Where are my pitfalls?

[Hitesh Deka]

Hi all,

I am a newbie in real estate and getting to learn from BP. I live in the bay area, CA (on rent) with my family. Home prices here are so high, more so in good school districts, I cannot afford (my be I do not want to ) buy a house to live here. I have some cash in hand and was thinking of buying an apartment (Potentially managed my a company -so that I can do things from here) in Texas (Plano or Austin). My target is to earn rentals which should be 100% more than my mortgage.  In the long run, I want to develop equity and buy more similar properties or sell it off if the market looks better.

1. With your experiences, what could be my pitfalls if I take this strategy? 

2. Is it a good idea to put money in an investment property or rather buy a home to live?

3. Is it a good idea to invest in Texas living in bay area CA?

Thanks,

HD

[Account Closed]

Originally posted by @Account Closed:

Most of our cash buyers are in California. You have to be careful who you invest with out of state, but I have a great contact/mentor here in the Alamo city. Austin investors do well but it's hard to break in there with the high prices. My partner started there 13 years ago and came down here quickly when he discovered he could buy 30k distressed houses and make 15% cap on them with no maint, if you owner finance. Obviously I am a fan of investing in TX :), but I work with a guy who's done 1000 deals in 13 years, and he is really changing my life in a great way. 

So can you show how you are calculating NOI? What operating expenses are you including? Can you provide a couple of 15% cap rate comps in your area that you were NOT involved with?

As far as risk and expense, a higher cap rate means the market perceives the NOI to be worth LESS than lower cap rate properties. Why do you think your properties (NOI) are perceived to be worth less if not because of high expenses or risk?