All Forum Posts by: Sarah Lacy

@Bonnie Low solid sound advice. thank you :)

Quote from @Travis Biziorek:

Quote from @Sarah Lacy:

Quote from @Travis Biziorek:

Sarah, we have a lot of parallels here and I'd be happy to talk through what I've done.

My wife and I were in the SF Bay Area (Walnut Creek after being in SF proper for ~8 years) but relocated to Metro Detroit in 2017. We were there for 5 years total. During 2.5 of those years we aggressively built a rental portfolio with the goal of moving back to CA without my wife having to go back to getting a W2.

We moved back (now on the Central Coast) in mid-2022. And... we're now building and ADU (literally started work today) that we'll operate as a STR.

The states you listed likely will not get you to a work-optional lifestyle any time soon. You're going to need a heavier cash flowing market. Even then, it will likely be 5+ years before you really start feeling the cash flow moving the needle for you.

I'm not trying to discourage you, quite the opposite! The best time to start is now but I don't think the areas you're targeting make the most sense given your goals.

Hi Travis, wow that's awesome. Thank you for sharing your honest feedback! It does give me some food for thought.. I don't mind 5+ year timeline granted I have a thought-out plan ahead of me, or even moving temporarily per se.. however, it must be considered that will reduce the household income and cash that can be used to invest in real estate. My income is remote, my partners not so much. 

"heavier cash flowing market".. could you give me some more color here? does that mean lower income, up-and-coming areas, is there a number I should have in mind? Maybe even using one of  the theoretical examples below as I'm a visual learner... (these were TX props)..

 Sure, by "higher cash flowing market" I'm generally referring to the midwest. Yes, homes tend to be lower priced. 

These examples you're showing... whoever is providing you these is selling you hopes and dreams. 

The biggest red flag here is your maintenance and capex lines items. There is ZERO chance these stay true to reality. I don't care if this house is newly renovated or even new construction. You have to put some money away for these items.

Usually, I'm assigning 20% of gross rents to capex/repairs/vacancy as a bucket line item. That's probably a bit high but I like to be conservative. I don't usually see folks going below 15% here. 

For reference, your first example is assigning about 7% gross rents to that bucket. 

The other thing I don't like is that they are showing some return values that include principal pay down. There's really no reason to do this unless they are trying to distract from the actual (low) CoC returns.

 HA! love it, thanks Travis very helpful! :)

 Hey Josh, thanks for your reply. I can go anywhere, but my partner would be commuting.. but I'd be willing to go to coto de caza, RSM? :)

In all seriousness,  this is where I get hung up. I love my lifestyle here in CA (i'm at the beach and hiking weekly, if not daily) and riverside... well it's dusty & hot! I moved from Tx after all; so then i look at the numbers and see I can't make anything work here in south OC and then go back to out-of-state investing as my solution until I can get into something here... 

it's a horrible mind game.. and the best time to start is now.. 

 Hi Nicholas, thanks for your speedy reply and recommendations! 

Geez the turnover costs cited in these forums are bananas! 

I'd love to invest closer to home (which is now CA), I think that without it I'm missing the opportunity to get hands-on learning. I'm also willing spend some time in TX, specifically the DFW metro because getting around is fairly easier the way the airport is situated. But as I mentioned in another reply, this thread is helping me gain clarity that I do want to break into the CA market, one of the reasons i moved here,  but I'd need considerably more cash to do so. Perhaps I just continue to save and search...

thanks again!

Hi Nathan, thanks for your response! Sage advice. This thread has helped me gain clarity around asking the question that if CA is where I'm going to be/want to be I should get aggressive on having something here (and get in on the appreciation as soon as I can). Even if I have to trade "down" to eventually trade up. But I also know 100k won't get me there in the coastal cities, so I'd probably have to give some serious thought to relocating.. 

 It seems we have some of the same designations (I'm a licensed TX CPA and CA realtor) (= 

Hi Travis, wow that's awesome. Thank you for sharing your honest feedback! It does give me some food for thought.. I don't mind 5+ year timeline granted I have a thought-out plan ahead of me, or even moving temporarily per se.. however, it must be considered that will reduce the household income and cash that can be used to invest in real estate. My income is remote, my partners not so much. 

"heavier cash flowing market".. could you give me some more color here? does that mean lower income, up-and-coming areas, is there a number I should have in mind? Maybe even using one of  the theoretical examples below as I'm a visual learner... (these were TX props)..

Hello,

I currently live in California and am looking to buy my first rental and trying to decide which state and strategy I should pursue to start.

A little about me:

-W2 (remote) - not sure how long will last, so trying to purchase as many props with this stability loan officers like to see

-up to 100k cash to invest without touching retirement accounts

-currently saving $3k/ mo to go towards RE, can push higher

-I would like to be work optional ( build a real estate portfolio) in the next few years so decided to rent to stay more flexible and keep expenses low, well as low as you can for California. I currently bring in 60% of the household income but after my nearly 30% tax bill my partner (1099) brings in just about the same. Ideally would like to live off of my partner's income plus some passive income from real estate investments. But this will affect our savings rate for sure, and I don't see us being able to get conventional loans with my partner's reported SE income right away.

Moreover, I would like to start a family in the next year or two and be fully present.

Areas considering:

Texas - I was born and raised here, lived in all areas along I 35, and experienced the growth firsthand before moving from DFW to California in 2019. I thought as a way to help lower my tax bill I could buy a ‘primary residence’ here … and then rent it out…

Feel like something that I know these areas, they are no longer in my backyard per se but if I were to ever move back in the future I'd have some property there…

I'm not sure if my sentiments are clouding my judgment here, but I'm seeing props with 1% LTR and in areas that will be/are booming (hello new Universal Theme Park), duplexes in other/less desirable areas, etc. The SFR are a little higher 400-500k and I'm seeing duplexes I can get for less than that… I've canceled out lower-income areas but some are in okay/urban/potential MTR areas.

Tennesse - recommended by a tax strategist (as a STR play put 50k in renovations open under LLC to relieve some of my tax burden). Knoxville area, no state tax, lower prop tax, I've cross-referenced the props I was presented with furnished finder Airbnb and pulled some rental comps in the area to see from all angles MTR, STR, and potential LTR. Maybe a little less than the Texas homes but know nothing firsthand of the state/area beyond the internet and what the agent tells me.

California - feels like a joke for this new investor. After reading David’s book I thought I wanted to househack in California but just couldn’t seem to make the numbers work here in South Orange County, I even got my RE license when I first moved here in hopes of finding a good mentor/broker and eventually use commissions towards a purchase. Was approved for a loan (800+ cr score), just didn’t want to feel “house-poor” and could not make the lack of space make sense after coming from a place like Texas.

After getting prequalified again and changing my strategy to out-of-state, I was out on a trip to Texas this spring visiting a lot of the new builds in the Rockwall area; I flew back through Ontario and saw some of the same builders here advertising homes starting in the 300s here. I grabbed my checkbook and headed to Riverside County that weekend, all to be told I had to get on a list, none were available at the time and they didn’t know when they’d be releasing more. Also taking into consideration CA being a tenant-friendlier state, I’d hate for my first experience to be a bad one. California seems like a distant dream or I’d need to lower my standards considerably.

Initial Goals before becoming disheartened/burned out this spring:

1. 1) LT buy & hold out of state (Newer build/low maintenance, 3-4 bed, good school district)
2. 2) Break into CA market. Prop w ADU or casita, the dream would be a cash-flowing multifamily

I'm now getting hung up on SFR v Duplex, LTR v MTR I'd even be willing to dip my toe into the STR for some of these that I've come across that are already set up on Airbnb

If you’re still here thanks for reading what’s basically my life story, but where I’m trying to seek clarity/mentorship is where to start…

area, buy one prop under the first strategy, buy two, don't buy an SFR go straight to duplex, buy out of state conventionally, then use an FHA for a CA prop, most important figures: cap rate, 1% rule, cashflow, etc etc…

I know I will learn a lot along the way and I’m afraid my analysis paralysis is getting the better of me, but for those seasoned investors, I’m pretty sure you have some wisdom/perspective on what I shared above.

Any thoughts would be most helpful. Thank you