Am I crazy to want to leave CA?
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Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
12yThe thing about the Bay Area is that rents are high and property is high. Appreciation rates are high and rent growth is high. THAT is a fact. There are high paying jobs in the Bay Area. If you are making minimum wage or the same pay that you would get in Podunk then you are probably better off living in Podunk. But if you can command the higher salaries that the Bay Area offers then with a little smarts and sacrifice then you can benefit from the high cash flow and appreciation that the Bay Area offers.
If you NEED the 3,000 sf house for $100,000 then Podunk is your place. If you NEED the acre lot with the snow mobile and jet ski and motorcycle in the three car garage then Podunk is your place. If you need equity to cover you $200,000 a year long term care then the Bay Area is where you need to be providing you invested in the Bay Area.
I've had friends who bailed with their equity after ever boom since the seventies and ALL the younger ones have regretted the move. Those that sold at $200,000 and see the same place selling for $400,000 ten years later and then $800,000 ten more years later almost cry. Friends that have bailed after retirement usually are only happy if they have extensive family in Podunk. Others complain about maintaining large houses that they feel are necessary because they are trapped in them most of the year.
84 Replies
- Investor · Santa Barbara, CA · Member since 2013 · 658 posts · 315 votes12y
I know just what you are talking about. If I wasn't a die hard surfer I would go elsewhere. I decided to stay here but invest out of state.
- Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes12y
We are transplants to the Central Valley. While I enjoy it here and have had some terrific opportunities, it wasn't my first choice. That beig said I have found some amazing investing opportunities. California while expense and interesting with their laws has some very awesome things in place. The taxes are really low compared to some areas. South Carolina and Texas are 3%. The insurance is also .25% of the purchase price compared to those same areas at 1-1.5%. My house in charleston escrow is almost equal to my principle and insurance on a 200k worth house!
While there are definitely "more desirable areas" make sure you are checking the "true" cost of living. I grew up outside of d.c I left in a hurry as a 18 year old and now I would kill to go back. I can tell you other than housing , the small town I am living in is often the same or more expensive. I have found that is most of the small towns we have lived in the only different in cost of loving is in houses not durable goods. I had to drive an hour yesterday to get my phone fixed at the apple store.
Also watch inflation eating your profits. While the Midwest has great cashlfow it also doesn't increase price or rents often times. So make sure you do an abalyssis. We have looked at investing in Texas that is cheap the high rents. The problem is I don't see us able to make money over time. I have even talk to so big timers account who I got my MBA with. His clients really didn't make money. I didn't understand it at the time I thought he was crazy. Now j get it lol. While we don't invest for appreciation per day. We do invest in areas that are houses and cash flow won't "lose value" and keep us with inflation!
My husband and I will spend are careers in small town American. I can tell you that right now our goal is to be able to early retire in Sausalito outside of San Francisco. Yes it will be rediculous but we miss all the comforts that a larger area offers!
Just wanted to give you a different opinion! From a girl who's husband joined the navy, the institution that promised to see the world and instead we have seen small town America lol
- Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes12y
The thing about the Bay Area is that rents are high and property is high. Appreciation rates are high and rent growth is high. THAT is a fact. There are high paying jobs in the Bay Area. If you are making minimum wage or the same pay that you would get in Podunk then you are probably better off living in Podunk. But if you can command the higher salaries that the Bay Area offers then with a little smarts and sacrifice then you can benefit from the high cash flow and appreciation that the Bay Area offers.
If you NEED the 3,000 sf house for $100,000 then Podunk is your place. If you NEED the acre lot with the snow mobile and jet ski and motorcycle in the three car garage then Podunk is your place. If you need equity to cover you $200,000 a year long term care then the Bay Area is where you need to be providing you invested in the Bay Area.
I've had friends who bailed with their equity after ever boom since the seventies and ALL the younger ones have regretted the move. Those that sold at $200,000 and see the same place selling for $400,000 ten years later and then $800,000 ten more years later almost cry. Friends that have bailed after retirement usually are only happy if they have extensive family in Podunk. Others complain about maintaining large houses that they feel are necessary because they are trapped in them most of the year.
@Brant Richardson investing out of state was one of my thoughts as well...how has that gone for you? It seems to me that the lack of proximity would be a challenge...I'm in Nor Cal trying to currently cosmetically remodel a place in So Cal and that has been a challenge so I've feared doing more out of state stuff.
@Elizabeth Colegrove great point about being trapped in the house.
- 12yJon HuberPro MemberRental Property Investor · Boca Raton, FL · Member since 2014 · 1k+ posts · 713 votes
@Andrew M. I understand your story exactly. I live on the westside in Los Angeles, and it is pricy. However, I will be moving back to to NJ-NYC metro area to be closer to my family. I am originally from NJ. I will miss the weather, the farmers markets, and my friends... however, family is most important and I can always visit.
- Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes12y
I think your thought process is correct. Where you live can definitely make a difference in how fast you can retire. There were only two places where I wanted to live in U.S. either Irvine, California or the northern suburbs of Georgia. It was important for me to move to a place with entrepreneurial soil. I wanted to move to a place where I could build my real estate brokerage and invest in my backyard and build my A-Class SFR 401k retirement portfolio.
I read somewhere in Tom Stanley's book that a person with average net worth of $1,493,804 lives in a home with average value of $404,240. A person with a average net worth of $3,416,267 lives in a home with a average value of $620,779. $400k does not buy you much of a home in SoCal or even in the inland empire.
You should check out the north suburbs of Atlanta, especially Johns Creek. The life style and weather is very good here and Atlanta is becoming the melting pot of all cultures like LA, SF, and NY. I do see a lot of California transplants in the Johns Creek area, and they are very happy here.
I understand exactly how you feel. I live in southern California and it is just a rat race out here. I've thought about moving but for now I just decided to invest out of state and so far it has been going pretty well. now if an opportunity presented itself I might take everything and run from this place.
Andrew, something to consider is that if you do want to move out of CA, is whether you want to move back at a later point in time. If you do, it will be much harder to do so as I've always found it harder to move from a less expensive to more expensive place, versus the other way around.
I moved from a more expensive city to Socal, and when asked by friends and family if I will ever move back, I tell them that even if I wanted to, I can't anymore because i'm priced out and would need to be making significantly more here in CA to have the capability to move back. And that is hard because compensation (be it as an employee or business owner) generally seem to take the level of the prevailing wages/price in the area, unless you make it so big that the business goes nation wide or international.
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes12y
@Andrew M. It all depends on your point of view. We are from the true northern California, Shasta County, where we were real estate developers for over 30 years. When the market crashed our 2 adult daughters and their families decided to relocate to Orange County (our son in law was originally from here). With all of them leaving us we decided to sell off everything, and relocate too. Our adult son moved too. We knew that southern California is always the first place to rebound and would be on the front end of the recovery.
It wasn't easy. It's taken us awhile to get rolling, but now things are moving along great! The profit potential here is much higher, even though the cost to get in was a challenge. It's probably much like your market in Danville. Even with all the issues we have in California, there's no other state like it.
- Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes12y
I would suggest staying in CA for opportunities, contacts, high pay etc..., but investing out of state. That said, many people are moving from CA to TX, AZ, WA, etc... for the same reason's you've mentioned. I'm an avid runner and cyclist, so even if I move, I'd always like to keep a place in the Bay Area.
- Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes12y
View from a recent bike ride...
- Real Estate Investor · Carmichael, CA · Member since 2013 · 111 posts · 16 votes12y
Probably try to take a 2 week vacation in midwest during winter (Jan) to see before you make the decision.
I think you need to specify whether you'd be leaving CA for 1. general cheaper cost of living to get ahead, including real estate investing or 2. just for real estate investing. Those are two totally different things. I can't imagine leaving CA because of all the lifestyle benefits it brings me, so I just make the expenses work. I don't invest here though, I only buy out-of-state, which is totally doable.
So that's why it matters your exact reason for thinking about leaving. You don't have to only invest here because you live here, you can invest anywhere. But if you are thinking all around expenses, then you have to weigh your happiness against how much money you think you'll save.
- Investor · Ukiah, CA · Member since 2014 · 196 posts · 83 votes12y
I live 2 hours north of SF, 2 hours west of Sac, near a small town of about 35k. I live on 50 beautiful acres in a strawbale house that my wife and I built together. It's a gear place to raise our kids who are now 3 and 6. My parents bought this property in the seventies for $25,000. Yes, we live in the sticks, and yes I have to drive an hour to get my iPhone fixed, but old growth redwoods are just down the road, the rugged coastline an hour away, the produce is fresh, the wine is good, the weather is great (okay it gets a bit hot and dry in the summer) and if I feel the need for some urban time, a day trip or weekend trip are easy down to the Bay Area is easy. On the RE side, you can buy stick frame fixers for under 1
- Investor · Ukiah, CA · Member since 2014 · 196 posts · 83 votes12y
accidentally posted befor finishing there. Too easy to do from the phone. I was going to say that you can buy stick frame fixers nearby in lake for well under 100k, and while you won't find a lot of 2% deals 1.5% is doable. Anyhow, I'm sometimes surprised that more people aren't moving here.
- 12yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Account Closed
Don't forget Oregon... its populated by 50% CA transplants like myself. Lifestyle is pretty good if you can handle another 2 months of winter compared to Norcal... Nothing like central to So cal though for weather...
Also one can buy 4 plex's in metro PDX that will cash flow just as good as any mid west rental and you will have a much better asset than buying low end stuff out in the mid west. If you buy higher price points in the mid west that is safer but your not going to really do much or anything with appreciation we all know that..
Just like there was too much reliance on buying for appreciation pre 08 there is far to much reliance or those that sell turn key for a living like many on this site do.. on Cash flow in out of state markets.. Its far more risky than what the blue sky that is talked about by those that sell it and make money putting you into those assets. YOu should go to @?jmartins meet up in East bay and see what he is doing with Bay Area 4 plexs save a very few locations out east these long term will be safer than going across country.. There is just a lot of logistics that come into play and no one is going to watch after your investments like you can period end of discussion.. I don't care how good the team is.
If your going out of state just buy at the very top of the market in what ever market that will give you the best chance at success.
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes12y
@Orion Walker Lucky you!! I love the northern coast of California, I was just telling my son that the other day. It's like another world. The redwoods are so breathtakingly beautiful.
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes12y
@Andrew M. Just be sure when you are looking at another area, you take everything into consideration. Property taxes, local economy (is it one employer or broad based), availability of services, etc. As for real estate, what is the market like? Are homes priced low, why? What is the balance between homes for sale and for rent? What are rents like? High rents on small homes/apartments suggest potential for new construction. Vice versa means it may not be a good market to invest. What are schools like? Local politics? Crime rate? AB 109 has completely changed the make up of many small towns here in California, turning them into a mecca for ex cons, drug addicts etc. looking for cheap housing.
- Rental Property Investor · Liberty Hill, TX · Member since 2014 · 285 posts · 166 votes12y
I have left twice in the last 20 years. Once to move back to the Midwest where I am from and once to Northern Idaho. The culture shock is huge. Yes, property is cheaper, yes you can invest more easily but you are likely moving to somewhere very alien to you and your spouse.
I left CA in 95 to move to the Midwest which I left in 1971 and found that culture was still in the 70's (NO offense meant to you living there) It is just a huge difference to NorCAL even if you move to a University town where you think that there would not be such a difference. I was wrong. We moved back after only 7 months.
Then in 2007 we moved to Northern Idaho where I own several rental properties. While the culture was definitely not mired in the 70's we missed our grown children living in CA and moved back after 2 years. I loved living there but NorCAL just has so many benefits despite it's overflow of people, traffic and high prices.
If you are going to move, move while your children are small because they acclimate easier when they are young. Both cities we moved to had superior schools to CA no doubt but that was only important the first move.
I likely will not move from here and will continue to invest but of state except the rare instances where I can find rental property here in CA. I wouldn't advocate moving just to invest in real estate. There are great properties here you just have to look.
- Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes12y
Sittin on the dock in the Bay, waitin for ....KaBoom Yeah free fireworks show to music!
I didn't catch your location until @Karen Margrave
mentioned it. You might want to describe Danville to the people who aren't familiar with the Bay Area. Do you see John Madden much at the Trader Joes ?
- Investor · San Francisco, CA · Member since 2014 · 577 posts · 203 votes12y
I love Oregon. Low taxes and beautifully preserved wilderness. In fact, driving through Eugene tomorrow enroute to Seattle.
@Account Closed , ha ha no haven't seen Madden but know he lives just down the road. Danville is a beautiful, safe and high end place and I feel extremely fortunate to live here, but to me there's a lot of pressure to "keep up with the Joneses" and as I'm just simple folk from the Central Valley, maybe that's what I'm struggling with. :-)
So maybe that's part of it is wanting a simpler life, but as @Martin Scherer so wisely points out, I may be underestimating just how different that reality is from what I'm used to.
Everyone makes good points.. It's all about why you are leaving.. I moved from Maryland to Miami Beach to escape the cold 20 years ago.. The cost of living is much higher in MB than MD.. I have discovered that also the average cap rate investors are getting and seeking is MUCH lower in Miami Beach.. Investors buying in Miami Beach are happy with 5-6% cap while in Maryland nobody touches anything below a 10% cap in the good area and in the bad areas like baltimore you can get 20-25% cap rate.. So, after 20 years I'm selling my Miami stuff and re-investing in property in Maryland.
- Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes12y
It depends on your definition of deals! I think so but they don't follow the Biggerpockets 1%, 2%, or 50%. We follow a "very" specific business plan. I wrote about it in the below article.
http://www.reluctantlandlord.net/southwest-airlines-model-my-inspiration/
I am finding great shortsales, (albeit they are fewer and take forever) that are in great neighborhoods. The houses cost about 210-225k and rent for $1600. I can levarage 75% (own above 5+ houses). So while my cash flow is $200-$400, I also have the principle being paid off. The house rent VERY quick because it is a huge transient population that will always exist (military, large high level farm/factory workers, and federal workers at the 3 prisions).
While those aren't "huge" margins my taxes are 1.25% my insurance is .35% or so. There are no hoa's on these houses, they are 7 years old and in class A neighborhoods. So for me it is perfect. While they aren't what they use to be in the bottom, they are still doing well.
I also predict growth will occur in the central valley. While I am not betting on appreciation, I do care about an exit startegy and what the future value of my money will be. I can sell any of my houses for a great profit. I couldn't say the same about my houses in TX. While they might produce cash flow, if they don't there was no great exist strategy. I like being able to leverage my houses and to be able to get rid of them if I want to.
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