Beginner in SoCal - Realistic expectations and action plan

7 Replies

Hi everyone, my name is James and currently live in Rancho Cucamonga, CA

I've been interested in real estate for a long time, but only recently started looking into it more. My current goal is to house-hack my first property and eventually buy-and-hold enough properties to generate long term passive income for financial independence. I'm still solidly in the learning stage and would really appreciate any tips on starting, getting realistic expectations, and next steps.

I currently make ~52k/year, I know it's not a whole lot especially out here in California. However, my credit is spotless. My credit score has been as high as 838, but now hovers around 812 after paying off my car loan early. I have no debt whatsoever and am extremely frugal. Currently saving at least 2k/month and have 30k in cash. I'd really like to buy my first property in about 18 months, by then I should have ~60k in cash. Additionally, I have ~55k invested in my Roth IRA and 60k in a high yield CD. Only caveat is that the CD belongs to my mother; I'm safeguarding the funds for her. Will this make my loan application look better?

What are some realistic expectations? What kind of loan would I be able to get? What should my next steps be? Ideally I'd like to house-hack further west towards LA where I'm originally from, but I'm assuming I'd probably be priced out? Should I start off trying to find something in the IE instead? 

Hey James!

Its ALWAYS good to meet fellow Rancho Cucamonga investors.  I too am at the beginning stage of my career, but have a TON of resources and a huge circle of friends/fellow investors.

Lets get together sometime and grab a coffee and chat!

Not sure how to send you my number/contact info privately, but i'll figure it out.

Originally posted by @Issac Meza :

Hey James!

Its ALWAYS good to meet fellow Rancho Cucamonga investors.  I too am at the beginning stage of my career, but have a TON of resources and a huge circle of friends/fellow investors.

Lets get together sometime and grab a coffee and chat!

Not sure how to send you my number/contact info privately, but i'll figure it out.

Hi Issac!

Sure, I'd love to grab a coffee and pick your brain a little. I'll message you! 

Rancho! My parents live in Redlands so I'm through there a lot.

First, learn to work the numbers. If you don't know how to work those, you're bound to get screwed somewhere along the way. You have such a good savings and all that building, you don't want to mess it up.

Househacking is doubtfully going to be profitable. Cash flow in SoCal in general is basically non-existent, and the further west you go, the worse it will get.

So yes, do all of those things you list, but long before them... learn what makes for a good property and learn how to run the numbers. If you don't know those two things, none of the answers to those other questions will help you.

Originally posted by @James Liang :

Hi everyone, my name is James and currently live in Rancho Cucamonga, CA

I've been interested in real estate for a long time, but only recently started looking into it more. My current goal is to house-hack my first property and eventually buy-and-hold enough properties to generate long term passive income for financial independence. I'm still solidly in the learning stage and would really appreciate any tips on starting, getting realistic expectations, and next steps.

I currently make ~52k/year, I know it's not a whole lot especially out here in California. However, my credit is spotless. My credit score has been as high as 838, but now hovers around 812 after paying off my car loan early. I have no debt whatsoever and am extremely frugal. Currently saving at least 2k/month and have 30k in cash. I'd really like to buy my first property in about 18 months, by then I should have ~60k in cash. Additionally, I have ~55k invested in my Roth IRA and 60k in a high yield CD. Only caveat is that the CD belongs to my mother; I'm safeguarding the funds for her. Will this make my loan application look better?

What are some realistic expectations? What kind of loan would I be able to get? What should my next steps be? Ideally I'd like to house-hack further west towards LA where I'm originally from, but I'm assuming I'd probably be priced out? Should I start off trying to find something in the IE instead? 

 Hey @James! Welcome to BP.

I love the goal of House Hacking as a starting point. My wife and I got started in Real Estate a few years ago doing that with our primary residence in Redlands. Can't say enough about the valuable experiences it teaches you in being a landlord, let alone the financial benefits!

With that credit score you will be able to qualify for the best type of loans. If you need recomendations for lenders in the Inland Empire send me a PM I can help you in that regard. 

With your primary residence, I would suggest first thinking about where you want to live for the next ~7 years. If you are open to anywhere, then house hacking somewhere in the IE will make a lot more sense than LA. However if you know that you just really want to live closer to LA then you can still get great benefits from a house hack, even if it doesnt fully cover the mortgage.

Happy to see you taking the first steps towards financial independence, if you ever have any questions feel free to reach out!

-James

Hello James,

Welcome to BiggerPockets. Getting in touch with investors in the market you'd like to invest in is a good place to start. You're going to need to speak to a lender to answer what kind of loan you can get. Since, you plan on house hacking I'm assuming you know about the FHA loan. Getting in touch with a realtor, lender, and other investors is probably where you should start. Best of luck.

Sincerely, 

Thanks for the excellent tips everyone! I'll work on saving up more and educating myself on how to evaluate properties and crunch the numbers. 

As I had already guessed, it doesn't sound like finding a cash flowing property in LA is going to be very likely. Perhaps sticking to the IE will be a better bet. 

Given the current state of the market, if most rentals are unlikely going to cash flow, how would you personally invest? Would flipping be the route to take?

There are a lot of options out there. What it boils down to is whether you want to house hack and finance with a low down payment loan in the super expensive LA area, or whether you want to finance an investment property in an affordable part of California (central valley for example) or another state, which will require more like 20% down. With the numbers you posted, I think you might be priced out of the LA area, but to be sure you should consult a lender to see what financing options you qualify for and see how it compares to LA and and less expensive areas outside LA. I live in an area where having $50k to put down allows you to buy a good cash-flowing 2-4 unit, so a lot of my RE clients are from the LA area and buy here for that reason.

Either way, welcome and best of luck to you in your investing endeavors!

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