Invest where I live or invest where I know?

Question

Hi all,

I was wondering if it would be better to flip homes where I live and don't know the market that well or invest where I grew up in a market I know pretty well.

I moved to Los Angeles a few months ago, but I grew up in eastern Pennsylvania (Nazareth to be exact). I know the market pretty well and still have connections back there, including feet on the ground. Plus, houses are much cheaper in Pennsylvania than in LA.

Any advice is helpful.

Thanks!

Logan Allec · Answer

@Jeremy Coyle In my opinion, house hacking a 3- or 4-unit property using FHA 3.5%-down financing is the best option for a young person looking to get started investing in real estate.  Just consider the benefits:

• You immediately get landlording experience, not just one with unit, but with three and when you move out four.
• With only 3.5% down, you'll still have plenty of cash for other investments, such as a Pennsylvania property.
• You live for free, or at least heavily subsidized by your tenants.
• In 30 years when the mortgage is paid off, you’ll be sitting on a million-dollar asset that cash flows thousands of dollars per month.

It’s really a no-brainer for 20-somethings, especially if they're currently renting and throwing away hundreds (in some places thousands) of dollars a month in rent making somebody else rich.

Good luck, man, let me know what you decide, and feel free to reach out to me with any questions.

Jeremy Coyle · Answer

Thanks everyone for the replies!

@Sunny Vig - you have a very good point. I never thought about it like that.

@Richard Bradshaw - agreed. just in nazareth alone there have been a ton of new housing developments and new stores along 191 between nazareth and easton.

@Thomas Zaremba - I totally agree. there is a smaller margin of error when buying lower priced properties, which is why i still sway back and forth between the expensive market of LA where there might be a little more room for error as opposed to PA where the prices are lower but have a small margin for error.

@Ashley Wilson - thanks! i'll connect with you soon!

@Kevin Peguero - yeah, that is my main motivation for investing back in PA.

Logan Allec - thanks for the input Stephen, but for now I am just looking to flip. Possible rentals in the future though!

Thanks again! Please send any references my way as I start building my team.

Richard Bradshaw · Answer

Invest in the Lehigh Valley. There is so much development in that area, over $2BB committed in that past couple years. California is at another peak in the market or at least close. LV is about to appreciate greatly.

I do like Logan Allec's idea also.

Stephen Franco · Answer

For flip, either go where you know or be a money LENDER (not just equity partner) on a deal with someone in their local area.  Like for my flips, I let people supply the money for a fixed rate of return plus a % of the profit.  That way, they know they're safe.

Ayodeji Kuponiyi · Answer

@Jeremy Coyle I would invest in PA, not because that's my current residence state :) but because of the affordable entry + knowledge of the area.

Sunny Vig · Answer

Hi Jeremy,

I would say that if the spread is right then you can invest locally or out of state. If you are getting a super deal out of state, but because of distance you let the deal go by i would say you left a lot of money on the table, now if you get a local deal with little spread and you do the deal because its in your backyard, i would say whats the point of putting the same amount of efforts and getting little to no money at the end.

Thomas Zaremba · Answer

Jeremy,

From my experience, flipping a home from afar is risky at best.  Unless you have a fully and completely trusted GC, you need to monitor the work progress and quality, etc, on a regular basis. (Weekly or so is how I feel comfortable).  I wouldnt consider a contractor fully trusted and vetted until he did about 4 or 5 flips for me and I knew exactly what I was getting with him.

Hot, high priced markets like LA can be ideal for flips because the numbers are so big.... buy a 600k house and sell for 1 million.... you can potentially cost overrun and still have a huge pad to make it work.

Conversely trying to flip a 60k house and sell it for 100k is really hard.  Any price overruns and your margins are down into the single digits because the spread is so small to begin with.

On the other end, you can landlord from afar, so long as you are buying deals that cash flow well, and your team is in place. That's much easier in PA than in LA.

Bottom line...  IMO, close range flips, long range landlording.

Cheers,  Tom

Ashley Wilson · Answer

I would say PA. I am also in SE PA and flip here and I think it's great for so many reasons! If you need any help with anything, feel free to connect! Good luck!

Stephen Franco · Answer

I know my market of Scranton/WB makes such great (15-25%) cap rates I can pay people 10-12% on mortgages and still make money.  I love rentals in this part of PA

Invest where I live or invest where I know?

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