New to OOS REI from Los Angeles, CA

14 Replies

Hi Everyone!

This is my first post and I've been diving into real estate investing for a few weeks now; just reading, listening, and watching REI information non-stop. So I'm brand new to the space. A little background… I'm a 31yrs old special education teacher and my girlfriend, turning 32yrs old next week, is a TV producer. We both live in the Los Angeles area. We're kind of house hacking right now by still living with our parents and we have a good amount of money saved up that we would like to invest in out of state rental real estate. Last year, we took a year off to backpack the world. We were able to travel to 17 countries over the course of 11 months. It was an incredible experience that'd we'd love to have the freedom to do again one day. We've dedicated ourselves and made it our goal to become financially independent by the age of 35. That gives us 3 years. Below is our rough business plan. Feel free to rip me apart over it.

How feasible are my expectations for my first turnkey property? When using a turnkey provider, such as Memphis Invest, what kind of ROI and cash flow can I expect on a $100,000 property? I was thinking starting with a turnkey provider would be a good way to start and get my feet wet but I also think that trying to do it myself would have a better (or worse) ROI.

I’m a teacher on spring break this coming week, so I plan to call as many turnkey providers and practice running the numbers on as many properties as possible to try to figure out the answers to these questions myself. I also plan to attend 3 of the BiggerPocket meetups in the LA/OC area this week. If anyone else plans to go, I’d love to meet someone with similar plans and goals. Finding a partnership on a deal where we could learn how it’s all done would be something we're very open to.

We have some starting capital which I think helps greatly, but obviously we can't get over eager and blow our first deal. I think I'm a little surprised at how quickly you can learn and start running the numbers. I hope to be making an offer on something profitable soon. Like I said, I've only been diving into this REI stuff for a few weeks now so any sort of feedback, advice, or encouragement is greatly appreciated. I hear it's a great time to get into real estate.



Mission Statement: To be achieve financial freedom as a couple by investing in rental real estate. This will allow us to travel more and spend the rest of our lives as we please. Hopefully we can prove that the model of BRRR works for us and invite our friends and family into deals so we can all prosper.

Goals:

  1. Achieve financial freedom by the age of 35. (3 years)
  2. Buy 2 properties in 2019

Strategy:

  1. Buy 1st turnkey property by July 1, 2019. Cash buy. Minimum 11% ROI $150/mo. Cash flow
  2. Buy 2nd turnkey property by Dec 31, 2019. Cash or traditional mortgage. Minimum 12% ROI. $200/mo. cash flow
  3. By April 2020, possibly try minor rehab project or buy another turnkey property. Traditional mortgage or refinance 1st property. Minimum 15% ROI $300/mo cash flow

Market:

  1. Indiana?
  2. Ohio?
  3. Michigan?
  4. Tennessee?

B, C, D class neighborhoods. Single Family Home or 2-4 unit multi-family homes.

Criteria:

Tenant in place. No/minimal rehab. 11% ROI on 1st property. In a city predicted to grow.

Marketing Plan:

MLS, bigger pockets, call as many turnkey providers/investment real estate agents as possible.

Visit the cities of interest.

Put in offers that make sense

Financing:

Michelle- $65,000 cash

Mark- $65,000 cash

Teams & Systems:

Mark & Michelle- kickass power couple.

Need to call turnkey providers and investment realtors

Need to set up LLC in state of property

Need to set up business bank account

Need to find Mentor

Need Attorney

Need Accountant

Exit strategies & Back up plans:

Hold and Rent as long as possible

I'd suggest investing in Southern California, if possible.  Great real estate and built-in scarcity that will bode well for the future.  I am not a fan of turnkey investments, so do your due diligence.

@Mark De sagun welcome to BiggerPockets it sounds like you have a good plan in place.  

There are definitely quite a few people here that will recommend turnkey providers and if you have limited time, don't have any real estate experience and don't want to capture as much equity in your investment from the start this it the way to go.

If you want immediate equity the best route is to not buy turnkey and find a property within one of the locations you mentioned, find a good contractor and have them do some of the renovations and you'll have more equity.

Definitely do your due diligence when purchasing turnkey as @Brian Ploszay mentioned.

@Brian Ploszay Thank you for the advice. You make a good point. I will definitely look for into southern california as it would be more convenient since I live here, but I worry about finding the right price point.  Would you know which southern california cities I should look more into?

@Michael T. Thank you for your input. I'm definitely leaning more towards finding a property, contractor, and property manager on my own, but if I can find a good turnkey provider that will give me the return I'm looking for, I'd probably jump on it.

I like what @Michael Tripp said.  Purchase a local property and do some renovations.  The problem with turnkeys is that the underlying value of the real estate probably doesn't have the same potential as Southern California.  

Now the trick is to find a good area for you to invest in.  I grew up in So Cal, but that was a long time ago, so I have no suggestions...

@Mark De sagun

Hey! Nice first post. Very detailed.

Be realistic. You probably won’t become financially independent in 3 years.... especially going turn key... set realistic goals and go from there otherwise burn out is highly probable. Also, trying to achieve goals like that can lead to poor decisions/bad investments. It’s possible, but not likely. Read up and start making moves! Good luck. And keep us posted.

@Brian Ploszay Again, thank you for the advice. I had completely ruled out investing in CA real estate. But now I'm a bit interested in areas like Bakersfield and Barstow which may offer an attractive price point and is only 2 hours from where I live so I'd be able to manage it better myself.

@Tanner Marsey Hi Tanner. Thanks for your feedback. I do know that achieving financial freedom within 3 years, is a lofty goal, but something still attainable. I definitely see your point that it can lead to poor decisions/bad investments.  While traveling for a year, we spent a total of $40k in expenses that year. So I figure if we can build about $4000 of monthly passive income, we could consider that financial freedom to travel.

@Mark De sagun , Being familiar with Bakersfield, I can say that prices are up dramatically from the bottom like most places but I still see investors putting together cashflowing deals.  I would say that Bakersfield is a more diverse economy than Barstow, but I am not that familiar with Barstow so I cannot say which would have better cashflow opportunities.  My suggestion would be, along with doing online homework, spend a day or two driving and exploring each.  That will help you get familiar with the different areas/neighborhoods.  

@Mark De sagun It sounds like you and Michelle have put together a heck of a business plan, so congratulations on that. In working with a number of folks from California it appears that the initial thought is to go right into a turnkey property. I would tread cautiously as you assess this route. @Brian Ploszay brings forth a great point in that turnkeys typically do not have huge upside appreciation long term. In my local market, I see a number of out of state investors over pay for turnkey properties in which providers have simply "put lipstick on a pig." Again, all comes back to you and Michelle's investing criteria. In a number of the midwest states you highlighted I would advise strictly buying for cashflow and if you realize appreciation, it serves as the cherry on top! In both of you brining 65k to the table that can go a long way in the midwest. Hope this finds you well.

Cheers! 

@Mark De sagun

since your end game is making $4k a month to travel,

130k in starting capital will get you five houses in 100k price range in mid south and mid west. probably $200 a door.  total $1000 monthly

Remember most of the cashflow cities are just coming back to 2006 levels.. 

130k down can get you a duplex, triplex or quad in riverside and san bernadino county. cash flow probably $400 to $500 a month

about your other questions,,

Need to set up LLC in state of property--- you dont need that. just a landlord insurance and a umbrella insurance to cover you.

Need to set up business bank account--- rental income can be deposited in any account

Need to find Mentor-- yes 

Need Attorney-- what for?

Need Accountant-- yes, you do need one. as a ca resident, you will need to file a state tax return where you invest

@Mark De sagun

How's it going? Four months out from the post, I'm curious how your calls went! 

  1. Buy 1st turnkey property by July 1, 2019. Cash buy. Minimum 11% ROI $150/mo. Cash flow. 

My thought is that if you're buying a property for 65k in OKC, you would be making 650/month rent. Operating expenses including vacancy, maintenance, property management, insurance, taxes shouldn't be more than $200/month. So you can pretty easily make 400/month! 

Hi @Alyssa Dyer ,

Well....we definitely still haven't bought our first property. But there have been lots of changes to our plan as we've defined what we want. We've been making progress! I've actually quit my job as a teacher and I'm now doing some property management work with a company that does high-end short term rentals in Hollywood. So now I'm all in on making real estate my career. It's crazy haha. My girlfriend and I are looking to do a BRRRR in Bakersfield, CA. Hoping to find the right deal soon.

Oh that's awesome! Have you read rich dad poor dad? I think it's smart to immerse yourself in the real estate world. You'll learn so much faster that way! BRRR is a big first step. In OKC the numbers are typically too tight to BRRR but I've been developing a relationship that looks like it might make it more doable on a bigger scale. Exciting stuff! Would love to hear how it goes for you guys. Don't forget to keep us in the loop haha!

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