Newbie living in San Diego

Tom Ott

Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes

Originally posted by @Nick Allen:

Hello BP Team,

My name is Nick and i'm originally from Memphis, TN. I'm active duty Navy and my wife, two daughters and I are currently stationed in San Diego, CA. I came to this website via a real estate investor friend. I have always admired him for his entreprenurial spirit and I'm now determined that I can do it too. I've never bought an investment property but I have used my VA loan to purchase a home in TN (last duty station- bought for 194k and sold it two years later for 230k. After all I put in it (new hardwood floors, appliances, Interior Painting, fixtures and TLC) I came out ahead by maybe 8k. Overall, I felt pretty good about it as my first experience in home ownership. I'll be honest, I've always had doubts that I could ever do housing investments based on the perceived risks. I guess thats the psychology for how most of us were raised. But, the last few years, the idea of passive income has become what I think about most throughout each day and investing in my IRA and TSP just isn't enough anymore.

*side note* I think it's funny but if I told my family (at large) my plans, they would probably discourage me (directly and indirectly) from ever investing b/c of WXYZ reasons. I've also discovered this from most friends as well. Why is that?

So, for now i'm just a student of the craft and keeping it to myself so i'm not surrounded by negativity. Just being upfront and honest of my situation.

I've been scouring this website to soak up as much intel as possible and already have been getting more excited every time I come back. I have a bunch of questions and I know most of what I will ask will be somewhere on this site but i'm throwing myself out there anyway and looking for some guidance. I'll keep my questions general for now because i'm having trouble linking all the puzzle pieces for how it works in my head.

1. As a family man starting out i'm leaning toward the strategy of single family homes that I can buy and hold. Long term I want to build a portfolio that brings in enough cash flow that is paying me more than my day job. I'm not too interested in buying and living in a multi unit place with my wife and 2 kids based on this local market and the necessity of being in close proximity to my daughters school. With that in mind, how does one afford to buy and place a downpayment on properties in this area (median cost of 600-800k). Even if I could afford it, the fear of not having it rented out for one month would be detrimental in my head since the rent would be around 3500-4k. Interested to know how the pros justify this even if the cash flow works out on paper.

2. Is it better to purchase a low income single family property in TN (25-35K) that has a 9-10% Cash on cash ROI or a single family home in CA which is much more expensive but the demand for renting is very high? I'm just curious how the experienced justify the risks of purchasing any type of expensive property regardless of ROI.

Thank you for enduring this diatribe as my intent is to just put myself out there and humbly ask for your guidance. Thank you to this invaluable site and those who give up their time to lead others. Thanks in advance.

V/r

Nick

Hello and welcome! Best of luck to you.

Michael Lee

Investor · Coppell, TX · Member since 2008 · 2k+ posts · 646 votes

You are doing things the right way. Just know that we were brainwashed when growing up and going to school, public and private, teaching us the wrong way and the sooner you know that, the better. You need to not listen or reserve any brain space to any parents or anybody who has not been a real estate investor. By the way, thank you for your military service. Most of the military (or Navy) service will or can be a good thing for you because of their group teaching. if you have not already done it, read Robert Kyosaki's books like Rich Man Poor Man and get aquainted with his views. i happen to believe in what he has to say and I was 59 years old at that time. Our parents were grown up at a different time and look at things differently.

The demand for particular unit is very important. Being creative is essential to do certain things. Because of my medical poor condition leaves me much time to learn and i found BP about 22 months ago when i was looking for something that is more flexible and had some knowledge for.

I have spent some time on you tube listening to successful people. One person, Grant Cardone, owns about 4,000 apartment units and does not come from a successful family. Some of his thoughts that SFH's are a terrible investments, you have to look at alot to get a good deal and only spend money on things that you have to have. As Lance Edwards says you do not need to have any experience to get into small apartment complexes and have less competition. You should consider that as your next investment. he got his start part time while he worked a w-2 job that he hated but had to work about 60 hour weeks and hated it.

i spend about 10 hours a day on the internet and that is why i have learned so much. You might consider a partner who complements you. You might have to give up some of the profit but that is better than nothing. I am available right now to help you with anything you think because i cannot walk yet. I have been listening to a guy that got his start renting SFH's and got completely broke with 7500 a month positive cash flow and then discovered owner financing was the way to go and now he is wealthy in San Antonio Texas.

There are so many options for loans and partnerships that you can do just about anything. SFH rentals work for many people that luck is not the only way to invest. Knowledge will help you.

Good luck to you1

Bruce May

Lender · San Diego, CA · Member since 2011 · 664 posts · 231 votes

Welcome @Nick Allen and thanks for your service. I'm in Oceanside. Feel free to connect with me and run questions past me. I'll help if I can.

OP

San Diego, CA · Member since 2017 · 8 posts · 9 votes

Thanks all for the warm welcome and the great advice. I will continue to research what is best for our family and look forward to engaging everyone in the future!

Robin Boyer

Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes

Welcome to bigger pockets from north county! The San Diego crew just keeps looking stronger and stronger! Looking forward to meeting everyone this summer. I am working on my first commercial sale right now it's a one of those head ache sales lol.

Fabio Salas

Investor · Champaign-Urbana, IL · Member since 2014 · 84 posts · 49 votes

@Nick Allen Like you I'm also in the military. 17 years of active duty as of a few months ago. You're smart to use your VA loan to help you get into real estate. I've done the same and have accumulated a few rental properties by doing so. In 2 years I PCS out of San Diego and will hopefully live somewhere cheaper where I plan to acquire at least 2 more rental properties through the use of the VA loan. In the meantime I'm trying to buy up rental properties that cash flow with the goal or reaching 10-15 rental properties total.

Keep doing what you're doing. Search the forums on this site. Set alerts for cities or topics that interest you and read the daily posts. Research online. Basically, keep learning and keep looking for ways to invest and make money.

For many of us, REI is just another form of passive investing. For others, many of which routinely post on this site, REI is their business. Notice I didn't say their job because I believe once they commit all their time to REI and no longer work a W-2, REI actually becomes their business. I say this to emphasize the fact that you need to first figure out what kind of investor you hope to be, now or after the military. I myself own a duplex in San Diego that I currently have rented out (coincidentally both units are rented out to Sailors), but keeping in mind what you mentioned about vacancies, I have just under $20K in reserves just to cover vacancies, repairs, and CapEx for this property alone. I have two other rentals in two other states where my reserves are less than a quarter of that for each. While trying to decide if you want to invest in SD or not, you need to figure out what level of risk you're willing to take. Are you willing to be negative cash flowing for a few years with the expectation of future appreciation (which is a risk given the already high costs of housing in SD)? How easy will it be to finance more properties in the future with an extremely high loan for one property in SoCal? Will the rents in SoCal be enough to balance out your debt-to-income ration? There's much more to consider, but my point is you need to have a plan for how you plan to finance and continue your investments into the future. Only then can you really assess your best course of action going forward. Owning property out of state can be scary, but I'll tell you there are many military members like myself who own properties all over America. I've been stationed in Japan twice and never had a problem with my rental properties thanks in no small part to my PMs.

Good luck and happy investing.

OP

San Diego, CA · Member since 2017 · 8 posts · 9 votes

@Fabio Salas - Wow..wonderful comments and thank you for the assistance and great advice. I will PM you if that's ok. I wanted to dive in a little deeper on the SD region options and how you started in this area.

I regret not buying our condo that we stayed in here back in 2010 but my logic then was the same. I just saw this large mortgage payment and was scared of the risk. Of course, the rent on that property now has almost doubled in the last 7 years. Could the same be said of Hawaii? We lived there on a previous tour. If you can accept the risk, it seems that the upside is huge given that the demand in those areas are the highest they've ever been.

Robin Boyer

Surveyor · Hemet, CA · Member since 2015 · 797 posts · 112 votes

@Nick Allen what part of San Diego are you from?

Alex ShaughnessyPro Member

Real Estate Investor · Spring Valley, CA · Member since 2016 · 288 posts · 98 votes

Welcome to the city. This is a great place w/ no discouragement.

Michael Lucero

Rental Property Investor · Pasadena, CA · Member since 2016 · 164 posts · 149 votes

hey i absolutely loved you post because it seems your eyes and mind have been opened to a growth, opportunistic psychology, its incredibly powerful. One thing you have to realize in life is most people live their life based on fear and they wont understand where you are coming from, risking what you have to gain something better; a great return in the bank, happiness, and lifestyle. Its quite sad society is like this, but know that it provides opportunity for those willing to think outside the box and take risks.

This is deeply ingrained into them by their parents and society, you are constantly told to be status quo, dont rock the boat, be a wage slave, because its safe and secure and therefore by default if you dont do this exact path, its the opposite, its unsafe, not 100% known so its not secure and is something to fear. Thats effin garbage. They think if they take a risk they may fail, fear that if they fail they somehow wont be able to pay for bills, fear what others will think of them, etc. We can talk forever on the reasoning or cause of this but one problem is that people never truly think for themselves and never try to self actualize, until its WAY too late. If u look at maslows heirarchy of needs(its very simple google image it if u dont know what it is, its a pyramid) most people never reach the top two levels of personal success and self actualization, rather they are stuck somewhere near the bottom (basic biological needs) to the middle and when they are stuck in those levels their psychology literally cant comprehend what you are doing because its not within the realm of their reality. Its a major problem with society but eh, what can you do; corporations make so much money from keeping people in the lower levels, its hard to stop it.

There is nothing wrong with fear, its just that you need to fear the right thing. You need to fear mediocrity, you need to fear regret, you need to fear what/how YOU will judge yourself of you dont take a chance!

Fabio Salas

Investor · Champaign-Urbana, IL · Member since 2014 · 84 posts · 49 votes

@Nick Allen I'm still a newbie as well, but I'm more than happy to share with you what I've accomplished so far and hopefully help answer any questions you may have. PM me anytime.

OP

San Diego, CA · Member since 2017 · 8 posts · 9 votes

thanks Michael. You're spot on with the psychology behind most of this. I feel like Neo when he took the pill and saw what the matrix really is. Mind blown at every turn.

I'm also reading rich dad poor dad right now and i'm questioning everything i've ever been told. I have been controlled by fear for years. It's the unknown. And ever since i've been in the Navy (super safe job - financially), that fear has only grown. isn't that interesting? It's to the point now where I can't even point to what i'm actually scared of. But, this itch inside has led me to this wonderful site and i'm seeing a different way.

I'm determined (i mean I will!) have my first property this year so I can start some momentum and overcome the fear. The reaction to these ideas are exactly what you said. A friend literally told me to enjoy what I have and just relax as I "have it made as an Officer in the Navy" or others have said don't do anything until you retire because you'll still be young. I respect these people but it's a drastically different mindset. aka scarcity thinking vice abundant thinking.

Well, i'm finally sick and tired of being sick and tired and it feels good. I'll keep you posted about the progress. Next step, is a work trip back home (Memphis) starting tomorrow and while i'm in the area, I have a sit down scheduled with a prominent BPer to pick his brain. I'm super stoked about what lies ahead. Thanks for the help.

V/r

Nick

OP

San Diego, CA · Member since 2017 · 8 posts · 9 votes

@Michael Lucero

Elizabeth Wilson

Real Estate Investor · Memphis, TN · Member since 2016 · 940 posts · 695 votes

@Nick Allen - if you are still in Memphis on Wednesday, you should come to "coffee with investors" at 7:30 at City and State Coffee on Broad. It's our weekly REI meetup.

Mandy West

Scottsdale, Arizona [AZ] · Member since 2018 · 1 post · 0 votes

8y

The problem is that San Diego housing prices and the cost of living are extremely high compared to other areas in the U.S.

https://www.storagewest.com/relocation/moving-san-diego/ <---Look at the section titled "San Diego Prices", it discusses housing prices, which are three times the national average, and also the high tax rates. I would suggest you really weigh your options when thinking about buying properties in California, the demand is getting higher and higher, but you also need to be cautious and see if placing loads of money into such a hefty investment is worth i

Tiffany Hoffman

Real Estate Agent · San Diego, CA · Member since 2016 · 52 posts · 29 votes

8y

@Mandy West yes those things are true, but the barriers to entry to build in San Diego make it a very unique market compared to almost any other area of the US besides Manhattan. San Diego is not a place to come and make a quick buck, it's a place you invest for your future. This is not Arizona where there is a never-ending amount of land, buildings become functionally obsolete and a market crash severely impacts the property owners. If anyone is new to the area and wants to talk about why San Diego is a great market to invest, feel free to PM me.