Riverside, CA · Member since 2017 · 15 posts · 5 votes
Newbie here practicing analyzing some properties in socal, particularly Inland Empire). I'm trying to implement the percent rules (2%, 70%, and 50%) but not even coming close with the property values. What percentages is everyone using as a baseline in the socal market? Or is everyone just looking elsewhere?
Wholesaler/ Rehabber/ Rental Owner/ Problem Solver · San Jacinto, CA · Member since 2013 · 18 posts · 5 votes
9y
Those cash flow rules you've heard of are mostly not available here in So Cal. Not saying it can't be done here but it's not very likely in most areas. I have come across a few deals in Desert Hot Springs over the last couple years that I wish I would have held on to instead of wholesale because they would have cash flowed really well.
For the vast majority, the So Cal rental game is an appreciation play, not cash flow.
I agree with @Kelly Singleton that the numbers you have don't work in SoCal. They do work in other parts of the country.
If you're looking to find rentals then parts of the Inland Empire will get you to the 1% rule. Bottom line of course is cash flow. Look in Yucca Valley, Desert Hot Springs (mobile homes), and Hemet for starters.
70-80% works. It just depends on how money is in the the deal.
Finally, I don't know what that 50% is you reference
Investor · Morongo Valley, CA · Member since 2013 · 53 posts · 48 votes
9y
1.25-1.50 percent... with the larger focus on capital gains.
cash flow has always been kinda a wierd thing to focus on.. the focus should be on getting out of the rat race (in the game I play). and any tool/tactic/guideline that gets me there is good
For me, I wanted cash flow from real estate because it felt REAL to me. (unlike hoping for 6% from the stock market). I played the RichDad/Poor Dad board game.. and wanted the cash flow to get out of the RAT RACE.
IF that is your goal (to get out of the rat race), THEN I would HIGHLY recommend you take a look at Mr. Money Moustache ( a financial blogger) and the sledgehammer he takes to the financial media that you need 3Million dollars to retire,etc... or whatever it is nowadays.
2-3 paid off properties paying 1200 month (after expenses)... while living in a paid off house (or sprinter van.hehe) .. GETS you to retirement/out of the rat race using Mr. Money's #'s!!!! woohoo
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
9y
Ignore so called "rules." Each deal must be analyzed on its own merits. You dig in the numbers and figure out your exit strategy. You don't just slap 1%, 2%, 50% and 70% on houses and decide it doesn't work and can't be done. I could give you so many examples of deals I've done that prove how irrelevant these percentages are. This is not a cookie cutter business. Doing what you imagine everyone else is doing will get you nowhere.
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9y
You definitely won't hit any of the "rules" in SoCal. You either have to buy solely for appreciation here (no to negative cash flow in the meantime) or buy out-of-state.
That's just if you are buying straight-up rental properties. If you're flipping or BRRRR-ing or whatever, maybe something can work. @Aaron Mazzrillo is definitely the one to hit up if you are set on SoCal. He seems to make things work pretty consistently. But if you just work with normal agents or straight listings, you won't find anything.
Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
9y
Bought a duplex and a house all on one lot less than 30 minutes from my house in December. Rehabbed and rented all three units. Spent $210K to buy it. $25K to fix it. Rented it for $2,700 gross and I only pay water.
What you seek is available. People who say it can't be found are just lazy. You have to look at lots and lots of potential deals and then get in there and make it happen.
Riverside, CA · Member since 2017 · 15 posts · 5 votes
9y
Thanks everyone for all the advice. I'm starting to see the trend of needing to think outside the box when it comes to finding the deals. @David Jarvi very interesting take on getting out of the "rat race." I briefly googled Mr. Money Mustache and his perspective on financial freedom seems to be interesting. I'll probably pick up his book. Aaron Mazzrillo thanks for the reassurance that the IE market is still alive. You got me motivated to start driving around and looking for potentials and make a list. Not now but on my next day off.