Big Town Real Estate

Big Town Real Estate

Core 4 Real Estate – Big Town Real Estate Strategy

The real estate strategy that we’ve affectionately dubbed “The Core Four” is, at its core, quite simple. It revolves around one fundamental principle, which is as old as time- buying and holding real estate, to build long term wealth.

Building Wealth through Southern California Property Ownership

The idea is straightforward:

If you own four properties in Southern California, you and your family can secure a comfortable and financially stable retirement. *

This strategy forms the cornerstone of our advice to our Los Angeles / Southern California real estate clients. We recommend that they gradually acquire their “core four” properties, which will serve as the bedrock of their wealth-building journey and leave a lasting legacy.

A Common Misconception: Selling Isn’t Always Necessary

Many people and families will purchase four properties over their lifetime, but a common misconception leads them to sell their previous property before buying the next one. We want to dispel this myth—selling your old property isn’t always necessary. Keeping your long, medium or short term rental home strategies help you qualify for and acquire your next property.

Los Angeles Real Estate Numbers Don’t Lie

Let’s delve into the financial aspect with some calculations based on data from plugging in some numbers for a hypothetical “Core Four” from LA County (Values from LAAlmanac and mortgage / equity numbers from Bankrate.com. ):

Year of PurchasePurchase PriceDown PaymentNovember 2023 EquityReturn on Investment
2000$300,000$80,000$1,129,00013x
2005$400,000$100,000$506,0004x
2010$400,000$100,000$875,0008x
2015$500,000$120,000$547,0004.5x

Total Equity of Core 4 in 2023: $3,057,000 (7.6x Return on Investment)

With an initial investment of $400,000 over 15 years, you’re now a multi-millionaire—just like that. Even if you started later than 2000, you can still achieve substantial wealth. For instance:

  • If you began in 2005, you’d have $2,366,000 in equity on a $420k investment (5.6x return).
  • If you started in 2010, you’d have $1,860,000 in equity on a $320k investment (5.8x return). You’re well on your way to wealth.

Your “Core Four” can consist of various property types, tailored to your unique circumstances. Ideally, a buyer should start early, perhaps before starting a family, by acquiring a fourplex or triplex and living in one unit while renting out the others. Subsequent steps may include a “house hack” where you purchase a single-family home, renovate it, and potentially add an ADU (Accessory Dwelling Unit). Then, progress to a more upscale single-family home (with the possibility of adding an ADU). The specific property type matters less than accumulating properties in Southern California to experience the wealth-building phenomenon.**

The Flexible “Core Four” – The Payoff Method, The Core Four + More Method.

Having your core 4 means you have real options/flexibility. One idea is the payoff method. When you are ready to retire- you can sell the oldest/most valuable home, take all that cash, and pay off the mortgages on the other three. If you had a good run, this results in free and clear cash flow from the 2 remaining properties which are rented, as well as the ability to live for (mostly) free, in the one where you live.

Or, you could go the opposite direction, and decide you want “Core Four, plus more” – and easily do a cash out refinance of one of the properties, or get a line of credit on one of them- and start buying out of state Airbnbs, fix and flips, or whatever other kind of real estate investments that you desire. When you have your Core 4, you have options- otherwise known as freedom.

Los Angeles and Southern California real estate have paved the way for many fortunes, and there’s no reason why everyday homebuyers can’t be part of this phenomenon. The key is to learn how to acquire real estate without the necessity of selling existing properties.

Multiple strategies exist for achieving this, and at BTRE, we offer our expertise, derived from ample experience, to guide you through these methods, to help you and your family achieve the financial security that Southern California real estate has been providing for generations.

*: Major grain of salt here- BTRE is not an investment advisor and all information provided on this site is the opinion of the author, based on anecdotal experience only. Any investment, including real estate, can lose money, and nothing is ever guaranteed, ever!

**: Typically properties with more rental units are easier to rent out for enough money to cover the mortgage and expenses. It is not so easy to rent out single family homes and cover mortgages/expenses, though creative strategies do exist which help provide this.

For more information on our Four Core investing strategy in Los Angeles contact Big Town Real Estate today.

Sources

David Chambers, Christophe Spaenjers, Eva Steiner (2021). “The Rate of Return on Real Estate: Long-Run Micro-Level Evidence”. Retrieved from: https://academic.oup.com/rfs/article/34/8/3572/6187963

H. Gale, S.S. Roy (2022). “Optimization of United States Residential Real Estate Investment through Geospatial Analysis and Market Timing – Applied Spatial Analysis and Policy”. Retrieved from: https://link.springer.com/article/10.1007/s12061-022-09475-x

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