I’m new to REI and haven’t started investing yet. I’d like to gain more knowledge before I begin. One question I have is: How does one start investing in Northern California with little capital to begin with? California is one of the most expensive RE in the country. I live in the San Francisco Bay area. Glad to be in this forum.
You may want to do more research to find out what the market is like. Parts of California, AZ, and other “hot” markets are starting to decline. When starting as an investor, it may be better to stay as close to home or areas you are very familiar with.
If you have a friend or family member who lives somewhere in a more affordable area, maybe they can help you learn more about their more market.
Here’s at least one resource for a market report.
I’m in southern california. I sold the 4 homes i owned here and have bought several out of state. It does not make any sense to buy at this stage in the market in CA.
read these posts, they should give you a lot to think about.
http://moneyshaker.blogspot.com/2005/10/real-estate-forecast-in-california.html
http://moneyshaker.blogspot.com/2005/10/understanding-real-estate-market.html
http://moneyshaker.blogspot.com/2005/11/high-home-prices-causing-californians.html
http://moneyshaker.blogspot.com/2005/11/spoke-with-robert-campbell-today.html
The California investors that I know have been cashing out for the past two years or more. We’re seeing a lot of 1031 exchanges here because investors know that they should sell at the peak in CA and AZ, then invest in lower-cost areas that will appreciate.
For instance, the Austin market as well as Round Rock and other area are finally ramping back up. According to forecasts, we may see a seller’s market in 2006. If you can hold until 2008 or so, you’d be in a good spot.
http://AustinMarket.AustinHomeNews.com
http://RoundRockMarket. AustinHomeNews.com
The problem with Austin[apart from the high taxes and insurance] is that there is just too much land.
I have several investors friends who have bought in austin and they got significant incentives from the builders
to buy the house. However in half the cases, they found that the incentives weren’t part of a good
negotiation strategy, but the fact that the builder was desperate to sell and later dropped the prices
even lower. All these houses were bought this year.
The same thing happend in boise. Since its so bitterly cold in winter with several inches of snow
the builder dropped prices 20-30k in my subdivision which really sucks because I’m trying to flip
my house. I guess I’ll have to wait until end of february to sell it.
Houston is another scary market. It historically gets massively overbuilt every cycle and builders find
it better to bulldoze their inventory rather than pay taxes on it.
But Texas is experiencing job growth and population migration from Katrina so it seems like its
picking up. I’m not sure if i’ll call it a sellers market just yet, but lets hope so!
Just be very careful and do your own DD.
Good post, Niravmd.
Just like most states and areas, there are good and bad investments in each city. For instance, Houston and San Antonio are seen as good cashflow cities in general. In the areas that I am familiar with, you can buy a great flip or rental property. Austin and Dallas are often good for appreciation. Flips are tougher, but can be done.
The good thing about San Antonio and Houston are the more stable rental markets. There is usually a good amount of inventory that will cashflow.
In Austin, it can be tough just being able to just break even. At the same time, changes are in the works for Downtown, East Central, Southwest, Northwest, and outer areas that will greatly affect the city. There are planned commuter rails, AMD is expanding, and a new highway SH130(the San Antonio-Austin corridor) is coming through. With that much growth and the continued influx of students to the University of Texas, most investors feel Austin is a safe investment that they should hold for at least 3-5 years.
Of course, there are many areas throughout the U.S. that can meet our goals. The latest issue of Kiplinger finance magazine outlined the top 100 markets.
Thanks to everyone’s post. So if someone wants to invest out of his home area without flying back and forth, say to Texas, can someone help? I mean is there someone I can pay to do some of the work for me in Texas?
Usually, a real estate agent can help if they specialize in investors. If you use an agent, many people recommend to choose one who also invests. Sometimes, you can hire a bird dog or person to do some of your legwork for a fee.
You may also think about joining some of the investment clubs because you can get the inside scoop on properties for sale, area statistics, and contractor/vendor referrals. Even though I live in Austin, I’m planning to travel to the RICH club in Houston as well as a few clubs in San Antonio.
Maybe you can make a single trip to go to each club meeting and connect with a person you can trust. They can help provide referrals for people who can help you.
yes you dont want to be travelling to Texas to collect every rent check!!!
either you have a good prop. mgmr or you build a team to help you out as i’ve done
in utah. either way, if you’ve bought 1 house you’re bottom of the food chain. if you’ve
bought 4 and your 5 friends have bought 2 each, your team will love you and bend over
backwards to help you.
i’ve bought 7 homes in SLC and have several more booked. my friends have around 40
more. i don’t have prop. mgmt. i do lease options and the tenants are responsible for
everything. if i don’t get a check on the 10th i call them up and fax/email/fedex a 3 day
letter to move out or pay up. if they don’t/cant pay i call up a local attorney who drags
them to court.
its actually pretty easy to do.
If you hire a team or a person to do the leg work, how do you get ahead of the cash flow? I don’t know how much it cost but I’m sure it’s not cheap.
they get paid a commission on the purchase of the house. if you convince them that if they perform well for you, they’ll get commissions on 20-40 houses, they’ll jump through a lot of hoops for you.