Newbie Investor in Southern California

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Newbie Investor in Southern California

Monica Sutton
Winchester, CA · Member since 2019 · 4 posts · 1 vote

Hi everyone. Another newbie here looking to get started in real estate investing. I stumbled across BP a few months ago and have to admit that I may be burying myself in books and webinars, getting excited with all the different opportunities that are out there. As I was starting to feel overwhelmed with all of this great information, I decided to take a step back and really think about where I want to start. I’m thinking passive income through rental properties might be a good place for me. Since I live in California, it’s no secret that properties out here are not cheap. Even though long distance investing does sound a little daunting, I believe that might be where I could have some luck in getting that positive cash flow.

Ideally, I think using the BRRRR strategy might be the most profitable for me, but I also believe that going with a turnkey rental might be the easiest way for me to get started. With so many experienced investors here, I was hoping to get some opinions on whether or not you would recommend a beginner go ahead and start out with a turnkey rental, or should I hold out until I find that great deal and put in the extra effort to rehab and rent out on my first deal? If I was to go with a turnkey, what are some of the cons (other than a potential smaller cash flow) that I should be aware of?

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Kiera Underwood
Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
6y

@Monica Sutton for a first time investment I'd consider something less than a BRRRR. I think that developing a relationship with a team on an investment that's a bit more straightforward might be a good interview process for a team.

With a BRRR the numbers can look great, but there are often surprises behind the walls. If you've not seen how a team handles an easier deal you're putting a lot of blind faith into a team that's going to have to handle a deal where there will likely be hiccups.

I say dip your toes in, take on something safe and get comfortable. Push for a more ambitious move once you've got a property or two under your belt! 

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  • Tom Ott
    Equity Raiser and Turnkey Provider · Cleveland, OH · Member since 2016 · 4k+ posts · 1k+ votes
    6y
    Originally posted by @Monica Sutton:

    Hi everyone. Another newbie here looking to get started in real estate investing. I stumbled across BP a few months ago and have to admit that I may be burying myself in books and webinars, getting excited with all the different opportunities that are out there. As I was starting to feel overwhelmed with all of this great information, I decided to take a step back and really think about where I want to start. I’m thinking passive income through rental properties might be a good place for me. Since I live in California, it’s no secret that properties out here are not cheap. Even though long distance investing does sound a little daunting, I believe that might be where I could have some luck in getting that positive cash flow.

    Ideally, I think using the BRRRR strategy might be the most profitable for me, but I also believe that going with a turnkey rental might be the easiest way for me to get started. With so many experienced investors here, I was hoping to get some opinions on whether or not you would recommend a beginner go ahead and start out with a turnkey rental, or should I hold out until I find that great deal and put in the extra effort to rehab and rent out on my first deal? If I was to go with a turnkey, what are some of the cons (other than a potential smaller cash flow) that I should be aware of?

     Hello and welcome! Investing in a Turnkey when you are OOS can be a great way to go. This way you can invest in the Midwest where prices are low, but the rent is high. 

    if you do go with a Turnkey, make sure it is with a True Turnkey Provider. Ideally, they should own the home first, renovate it in-house, place a tenant before closing, and then sell it to you. Ater you buy it, they should also do the property management in-house. No third parties. The only third party should be your home inspection!

    Try looking at:



    Assessing the Risk of a Turnkey Real Estate Company


    5 Keys to Turnkey Real Estate Investing

    2Reply
  • Kiera Underwood
    Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
    6y

    @Monica Sutton for a first time investment I'd consider something less than a BRRRR. I think that developing a relationship with a team on an investment that's a bit more straightforward might be a good interview process for a team.

    With a BRRR the numbers can look great, but there are often surprises behind the walls. If you've not seen how a team handles an easier deal you're putting a lot of blind faith into a team that's going to have to handle a deal where there will likely be hiccups.

    I say dip your toes in, take on something safe and get comfortable. Push for a more ambitious move once you've got a property or two under your belt! 

    3Reply
  • Todd Rasmussen
    Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes
    6y

    @Monica Sutton

    BRRRR is a complicated as a fifth investment let alone a first. Turnkey or very minor rehab will give you a slower start but a much safer learning environment.

    1Reply
  • Monica Sutton
    OP
    Winchester, CA · Member since 2019 · 4 posts · 1 vote
    6y

    @Tom Ott Thank you so much for the information! I have to admit that I have been leaning towards a turnkey because one of my greatest fears is not having enough time to properly manage a BRRRR deal from start to finish. Thank you again for your reply.

    0Reply
  • Monica Sutton
    OP
    Winchester, CA · Member since 2019 · 4 posts · 1 vote
    6y

    Thank you to everyone for your replies. I appreciate you taking the time to share your thoughts. Now, to get started in trying to figure out where I will start investing. 

    0Reply
  • Jack Butala
    Los Angeles, CA · Member since 2014 · 2k+ posts · 515 votes
    6y

    Welcome to BiggerPockets, @Monica Sutton. Congratulations and I wish you a ton of success. You are not alone in your real estate ambition.

    0Reply
  • James Gates
    Real Estate Agent · Redlands, CA · Member since 2017 · 199 posts · 487 votes
    6y

     Welcome to BP @Monica Sutton! I am totally with you that CA is prohibitively expensive as a first-time investment. My partners and I BRRRR out-of-state for this reason. Have you looked into any potential markets?

    I also host a real estate meetup about once a month in Riverside. You just missed the last meetup but it would be awesome if you could make it to the next one and meet a few other local investors! DM me if you are interested.

    Cheers!

    -James

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    6y
    Originally posted by @Monica Sutton:

    Hi everyone. Another newbie here looking to get started in real estate investing. I stumbled across BP a few months ago and have to admit that I may be burying myself in books and webinars, getting excited with all the different opportunities that are out there. As I was starting to feel overwhelmed with all of this great information, I decided to take a step back and really think about where I want to start. I’m thinking passive income through rental properties might be a good place for me. Since I live in California, it’s no secret that properties out here are not cheap. Even though long distance investing does sound a little daunting, I believe that might be where I could have some luck in getting that positive cash flow.

    Ideally, I think using the BRRRR strategy might be the most profitable for me, but I also believe that going with a turnkey rental might be the easiest way for me to get started. With so many experienced investors here, I was hoping to get some opinions on whether or not you would recommend a beginner go ahead and start out with a turnkey rental, or should I hold out until I find that great deal and put in the extra effort to rehab and rent out on my first deal? If I was to go with a turnkey, what are some of the cons (other than a potential smaller cash flow) that I should be aware of?

     Welcome to the site Monica.

    0Reply
  • Forest Skufca
    Specialist · Memphis, TN · Member since 2019 · 24 posts · 17 votes
    6y

    Hey @Monica Sutton! First of all, congrats on taking your first steps to financial freedom! This is an exciting time for you!

    I want to be transparent that while I do work for a turnkey company, my first priority is helping you achieve your goals - whether that's turnkey, BRRRR, or house hacking. If our company has the privilege to help, great! If not, also great! Because at least then you are confident in your next step and on your way to achieving your goals and I've had the opportunity to be a part of that.

    All of that said - I've had several conversations with first-time investors weighing the options of investing. What I've noticed is that it all comes down to one underlying factor. Time. The ultimate goal of most of the investors I talk with is increasing cash flow to supplement (and eventually replace) their income and earn back their time. Some of them want to build wealth while they work their primary job (passive). Others want to work towards making real estate investing their full-time job (active). It all comes down to what's most important to you - your time or your money. That's the difference between an active investor and a passive investor.

    As for potential cons, there can be several. You might not be managing properties or managing a renovation, but you will be managing your turnkey company. You're responsible for holding them accountable to hold up their end of the deal. You purchased a property from them because they showed you numbers on paper that looked great to you. Now, they have to deliver. There are a few things you can do to dwindle down your list of potential companies. First of all, every great turnkey company should do these same four things as a baseline:

    1. acquire the properties themselves
    2. renovate the properties to address potential capital expenditures
    3. provide in-house property management
    4. provide great in-house customer service and support to you as the client.

    It's the details within each of these four things that separate good companies from great ones. What kind of houses do they acquire? How deep does their renovation go? Do they offer a guarantee on the performance and maintenance of the property? How efficient are they at communication?

    The key is - You have the leverage! So, ask questions! It shouldn't be a sales pitch - it should be a relationship.

      0Reply
    1. Andrew SyriosPro Member
      Moderator
      Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
      6y

      Welcome to BiggerPockets Monica!

      Podcast Guest on Show #121
      0Reply
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