Newbie from Sacramento, Interested in OOS

[email protected]979-218-2286

Joseph CacciapagliaBusiness Member

Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes

6y

I'm a big fan of San Antonio. I moved here a couple years ago in large part due to the fantastic long term outlook of the real estate market here. The thing is, there is no "right" answer, so you just need to pick a market and go all in.

Also, I think the concept of a "light BRRRR" is a little problematic. I have a lot of newer investors approach me with this idea, and it's very difficult to implement in practice. If you're not doing a significant renovation, then you rarely add the type of value you need to make the BRRRR strategy work properly. It doesn't make sense to pay closing costs on the refinance for the limited cash out you'll receive, because you weren't able to add a ton of value. You're just not building enough equity with a "paint & carpet" type deal in most cases. I think either doing a real BRRRR with a significant rehab or just a simple buy and hold both make sense, but trying to split the difference doesn't seem to work the way a lot of people would like it to.

Joseph Cacciapaglia powered by Morty

2 Reply

OP

Real Estate Agent · Walnut Creek, CA · Member since 2019 · 10 posts · 9 votes

6y

@Brenden Mitchum - I understand deals may be hard to find, especially at first, so you’re right, I shouldn’t give up and choose a different market if I can’t find something at first! It’s encouraging to hear that good deals can still be found in Atlanta. I think I’m leaning towards Atlanta as I have extended family there.

Alex Olson

Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes

6y

@Haley Dahlgard I would suggest reading David Greene's book on out of state investing. It walks you through many of the steps you should consider when looking at an out of state market. Of course I love Kansas City but it is because I live here and frequented it often when I was young. You may have another market that is great to look at because you have been there many times...like...and it is affordable! Hope that helps!

Nick Peters

Specialist · New York City, NY · Member since 2019 · 400 posts · 168 votes

6y

@Haley Dahlgard

Welcome to BiggerPockets! You came to the right place to learn more about real estate and connect with other motivated investors. BP is full of great content, so I strongly recommend you to have a look at the following resources:

1. Start by reading the Ultimate Real Estate Investing Guide: https://www.biggerpockets.com/guides/ultimate-real-estate-investing-guide/introduction

2. Then check out other online guides available here: https://www.biggerpockets.com/guides

3. Have a look at BP's blog where new articles are published every day: https://www.biggerpockets.com/blog

4. If you wish to network or ask specific questions about your local market, you can go to your local real estate forum and discuss with investors from your area: https://www.biggerpockets.com/forums/86-local-real-estate-networking

5. Or you can directly meet them by registering to real estate events around you: https://www.biggerpockets.com/forums/521-events-and-happenings

6. Finally, BP has various tools available to help you analyze your deals (rental, flips, wholesale, etc), feel free to use them: https://www.biggerpockets.com/investment-calculators

Please let me know if I can help, and best of luck!

OP

Real Estate Agent · Walnut Creek, CA · Member since 2019 · 10 posts · 9 votes

6y

@Joseph Cacciapaglia - There’s a lot of things I like about the San Antonio market. A couple of negatives may be the lower median wage and higher property taxes. What do you think about these two things? Thank you for your insight regarding “light BRRRs”. If I still wanted to go with a lighter rehab without refinancing, it would still be adding value to the property, correct?

Aaron Bihl

Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes

6y

@Haley Dahlgard I think you are definitely right to be concerned with our property taxes in SA. I live here, invest here, and absolutely love the city but property taxes make it difficult. And the tough part is they are unpredictable. I have a house i'm about to dump 85k in to renovate and somehow with no changes last year the appraised value went up 16% and there is so my junk outside this house it's going to take 5-6 dumpsters. Another one I own went up 60% this year. The only thing you can do is protest your taxes each year.

Also, light BRRRR deals are hard to come by here. And investing out of state is hard. I recently got a call about a house an out of state investor bought and they have been paying a hard money note for almost a year and with a few bad contractors they are 200k or so into a remodel that still needs over 100k in work that has an arv in the low 300s.

Regardless of where you choose, find some reputable and reliable people and you're going to have to babysit your projects even if you live far away. I would suggest being as hands on as possible for the first few until you have systems and place and folks you can rely on.

Derrick LindPro Member

Rental Property Investor · Hayward, CA · Member since 2019 · 31 posts · 11 votes

6y

Definitely read Greene's book. It's a must. Brandon's rental property book is also great.

Best of luck. Hopefully, we'll see a flow of success stories from you over the next few years.

Zeke Liston

Real Estate Agent · Columbus, OH · Member since 2018 · 1k+ posts · 1k+ votes

6y

Columbus, OH is a great market for the BRRR strategy @Haley Dahlgard!

https://www.facebook.com/Multi...

Melanie Gatton

Sacramento, CA · Member since 2017 · 2 posts · 0 votes

6y

Neal Bawa is the data king! Here’s his Facebook page:

He just did a live video yesterday (3/16/20) at 10:00am where he explains his entire process of choosing where to invest. His YouTube channel is great too. And he’s affiliated with two Meetup groups here in a Sacramento that would be great for you to network:

http://meetu.ps/c/4f80Y/jmSgT/...

http://meetu.ps/c/3BHjL/jmSgT/...

Account Closed

Real Estate Agent · Cleveland, OH · Member since 2019 · 33 posts · 19 votes

6y

@Haley Dahlgard

Hey Haley!

My name is Noah Mehrle. I just recently graduated undergrad from CWRU and have my real estate license. Next year I will be in Cleveland doing my Masters. I will have time on my hands. Connect with me. Let's see if we could figure something out.

Noah

[email protected]979-218-2286

Joseph CacciapagliaBusiness Member

Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes

6y

Originally posted by @Haley Dahlgard:

@Joseph Cacciapaglia - There’s a lot of things I like about the San Antonio market. A couple of negatives may be the lower median wage and higher property taxes. What do you think about these two things? Thank you for your insight regarding “light BRRRs”. If I still wanted to go with a lighter rehab without refinancing, it would still be adding value to the property, correct?

There are certainly going to be things to worry about in every market. I think those are two worth considering. I'm not terribly concerned with the low median wage, because it's still way above what you need to afford the average rental here. Also, there are plenty of zips with rental stock with significantly higher median incomes.

Of course, I'd love to see lower property taxes. That's the trade off for having no state income tax. It's just something you have to account for when running your numbers. If you're a pure cash flow investor, it can make it pretty tough. I find most of the out of stat investors that find there way here are more focused on total returns than cash flow.

Joseph Cacciapaglia powered by Morty

OP

Real Estate Agent · Walnut Creek, CA · Member since 2019 · 10 posts · 9 votes

6y

@Aaron Bihl - I know OOS investing can be hard, but plenty of people find a way to make it work. Yes, I definitely need to do what I can to find a good contractor so that doesn’t happen to me! Why do you think the appraised value went up 60%? That is a lot! How does that affect property tax? Isn’t there an appraisal when you first buy and the property tax is based off of that?

@Melanie Gatton - Thank you for the resources! I see you’re in Sacramento, I’ll send you a PM.

@Joseph Cacciapaglia - Thank you. I think I need to decide how important cash flow is to me. When you say investors in SA invest more for a high return rather than cash flow, do you think most of them are still receiving positive cash flow of at least $200/month?

[email protected]979-218-2286

Joseph CacciapagliaBusiness Member

Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes

6y

Originally posted by @Haley Dahlgard:

@Aaron Bihl - I know OOS investing can be hard, but plenty of people find a way to make it work. Yes, I definitely need to do what I can to find a good contractor so that doesn’t happen to me! Why do you think the appraised value went up 60%? That is a lot! How does that affect property tax? Isn’t there an appraisal when you first buy and the property tax is based off of that?

@Melanie Gatton - Thank you for the resources! I see you’re in Sacramento, I’ll send you a PM.

@Joseph Cacciapaglia - Thank you. I think I need to decide how important cash flow is to me. When you say investors in SA invest more for a high return rather than cash flow, do you think most of them are still receiving positive cash flow of at least $200/month?

It depends a lot on the price point, financing, and strategy, but in general I'd say no. There are certainly some high cash flow opportunities here, but they're not typically in the same parts of town that you'd expect to perform best in the long run. There really is no free lunch when choosing where to invest. You're almost always trading higher cash flows in year 1 for better overall returns. It's rare that you'll find a market/sub market that provides strong cash flow that also has decent rent growth and appreciation. I like San Antonio, because we have plenty of deals where you have a positive cash flow day 1, but also has great fundamentals that create growth in the long run. If your plan is to reinvest your higher cash flow anyway, you're often better off going with the deal with the stronger overall returns. If you need that cash flow to live on today, then that's a different story.

Joseph Cacciapaglia powered by Morty

Stone Saathoff

Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes

6y

You mentioned wanting to do BRRRR, but also no/low money down, those two don't really go together. The whole concept of BRRRR is to benefit from discounted deals by buying in all cash. 80K is close to enough to be able to do that in San Antonio, but I think you may want to decide which route you want to go as those two are not the same.

Aaron Bihl

Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes

6y

@Haley Dahlgard no clue on taxes, it seems when properties change hands that’s used to increase the value. The tax assessors office looks at the outside of the house and determines it’s appraised value (or at least that’s what they say their process is).

Appraisals and MLS data are private and they aren't supposed to use that since we are in a non disclosure.

The appraisal district will send out a sneaky letter asking what you paid for the house but you don’t have to disclose it.

And @Stone Saathoff low/no money down and BRRRR absolutely go together. That's where hard money and private money come in, a "cash sale" often isn't cash. And there are lenders in SA that will lend 100% loan to cost if the deal is good enough making it an ideal scenario to invest with little out of pocket and then refi out of it, hopefully with equity and some cash back.

Aaron Bihl

Investor · San Antonio, TX · Member since 2017 · 344 posts · 268 votes

6y

@Haley Dahlgard but full disclosure, if I were an out of state investor I would be much more interested in Midwest markets that have lower price points and better cash flow. I love San Antonio but I don’t know that it would be at the top of my list if it wasn’t in my back yard

Stone Saathoff

Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes

6y

@Aaron Bihl Not sure if you have actually read or listened to the BRRRR book, but you are dead wrong on that one.

Of course you can use hard money to purchase, rehab, and then re-fi with the bank but that is not the BRRRR strategy. He explicitly suggests saving up enough so that you can do purchase and rehab in all cash.

[email protected]786-494-6766

Robert EllisBusiness Member

Developer · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes

6y

Originally posted by @Haley Dahlgard:

Hello BP! I am a new investor who recently moved to Sacramento from the Bay Area. I would like to househack in Sacramento, but want to start focusing on investing out of state.

I work as on occupational therapist, and my first goal is to be able to cashflow enough that I can be financially free in 3-5 years, and then grow from there. I currently have 80k to invest, and can save about 15-20k more per year. I am interested in no/low money down and creative investing strategies, as I don't think I can reach my goal if I have to put 20% down on each property. I'm thinking BRRR is the way to go. Perhaps do a lighter BRRR first to gain experience, then do heavier rehabs. I'm also interested in seller financing and investing with partners (who can provide more capital) once I start to build my investing resume. I would really appreciate any suggestions on how to work with the amount of capital I have to reach my cashflow goal!

I have been spending way too much time trying to choose an OOS market. I am thinking that I should avoid the super popular markets because there is probably a lot more competition, but I’m not sure if this is the right way to think. I am currently looking into San Antonio and have also considered Columbus, Cleveland, and Atlanta, as I have friends and family there.

I love real estate and am eager to get over my analysis paralysis, start making connections, and building my team!

Haley

you can focus on easy BRRRR deals in columbus ohio. i'd look at single family between 50k and 70k and doubles between 75k and 100k with light value add and buying below market. plenty of opportunities even on the market.

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Mike D'ArrigoPro Member

Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes

6y

@Haley Dahlgard It looks like you have a good plan. The only thing that I would suggest is that you narrow down your criteria more. The 4 markets that you mentioned are all very different markets so it leads me to think that you haven't defined your criteria well. Also, keep in mind that in order to force equity, you have to make some substantial improvements. You may not be able to get your cash out with a "light BRRRR".

DJ DawsonBusiness Member

Real Estate Agent · Sacramento, CA · Member since 2015 · 394 posts · 259 votes

6y

@Haley Dahlgard! Congrats on the start of your journey I am local here in Sac too, I think you are right going to OOS route as a buy and hold , not necessarily from a cost standpoint, but the tenant friendly state that is California can cause issues for you as a landlord down the road, and cash flowing here in California is much more difficult that some OOS options. I will agree with what @Alex Olson said read David Greene's book on OOS RE investing! Best of luck!

Anthony Morrow

Member since 2020 · 5 posts · 5 votes

6y

I am a true "newbie", is there a glossary of terms I can obtain just to keep up in this conversation ?? OOS? I feel like I am back in boot camp drinking out of a fire hose...

OP

Real Estate Agent · Walnut Creek, CA · Member since 2019 · 10 posts · 9 votes

6y

@Aaron Bihl - Thanks for the honest advice!

@Mike D'Arrigo - Do you mind elaborating on how Atlanta, San Antonio, Cleveland, and Columbus are very different markets? My understanding is that some markets are known for great cash flow/low price points (more of the midwest markets such as Cleveland and Columbus?) and others you are able to cashflow but maybe not as well, but are better for long term growth due to high job and population growth (such as San Antonio and Atlanta?). Is there something else major that I'm missing when trying to compare the markets?

@DJ Dawson - Great meeting other investors in Sac. Do you attend meet ups here? If so, are there a lot of out of state investors at Sac meetups?

@Anthony Morrow - OOS = out of state :)