Author Topic: Need some advice/opinions/perspective on buying Southern California real estate.  (Read 353 times)

droh82

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Hey all,

I am new to real estate game but have always wanted to try it out. Lately, I've been going back and forth on if I should invest in rental properties in Southern Cali or not as I live here. I can't seem to make up my mind and its driving me crazy so I'm looking for feedback to help me finally decide....sometimes I can be so indecisive that I hate it.

Ideally, I wanted to buy a triplex (Duplex/Quadplex would be ok too) similar to what I'm living in right now so I can live in one and rent out the others to cover my rent but the prices here are ridiculous that I wouldn't be able to get anywhere near the 1% rule. If I did end up jumping into RE, my goal would be to buy and hold rental property for the long term (30+ years) as I ultimately am only interested in the cash flow but would have to put down a large down payment to be cash flow positive. I mean I dont mind if I dont meet the 1% rule as long as I can cash flow.

The other issue is that since I need to put down a large down payment, I would have to drop my 401K contributions down to employer match of 6% so I can build enough capital to buy a property. I currently contribute 50% of paycheck to 401K, most my employer would allow. I was thinking about dropping my contributions down to 6% and the money I get from the paychecks, I would immediately invest into my taxable account (probably VTI) and max out my Roth IRA until I have enough money for a downpayment.

I'm ok with doing this but based on my situation would this be a ok move? Or would it be better to just continue maxing out 401k/HSA/Roth/taxable?

Could mustashians chime in and give me some advice?? constructive criticism??experience, different perspective?? anything... open me to other options...




A little about me...
I'm 35, single living in southern cali and making about 100k/year
4 years ago.. i was out of job, net worth was 0 (lol) and had decent debt.
4 years ago I found this website and it saved my life.
It took me a while to get rid of all my debt but at least its all behind me. Currently net worth only about 150K (mostly pretax and 100% equities)
Rent 500/month. Still living with parents lol and I plan to stay that way unless I get married.
« Last Edit: October 08, 2017, 10:52:45 PM by droh82 »

Thinkum

  • Pencil Stache
  • ****
  • Posts: 777
  • Location: SoCal
  • Life is Good
Buying for profit makes absolutely no sense to me if banking on appreciation in SoCA. If you're unhappy living with your folks, I can understand the want, but not the numbers.

1. You admit to be indecisive. -1
2. You want cash flow, yet know you will not get it using the 1% rule/guideline. -1
3. You want to stop the tax benefits of contributing to your 401K -1
4. You are 35 and "only" have $150K saved. +/-1
5. You make $100k/year +1
6. Rent is $500/month, but you live with your parents +/-1

Add it up and you get -2. So no, buying for the reasons you stated is not a good idea.

Rents are pretty stupid when compared to salary's here in SoCA. Real Estate is almost worse since the buy-in so high, but then the houses are also mostly so old. Meaning they need repairs and/or updating. I would advise you not to just look at the mortgage payment, but also remember how much owning a home really costs. You have the loan fees, interest, tax, insurance, mostly higher utility costs, upkeep like landscaping, gutter cleaning, and of course repairs like appliances, plumbing, electrical, etc.

Congrats on getting out of debt and building a nice pile of loot. I hope you keep adding to it. 

droh82

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Thanks Thinkum!

When you break it down like that, it makes my decision easier. I guess I was just trying to convince myself that it would be ok when in fact I lose out on more than I could gain.

Also, on a side note... I have no issues living with the folks. When I see my friends struggling and living paycheck to paycheck just so they can live alone....I'm glad I'm still living at home lol. Cant beat Mom's cooking.

Thanks for your advice. Much appreciated.

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 1909
  • Age: 23
Agreed with Thinkum.  Do not invest in real estate that costs you money each month.

tralfamadorian

  • Bristles
  • ***
  • Posts: 396
Agreed with Thinkum.  Do not invest in real estate that costs you money each month.

+1

Also, pile on the rising popularity of rent control in CA and the (to me) insanity of the courts with regards to liability in the state as well...