Investor · San Bruno, CA · Member since 2017 · 19 posts · 22 votes
Hello!
I have around 200k willing to use for investing. I can’t decide if I should look for a place out of state as rental or pay down payment for a house in bay area(where I live) and rent part of it out. Or purchase a piece of land...and build something on it. I don’t own any properties right now..looking to take the first leap..not sure where to start..
@Anthony Dooley your fundamental premiss on the lack of cash flow in hot markets like the SF Bay Area is incorrect. Perhaps you are considering immediate cash flow as your key indicator, but the real analysis should consider an overall calculation leading to wealth. Cash Flow + Appreciation = Wealth. It would be absolutely a waste of resources to do a deal that has either cash flow or appreciation = ZERO over a long hold period. Both @Amit M. and @Account Closed have been extremely successful in this market and I am certain the cash flow more than $100 a door per month.
The fundamental rapid appreciation of "A" markets allows an investor to take a short term hit on cash flow. Based upon the down payment size and price negotiation the property can be cash flow neutral at initial acquisition or in many cases cash flow positive. Through appreciation, forced or otherwise, the property can be refinanced to pull most, if not all, of the initial investment out. With proper management and business plan structure, a property can produce an essentially infinite ROI allowing an investor to roll funds into the next deal while at the same time being able to show an increase in assets and income.
To be honest, I have no idea what the market in Columbus Georgia looks like, so I cannot comment on the application of a Bay Area strategy would be in that area. More than not, my strategy would not work in Columbus... but it might, I don't know and I will probably never find out. Cats and lions are both felines, but taming them takes different strategies.
@Wenqian Guo if you are single, doing a house hack is the simplest and most tax-efficient way to start building your wealth here in the SF Bay Area. You will be able to get a lower interest rate. You will be in full control of your assets. You will learn the basics of being a landlord. Just don't tell your tenants you are the landlord. Get housemates and just let them know that you will be handling the master lease and that all issues will be flowing through you.
Good luck with your next step in your real estate adventure!
@Arlen Chou If you think $100 per door is a good investment based on the cost per door in that market, then we have a difference of opinion. As I stated, I only invest for cash flow. You can invest with any criteria you choose. Appreciation is not a return until the property is sold or refinanced. If and when the market goes down, your appreciation will be lost. Best wishes.
@Medi Sarwary there is no real reason to hide the fact. However, having a 3rd party to defer decisions too is always a good negotiation tactic to gain you some time to make a more informed/thought out decision. If a person you are living with, who knows you are the owner, were to ask you to replace the carpet in his room, you immediately must answer yes/no or let me think about it. This creates a small amount of friction within the house for everybody living there. However, if you say I will need to discuss the matter with the owner, you give yourself space and the opportunity to deflect the final decision to a third party is created. As an example, if I go to a car dealer and they start the pressure sales pitch I will say "I cannot make the decision because I must defer to my wife".
@Arlen Chou Got it. Thats a nice barrier to have, I think this is the same reason my Dad opened a P.O. box. With all the privacy data issues these days I wonder how easy it is for the tenant to look up the owners personal information.