Hi, so I'm a brand new real estate investor and I'm trying to invest in San Luis Obispo single-family properties, preferably houses close to Cal Poly/downtown area. My question is fairly straightforward: do you guys recommend pursuing house flipping in SLO as a viable strategy for profit or is it more of a buy and hold market? Has anyone been successful house flipping in SLO? If so I'd love to hear your story; like how you did it-or if it didn't work out I'd love to hear why. Thanks!
I agree with @Ben Tilbury on everything. This area sucks for cash flow comparatively speaking. No way you'll get even close to the 1% rule. More like half percent rule. And to find something at a discount is like a needle in a haystack. What I'm in the process of doing in Paso Robles is a live-in flip which I will turn into a rental once completed and move onto the next. Purchased a couple years ago as a trust sale for $405k with only 5% down. I now owe $364k and it's worth about $525k. Have put MAYBE $15k into the place as I've done almost all work myself. Dropped the PMI off a while ago and will be refinancing probably in the next month which will bring PITI down to <$2,000/month and I will be able to rent it out for about $2500-$2600. By the time I'm ready to move onto the next hopefully more like $2750. Contemplating what to do with $55k HELOC I'm now eligible for (even more if I want to pay higher interest). Next one I hope to find off market and for a deeper discount and possibly with an ADU. Good luck and let me know if I can help!
Hi Stephen - If you've got the money, I'd recommend a B&H strategy for a couple reasons. The market is really small and there are a LOT of people trying to flip. Not just professionals, but realtors, contractors, and people who have been influenced by TV shows. It's a crowded market.
However, SLO has a lot going for it (e.g. Happiest Place on Earth, a coastal town, a college town, wineries, etc.) and while I do think we are at the peak, once/if we take another dip, things will continue to rise and more and more Gen X and baby boomers try to retire here. If you live hear and have traveled, then you know its a special place.
Hi @Scot Burns, thanks for the reply-super helpful. Flipping from what I've heard from others too sounds pretty difficult in SLO so as you said buy and hold is likely the best option for me.
And the challenge with B&H is most properties won't cash flow without a significant down payment. Forget about 20% down. You need big money or patient money. Best of luck.
@Stephen Wyer As you know SLO is one of the most expensive markets in CA so it’s got a high barrier to entry. But if you have the cash then it’s a great market and there’s always money to be made if the numbers make sense on the deal. There are flip opportunities but you’re going up against more experienced investors who do this for a living so you better have all your ducks in a row first, like financing or cash and contractors. Plus what you stated above is what ever investor and Cal Poly parent is looking for, a fixer upper at a good price next to Cal Poly. Those sort of deals virtually don’t exist or are hard to come by because investors who have properties near the college know exactly what their properties are worth and they aren’t going to sell for below market price. I specialize in investment properties and yesterday I looked at a listing which is $600k and needs another $200k in renovations so that is a more realistic view of what you’re going to come across in SLO and you’ve got to find the right deal that works for your skill level and budget. I think an easier way to get into the market here is buy a property that needs some work but you can purchase with 3.5-5% down owner occupied and you can house hack and fix it up along the way then go and repeat the process. Unless you’ve got a few hundred thousand to invest then you may be able to look into other options. Feel free to reach out or call anytime and I can try to help you get into the market here.
I agree with @Ben Tilbury on everything. This area sucks for cash flow comparatively speaking. No way you'll get even close to the 1% rule. More like half percent rule. And to find something at a discount is like a needle in a haystack. What I'm in the process of doing in Paso Robles is a live-in flip which I will turn into a rental once completed and move onto the next. Purchased a couple years ago as a trust sale for $405k with only 5% down. I now owe $364k and it's worth about $525k. Have put MAYBE $15k into the place as I've done almost all work myself. Dropped the PMI off a while ago and will be refinancing probably in the next month which will bring PITI down to <$2,000/month and I will be able to rent it out for about $2500-$2600. By the time I'm ready to move onto the next hopefully more like $2750. Contemplating what to do with $55k HELOC I'm now eligible for (even more if I want to pay higher interest). Next one I hope to find off market and for a deeper discount and possibly with an ADU. Good luck and let me know if I can help!
Yes, I agree with everyone above. 1% rule is almost impossible in SLO, If you're looking for long term buy and hold you're going after appreciation over cash flow. If you wanted to go long term buy and hold and not have to put large percentages down expanding your range to North and South SLO County could be beneficial. Possibly looking at multi family homes, or starter homes at lower price points can make the numbers work. I'm also much more attracted to properties where I can take advantage of the newer ADU laws which can really make your numbers look much better. Who knows what will happen over the next few years, but I would bet on SLO as one of the best places in CA for appreciation over the next 10-30 years.
My wife and I have been able to pull together a .86% Rule Duplex in Grover Beach with a bangin COCROI over the last 3 1/2 years. We totally stumbled into it and feel super blessed now that we realize what we were able to purchase. We've definitely experienced the equity build a lot more than the cash flow but the cash flow is still there. I know a lot more people that buy and hold than flip.