All Forum Posts by: Zahra Fathollahi

In general the rents lag the market in both directions. The market has gone up significantly over the last decade and rents were on pause in early pandemic due to low consequences of non-payment. this leads to reduced rent to cost ratios at purchase. however, this also leads to crazy rent increases such as the $700/month average rent increase on San Diego 3/2 SFH in the last year.

I have not purchased in over 1.5 years, but virtually all my San Diego RE have over 2% rent to purchase ratio (2% ratio produces outstanding cash flow). They started with poor to OK ratios but the rent increases have made the ratios great. I only have one 3/2 SFH rental and their rent increase was $800/month in the past year (slightly more than the average (~$100/month more than the average)). You can see how poor cash flow can quickly turned to good cash flow with the type of rent increases that my market has supported.

My RE market YOY increase is 3% so this is a year were rents will narrow some of the gap between rents and property values of the past decade (my average unit rent increase will be ~10% so 7% higher than YOY RE appreciation). There have been few years in the past decade where rents increased more than values in my market.  I suspect maybe the last 2 years are the only years in the past decade where the gap between rent and values has narrowed. The rents in my market are reflecting the lag between price and rent; the rents are still playing catch up.  

Good luck

@Zahra Fathollahi it would be great if you could invest locally to learn the rental business and THEN go out of state for better cashflow deals. Even if it means doing a joint venture that negatively cashflows, but you sell in 2-5 years for the appreciation.

If you can't do that, then like many in California, you will be forced to look out of state for cashflow. The challenge is finding people to do business with you can actually TRUST that align their interests/income with your interests/ROI.

Read this copy & paste info below to learn one approach to analyzing an OOS market, so you can apply it to wherever you decide to invest:)

You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/member-blogs/3094/99854-deep-dive-into-metro-detroit-cities-ecorse

Our analysis is a template you can follow for any city, but doubt you'll find this much info for any other market in the US.

So, why would you invest remotely anywhere else?

How can we assist you further?

@Zahra Fathollahi

Thank you! 

Here are a few things to keep in mind: 

1. You will be living w/ or next to your tenants. This just is what it is. I considered at one point purchasing a trailer to live in on the side of the home, but eventually decided against it. I realized having roommates made the most sense for me, and renting by the room would provide the most safety and rental income. 

2. There will almost certainly be instances of things you do not like (parking, trash, noise, pets, etc.) Yes, you can hire property management, but I personally would not suggest that when house hacking initially. You will learn a lot of how to manage people and your emotions.

3. Cash reserves are huge. It's always a fantastic peace of mind to have at least 3-6 months to be able to make the full mortgage payment. If you do not have this, that's OK, but there is more risk. 

4. Try finding locals who have done it in your area. Understanding their process will be instrumental to you learning. If you can find multiple people (3-5 is ideal), that will give you context on different people's experience, and you will likely start to see patterns. 

5. Consider moving out of state or in a completely different area in your state. This one may be controversial, but the reality is in some areas house hacking is not realistic with a small amount of money (especially with current interest rates). Moving may not make sense for you, and that's totally OK. I was willing to move to an area where I really did not know many people, because I knew long term it would be a good call. 

6. Stick to the lease. Having a strong lease agreement is a huge benefit. You can make some exceptions where you see fit, but if people try to really push boundaries I suggest being firm on  

House hacking for me was not "fun". I pushed myself, learned a ton and 100% do not regret it at all.

It can completely change your life, but you need to make sure it's right for you. 

@Zahra Fathollahi

SoCal is traditionally not a cash flow market. But, the appreciation there can/has been phenomenal. 

You'll hear about cash flow a lot here - but it's not always the best strategy for everyone. 

House Hacking is a great strategy starting out, and what I did to now have 2 rentals that I've now moved out of. 

I'd recommend checking out that section on BP! Good luck!

I have found multiple tenants through Facebook Marketplace. However, a couple of things to note when posting on FB:

1. You will get bombarded with leads. It will be a part time job filtering the leads.

2. Many of the leads are low quality. They will reach out, you respond, and then you never hear from them again.

3. DO NOT SCHEDULE PRIVATE SHOWINGS. Do open houses and have them come in that window, no exceptions. I cannot tell you how many no shows I have gotten. Once I had 17 scheduled showings during my open house. Only 2 showed up.