Wow, there’s no place like home. I just got back from a trip to Orlando, FL where it was freezing 2 weeks ago. I then headed out to the Bahamas thinking I was going to go thaw out there, but it was a little cold there too! Even though it’s raining today, it’s still a lot warmer here than in other parts of the country.
Can’t beat the great Southern California landscape with mountains on one side and great beaches to the other.
Great weather (even today), great scenery, great food and people–who wouldn’t want to live here? And to top everything off it looks like it’s becoming affordable to own a piece of the California dream!
If you have ever thought of investing in real estate, now is THE time to start buying property! Whether your strategy is to rehab, or to hold long term as a rental property, housing prices are definitely shifting to a place where anyone with a little know-how can buy discounted properties.
The real estate market is still changing everyday, so you’ll need to be on your toes and make sure you buy your investment properties right. I’ll give you some examples of ways to analyze your numbers to make sure you don’t get stuck with an unwanted property:
1) Fix and Flip Strategy. You’ll want plenty of equity in your deals to make sure you’ll have enough profit at the end. It can generally take anywhere from a couple of weeks to a few months to fix a property well enough to retail, so you’ll want plenty of room if the market goes down some more while you’re fixing the property.
You’ll also want to have lots of equity so that you can qualify for private money loans. Most investors use hard money loans to buy and fix their investment properties. The rule of thumb is you’ll want to have a purchase price of at least 65% of the After Repair Value (ARV) since most hard money lenders will lend at this ratio. If you want your hard money people to lend on repair costs, you’ll need to buy below 65% ARV.
2) I want to be a Landlord strategy. I never thought I’d see this day: Southern California homes are starting to CA$H FLOW! Woo-hoo! Many people have anxiously been waiting for this. If you’re going to hold these investment properties long term, then you’ll definitely need to make sure that they provide positive cash flow. One way to determine this is to use the 1% rule of thumb. Here’s an example:
If the rents for a 3 bedroom, 2 bath home in your area grosses $2,000/month, you’ll want to pay–at most–$200,000.
These tips will guide you through all the great real estate investing opportunities that you’ll see in the next couple of years.
This may be the next California Gold Rush. Don’t miss out!
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