Los Angeles not for beginners

damn this place is expensive! how the hell does anyone pull positive cash flow here? :banghead

I think I might move back to Texas to start my real estate career…

would you guys agree that los angeles is the wrong place for a beginner?

I mean, there might be a couple areas with decent appreciation, but without a lot of capital, I wouldn’t be able to stay afloat month to month…

 The strategies on this website, and those recommended by almost everyone who is a guru or writes a book on real estate, recommend positive cash flow.  You're right.  Money can be made in LA but it isn't good for a newbie.
 Some of the content on this site explores the ideas of bird dogs and short sales, which may be a good business for a beginner in LA.
 If you want to explore the rental business, and you want to stay in CA, I've heard (but not confirmed) that the central valley has some deals that may cash flow.
 Pick an area first, then pick a strategy.  I know lots of Californians investing in Idaho, New Mexico and Texas.  I personally wouldn't want to have to fly 4 hours before I could get to my rental property.
 Just out of curiosity, what are 3 bedroom 2 bathroom houses going for down by UCLA?

A quick search on realtor.com for 90024 shows 3 bed/2bath homes (not condo) going for 1.0-1.3M.

thanks for the advice!

You don’t live in LA to be rich, you live there because you want to live there. You have to remember it is not about the money it is about the lifestyle. The reason we are running around this planet is to live like rock stars. We want the mansion and the pool. I have found in my travels that it costs the same to be poor everywhere in the USA. You can find hamburger meat on sale for $0.89/pound, 10 pound bad of rice for $1, and someplace to live for $300/month in every city in the USA. But where can you find a mansion with a pool that you can actually afford. Well it ain’t in LA. So if we are trying to be rich, then why do we live in places that you actually have to be rich to live like you are rich? You should move to Nashville, or Mobile, or some place that you can actually get there.

while I agree with the concept that money can be made in any market (given the right techinque), SoCal is a rough market to dive into. First and foremost, there is a ton of competition. Competition is bad for any invest type and that couple with the large deal size (as compare to other places in the country), makes for a tough place to start.

With respect to competition, I’ll use the example of foreclosures. I know some guys working that market and they have it down to a science (database syetms for tracking NODs, plenty cash ready to go, etc). What they leave behind is marginal deals and assorted crumbs. Finding “diamond in the rough” deals is much harder than smaller, less competitive markets.

One strategy is work a niche market on the outskirts of LA. I’ve done this with some success in the past ('99-'04), but like always, you must have an excellent knowledge of the market and what is happening in that market. This is true regardless of where you invest. These days I fish in other waters and may get back into the SoCal market later this year or next.

I left LA for the same reason a year ago. Before I left the best potential seemed to be simi valley.

Rentals seem impossible to me though, rents were $2000-$2500 for $600k houses in the san fernando valley. I think you need to rehab or flip, I don’t see cash-flow through rentals.

I don’t think rental property is good for beginners whether it’s So Cal or otherwise. It’s not the simplest of strategies to get your feet wet and has the most potential for problems.

There are tons of properties here in So Cal that are under $1MM, which is pretty much the major threshold for financing. The one thing about So Cal that you do not have other places is that you can buy a property for only a 10% discount and still make money.

I guess if big numbers are scary to you, then So Cal is not the best place to get started, but if you can get over the sticker shock, then you should do fine. If you buy a property at 70 cents on the dollar, it doesn’t really matter if it’s $60,000 or $600,000 you won’t have too much trouble moving it.

JL I have to disagree.

  1. If you are a beginner investor you’re probably closer to a sizable down payment on a 60k property than a 600k property.

  2. You can make money anywhere for the right price/terms.

3)I like big numbers but the rents compared to the purchase prices here don’t make sense for new investors (No cash flow). I’ve noticed a lot of inventory sitting on the market here in So Cal so they arn’t selling and most are dropping price. 4plex here in Costa Mesa 950k, units rent 1200 each. Do the math.

I really appreciate the advice from so many different points of view. many thanks to all. i’ll read more thoroughly when i’m not so jet lagged…

I don’t think you disagree with me, it just appears that you didn’t understand what I was saying.

  1. I never addressed down payments; if I had, I would say that you don’t “need” one. There are some deals that may require it, but if you’re a beginner, you probably shouldn’t be going for that deal.

  2. This is actually in agreement with what I was saying: “70 cents on the dollar…”

  3. I said that I don’t think beginners should be doing rental property anyway, so rents don’t exist in my conversation. Why is a beginner purchasing a 4 plex in Costa Mesa? A beginner should be doing something that’s pretty difficult to mess up, like buying a pre-foreclosure that’s worth $400k at $300k. I don’t care what the market is doing, you will not have a problem getting that sold.

See, I think we agree… kind of.


I apologize I misread some of your post and thank you for commenting further! :biggrin


The 4plex in CM was just an example since the original forum poster was in the area. Cheers!


“Opinions are the cheapest commodities on earth. Everyone has a flock of opinions ready to be wished upon anyone who will accept them. if you are influenced by “opinions” when you reach decisions, you willnot succeed in any undertaking, much less in that of transmuting your own desire in to money.” Napoleon hill

That quote by Napoleon Hill is too simplistic to be useful. The trick is to know which opinions to take seriously and which ones to discount. Ignoring ALL opinions seems a recipe for disaster most of the time.


Not only is the quote being taken out of context, it really has no place in the discussion forum; because if you were to truly follow it in the context in which you are using it, you might as well leave the forum now.

Everything here is an opinion, or perhaps a statistic; and we really don’t need to pass statistics along to one another.

Hill wasn’t saying not to listen to anyone’s opinion, but to keep your own counsel and be selective of those you choose listen to. His book think and grow rich was nothing but a book full of opinions; they just happened to be the opinions of very successful men, which might be good opinions to listen to.

I’m also in the Los Angeles, California area and you can make great money right here in the Golden state of California! As a beginner I made thousands my first week flipping properties. The margins are slimmer but the profits are larger!