I can sell at a profit if I need or choose to and am not solely dependent on cash flow or the market going up to make my money; no speculation needed. If there is cash flow or the market does go up, though, I still get to keep those profits too.
While we're at it, let's talk a bit about cash flow, appreciation, and speculation. Coastal SoCal has appreciation rates of around 6% depending ... that is not last year, that is not in a hot market only, that is the long term historic average, going back 40+ years. Do you think assuming the average 40 year historic appreciation rate is speculation? Sure, there is volatility there, which is why buying right is important to insulate you from short term market fluctuations, but if you hold for the longterm I believe it is perfectly reasonable to assume the long term average. You are doing this anyway when you buy in "high cash flow" areas and assume zero appreciation, which is the appropriate assumption in most cases but may be aggressive and speculative in itself for markets like Detroit that have been in decline for decades. If you put 20% down you have financial leverage of 5-to-1 on 6% average appreciation, which is 30% return, and that is before considering cash flow which is the "icing on the cake". That adds up to hundreds of thousands, then millions, real quick and you don't even need many units to get there ... how many units and how many years at $200/mo would it take to get to the same place on cash flow?
And what about cash flow? All my stuff in CA, whether inland or coastal, cash flows very well. How? Rent increases ... they go hand-and-hand with price appreciation and usually increase at a similar clip. This makes sense, since they are both driven by the same forces of persistently limited supply of housing and high demand for it. So, understand that when you say you are looking for cash flow, please understand that short term cash flow and long term cash flow are NOT necessarily the same thing.
See what I mean when I say it takes a shift of mind set? Hopefully see what I mean by no speculation needed? It is simple, but not easy. Once you crack the code, you'll never go back or consider investing anywhere else.
Good luck, whichever path you choose.
Welcome Vincent! newbie here as well I have found this site to be a wealth of info.
Hey Vincent! I'm just north of you, up in LA (Venice). I have always bought out-of-state turnkeys since living here and I love them.
As far as markets, the best turnkey markets are always changing. A lot of it will depend on, assuming good market fundamentals, what your price range is and what kinds of properties interest you. For example Indy and Kansas City offer more suburban-style SFRs while you can get more urban MFRs in Philly and Chicago, Chicago being a higher price point than Philly. So a lot of that just comes down to interests and comfort levels.
Not sure if this helps, but I wrote this a while back...it talks about what I look for in a turnkey market-
https://www.biggerpockets.com/renewsblog/2015/12/2...
As far as meeting the good folks, a lot of it will just be a matter of shopping around different companies and seeing who you resonate best with. A big chunk of it then is about due diligence--knowing what goes into deeming a company "good" versus the bad ones.
If you need any help along the way, don't hesitate to reach out anytime!
I just looked a bit into "force appreciation", and seem like it does require a bit of active involvement and hand-on to upgrade the props, which I would try to avoid doing at this time. I also understand about long-term historic higher appreciation rate in coastal markets vs midwest. Since I'm totally new and don't have much knowledge in REI, I would like to minimize the risk as much as possible, even that means a bit lower return in future. Of course my investment objectives and strategy could be change as I gain more knowledge. I'm not really a big risk taker, and at this time, preserve my capital is one of my top priority by playing it safe. For example, a $200k SFR in Riverside couple years ago, now worth $300k. If I bought at that time, I could have gained double my down payment if I sell now. Let say if I purchase it now (no cash-flow), it may go up another 30% in couple years, or it could go down the same rate (ie: wipe out my down payment).. forcing me to stick with the none cash-flow props till the trend turn back up. I don't know nor have enough knowledge to forecast the trend to time the market to catch the up wave. However with a cash-flow props, I know (or at least hope) that most likely it would continue to produce cash-flow on my capitals even in down trend. Regardless, thank you for your input, and hints. I do understand what you said, I just need more time, polish my swords and weapons so I can pull the trigger on bigger deals. I'm definitely would look more into local markets, and learn as much as I can to gain more knowledge so that deals become an investment instead of just speculation.
As for investing out of state, one other major thing I need to know is the tax implication, advantage / disadvantage, would I be double-taxed for rental income in rental's state, plus CA etc..? Would this varies depending on state that I invest in etc..
@Ali Boone I PMed you request for turnkey company names. Thanks!
I'm open to all ideas and input, the more I know and understand, the better decision would be.
I just looked a bit into "force appreciation", and seem like it does require a bit of active involvement and hand-on to upgrade the props, which I would try to avoid doing at this time. I also understand about long-term historic higher appreciation rate in coastal markets vs midwest. Since I'm totally new and don't have much knowledge in REI, I would like to minimize the risk as much as possible, even that means a bit lower return in future. Of course my investment objectives and strategy could be change as I gain more knowledge. I'm not really a big risk taker, and at this time, preserve my capital is one of my top priority by playing it safe. For example, a $200k SFR in Riverside couple years ago, now worth $300k. If I bought at that time, I could have gained double my down payment if I sell now. Let say if I purchase it now (no cash-flow), it may go up another 30% in couple years, or it could go down the same rate (ie: wipe out my down payment).. forcing me to stick with the none cash-flow props till the trend turn back up. I don't know nor have enough knowledge to forecast the trend to time the market to catch the up wave. However with a cash-flow props, I know (or at least hope) that most likely it would continue to produce cash-flow on my capitals even in down trend. Regardless, thank you for your input, and hints. I do understand what you said, I just need more time, polish my swords and weapons so I can pull the trigger on bigger deals. I'm definitely would look more into local markets, and learn as much as I can to gain more knowledge so that deals become an investment instead of just speculation.
As for investing out of state, one other major thing I need to know is the tax implication, advantage / disadvantage, would I be double-taxed for rental income in rental's state, plus CA etc..? Would this varies depending on state that I invest in etc..
@Ali Boone I PMed you request for turnkey company names. Thanks!
I'm open to all ideas and input, the more I know and understand, the better decision would be.
Investing out of state, with no REI experience, in a market you are not familiar with, relying 100% on providers you don't know, paying retail (or more) with no extra equity buffer, no exit strategy if the property doesn't work as expected as a rental, and properties that are thousands of miles away sounds far riskier and speculative to me. I've tried out of state too, so I speak from personal experience on both methods and have nothing to sell you either way. I think you are making a mistake, but I wish you all the best either way.
Thanks David. I really appreciate your inputs. I'm gonna put my thoughts into this whole out-of-state thing. Of course I would prefer doing it local if possible, it's just that I have not found local markets near where I live that met my requirements yet.
@David Faulkner merely a step to the left and shift to the right... ["let's do the time walk again"]... bravo to that... to out-of-the box and creative thinking... you "don't depend on luck but am able to put myself in luck's path. In this way, I pick up the quick nickel (forced appreciation), the slow dime (cash flow), and the really slow dollar (market appreciation) all along the way, all with leveraged compounding nearly (or totally) tax free"... cheers to this and thank you for your entire post. for the really basic breakdown and putting into words for us all. thanks!!
@Vincent Van, welcome to BP! It looks like you've been given a lot to think about with everyone's input :). One thing I would add is to again think about what your goal is. I'm assuming you want to invest in rental for cashflow, which means that flipping is out of the question. However, you can consider partnering with someone who flips locally, buys and holds locally, buys and holds out of state, etc. If you find someone you trust and develop a relationship with, that may help you get further in what you are trying to achieve. So the options are numerous :)
@Vincent Van Cool! Will respond there.
Thanks David. I really appreciate your inputs. I'm gonna put my thoughts into this whole out-of-state thing. Of course I would prefer doing it local if possible, it's just that I have not found local markets near where I live that met my requirements yet.
The less educated Cali investors invest out of state more often than not seems to be the running theme on BP. Not to say there are not good opps everywhere but for the smaller investor where one needs to make a safe investment everytime vs losing one time could wipe them out, consider the historical sfr investment facts as perhaps they might meet anyones requirements.
The top 3 cities nationally for total returns (cashflow/equity) since 2009 are SF, SJ and LA. Since 2000 that is LA, SF and SD. Long term location will rule the investment day. This is not a secret but with so many trying to sell out of state to Cali types it seems to get overlooked on BP. Remember 1 out of 8 renters in the USA live within driving distance to your front door. Good luck with your search!