Profile picture for buytoinvest

Investment - Buying a property and rent it out

I am a 29 year old single professional working for a high-tech company located in Bay Area, California (South Bay to be precise).

I want to diversify my investment portfolio by adding something 'concrete'.  Buying a property comes to my mind.  Due to the high income in my area, the property is expensive as well, so I am open to other location as well, even if it is in another state.

Goal:
1. Buying a property where it can be easily rented
2. Hopefully the monthly rent will at least cover the monthly mortgage payment if I get no extra income form it
 
My annual income is $110,000.
Right now I can provide $120k as down payment

I have no idea where to start, who to talk to, or where to search these kinds of properties, since I am not buying a home for myself, and as I said, the houses in my area are too expensive, something I cannot afford.

Can someone please guide me on this kind of investment?
  • April 20 - Santa Clara
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Answers (6)

Profile picture for aracz
Hi,

Meeting with a local loan agent would be the first step, then you could start with looking at strategy, location, etc. I would be happy to refer a great local loan agent if needed.

Kind regards,

Arpad
 
  • April 21
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Hi,

Congratulations on your success!  Buying a rental property is exciting, and can be a great way to build wealth over the long term.  There are some great answers here already.  In general, when buying a property, the first step will normally be to get preapproved with a lender.

In your case, though, it would be advisable to do some research into what geographic areas you want to look.  If you're not going to buy in your local area, there's not much difference in buying a couple of hours away or a couple of time zones away.  Either way, you'll need to work with local experts to find the right property, as well as to help manage your investment.

I would recommend doing research on what area or state you'd like to invest in, then reach out to start your "interview process" to decide who will be getting your business, and who you will trust with your investment.  Once you have an area in mind, and have found the right people to have on your team, you'll have all the resources necessary to buy a rental property.

If you decide to buy in California, I'll be happy to help with your home financing needs.

Good luck!
  • April 21
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Profile picture for craigfial
Great. Post and I'm sure you will get a lot of advise.


Here is my advise.  Rental property should not just pay it's expenses, but also bring a return.  If it's covering expenses, what happens if there is a vacancy or unexpected (expensive) repair? Then you have - Cash Flow.

Look for appreciating areas but also be aware some areas may be experiencing short term bubble effect.

Finding good investment property is getting harder but not impossible.  5 years ago we were buying when everyone else was selling.  Now most of my investors are laying low and being VERY selective.

I still feel South East Florida is undervalued, but rent/price are not where Iwould like them to be.  Rents rates are still low compared to values and until rent start rising, returns are low.

We are picking up nice single family homes under $140sqft. which is a bargain with new Construction homes under $200 sqft.

Here are some things to consider:
Potential Gross Income (Verify rent rates)
Estimated Expenses:
Insurance
Taxes
HOA
Property Management
Estimated Vacancy
Real Estate Commissions
Repairs

Income - Expenses / Acquisition Cost(including rehab) = CAP


Good luck. and run the numbers on any property you are considering.
  • April 21
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Hard to imagine taking on a first-time investment property that isnot within an hour or two of your home/work. This is a learning experience. You will be figuring it out as you go, making mistakes and having to spend more time than initially thought. Keep it small and close to home to start.

I have a client that is buying $100k to $150k condos up in Fairfield area. Rents out within 5-10 days of closing escrow, nice rental income and the market has been appreciating. He is in similar situation to you on work location and finances. By keeping investment price low, you can be an all-cash buyer with 15-day close and command the best price and compete effectively against other buyers. Then finance the purchase to free-up funds for the next all-cash purchase.

Pretty smart way to build a portfolio of properties. Fairfield is a bit far (90 minutes), but doable. In any case, the concept is solid.

Happy to help.
  • April 20
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Hi,
Local agents cannot provide recommendations regarding property out of California, unless they are also licensed in the destination state. Our licensing is statewide, not nationwide.
Taking into account your down payment and income, it should be possible for you to purchase a condo locally, provided that your credit score is good, and that you don't carry other major debt.  It is really critical that you discuss your borrowing capabilities with a lender to ensure that you're getting the latest information, and to receive a pre-approval, which is a critical part of making an offer on a property.

When looking for an investment property, in my 30yrs experience I have always suggested that people should not consider anything that they would not live in themselves.  Look for a location which has not had sharp downturns in the past, and for a property that is in good repair.

I'm happy to help you through this - I have managed property for most of my career, but it's a far more complicated discussion than can be properly completed on this message board.
Feel free to be in touch if you wish, for a no-obligation chat.
Best wishes,
Aileen
650-804-0522
  • April 20
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Sure. This is totally doable . . . but.

The areas with the highest cash-on-cash returns are generally the least likely to experience value appreciation; same thing with properties in a particular market. Here in Seattle, prime neighborhoods, $600,000 house with 20% down, $2400/mo payment plus $600 taxes & insurance (this is all rough, back-of-the-envelope, information not warranted stuff), probably rent for $2750 a month. BUT, if you bought that property a year ago, it would be worth $675,000 today.

I have a friend that buys properties on the Olympic Peninsula. $45,000 houses he rents for $750/mo.

There's a wide range. I can tell you that it costs almost as much to re-roof a house in a good in-city neighborhood than it does in some back-country hamlet.

All the best,
  • April 20
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