Want to leave CA
Real Estate Agent · Rocklin, CA · Member since 2016 · 79 posts · 50 votes
I saw a thread like this pop up a while back but instead of reviving it I want to hear if anyone has any fresh suggestions/opinions. As the title states, my wife and I want to leave CA. I feel as though even though I make decent money here we could do a lot better if we liquidated everything and moved to a less expensive area and could seriously invest.
Anytime I visit friends in different parts of the country (Memphis, Orlando for example) I can't help but look at real estate and their rents in the area. It is crazy how good of deals there are that you would never get here. In my area most investments are done off speculation and only in the scary areas do you start to see cash flow.
Anyways, has anyone who left or thinking about leaving CA have opinions or regrets?
Also, if you could choose a market to start over now which area would you choose?
Chris,
I live in California and pay heavy "sunshine" tax for doing so. I invest both in California and outside of California. We invest outside of California for the very reason you mention which is to get good cashflow. But we also invest in California because good deals come to us here from operators who do well here.
Live where you want to live and invest where there are good investments. In my opinion, living in a certain marketplace does not make you a good real estate investors. You can make great money in California as much as you can make great money in Tennessee. It is you who determine success.
Having said all this, I am not discouraging you from moving elsewhere because that is not a bad strategy. But you will fail in any great market if you do not have the skill set and resiliency to succeed. Work at acquiring both. Good luck to you.
I never lived in CA, but have lived in Denver, El Paso and now Rochester. I think one of the most important factors to consider, is not only the price of the property, but the real estate taxes that go along with the property. Real Estste taxes here in NY are some of the highest in the country. Property taxes I will pay forever, with no built equity from them. My principle payment, I will however get back, hopefully when I sell, eventually. I think a good thing to consider is appreciation. Real estate in other parts of the country don't appreciate like CA.
Chris,
I live in California and pay heavy "sunshine" tax for doing so. I invest both in California and outside of California. We invest outside of California for the very reason you mention which is to get good cashflow. But we also invest in California because good deals come to us here from operators who do well here.
Live where you want to live and invest where there are good investments. In my opinion, living in a certain marketplace does not make you a good real estate investors. You can make great money in California as much as you can make great money in Tennessee. It is you who determine success.
Having said all this, I am not discouraging you from moving elsewhere because that is not a bad strategy. But you will fail in any great market if you do not have the skill set and resiliency to succeed. Work at acquiring both. Good luck to you.
@Chris Isaacson Chris, I forgot to link my post to you.
I never lived in CA, but have lived in Denver, El Paso and now Rochester. I think one of the most important factors to consider, is not only the price of the property, but the real estate taxes that go along with the property. Real Estste taxes here in NY are some of the highest in the country. Property taxes I will pay forever, with no built equity from them. My principle payment, I will however get back, hopefully when I sell, eventually. I think a good thing to consider is appreciation. Real estate in other parts of the country don't appreciate like CA.
@Jerry Padilla I do understand property taxes can kill margins and that is why we began to remove certain areas off of our list. I know CA and 1% property tax sounds alright but there are ways they go around prop 13 to ensure they get their money, one of them is Mello Roos. We have a city here called Lincoln (once the fastest growing city in the nation) that is notorious for MR, it tacks on close to $300 in some areas where the home prices average $300k.
Memphis is on fire! My investors are from New Zealand, Australia, China, Israel, West Coast and more!
Best rent vs. purchase price available. We have a high demand for quality SFR rental homes.
My Brother in Law lives in Memphis so we go out there as often as we can, I am constantly shocked at the crazy deals. I will forward your info on to him as I am always pressing him to invest but I feel like he is waiting too long and will be late to the party.
Carl's Jr. just left California for Tennessee. They will miss the sunshine, but will love the extra money they will make since they will pay far less in taxes.
@chris
@Chris Isaacson your brother in law has plenty of time. The party will be around for years, decades, maybe forever. My father bought rentals in the 80's, I learned under several locals who bought in the 90's and I started buying in 2007 and continue to buy.
@Kevin Yoo I agree just moving somewhere does not make us good RE investors. Full disclosure there is an ulterior motive to leaving, my wife and I grew up here and when I got out of the Army we were searching for a place to call home. At that time we could not decide on a place to move so we chose to go back home as a staging ground. I got involved in RE when we came back and was a "top producer" since yr 1. I feel I can recreate this anywhere but the longer we stay here the more I feel the roots growing as we have two boys (another on the way) and they are getting near school age.
My wife and I never envisioned raising our family here and when we visit these other areas we see it as not only a new adventure but a more condusive place to raise our family the way we want too.
With all that said I am not against out of state investing but if we are looking for a new place to live as well than might as well look in the markets I would be investing in if we were to stay here.
@Kevin Yoo I agree just moving somewhere does not make us good RE investors. Full disclosure there is an ulterior motive to leaving, my wife and I grew up here when I got out of the Army. At that time we could not decide on a place to move so we chose to go back home as a staging ground. I got involved in RE when we came back and was a "top producer" since yr 1. I feel I can recreate this anywhere but the longer we stay here the more I feel the roots growing as we have two boys (another on the way) and they are getting near school age.
My wife and I never envisioned raising our family here and when we visit these other areas we see it as not only a new adventure but a more condusive place to raise our family the way we want too.
With all that said I am not against out of state investing but if we are looking for a new place to live as well than might as well look in the markets I would be investing in if we were to stay here.
@Logan Turner It's great to hear a former locals perspective, Roseville prices are crazy and I do think moving will allow us to accelerate our investments and passive income. I am not against investing out of state but we would like to move anyway so I am trying to create a win-win.
@Alex Craig I am glad to hear your thoughts on the Memphis market, we have contemplated moving out there and still do. I saw your profile and Collierville is where my father in law was living for a while before he sold his company and moved back out here, he missed paying taxes I guess.
What are the good areas in Memphis for B and C+ rentals?
A local skilled REI operator can make money in either market, CA or Memphis, or anywhere else for that matter ... the strategies that they will employ will be vastly different, doesn't mean that one is right and another is wrong, or that one is pure speculation and the other is sound investing. There are intelligent and dumb ways to make money or lose money in any market.
For example, if you want to continue to make money as a real estate agent, I would think that Memphis is just about the last place you would want to move ... same amount of work to sell a home as CA, but the commission check would be 1/10th. If you want to buy and hold for cash flow only, that's another story. I say live where you want and utilize an investment strategy that works for that market. You seem to be saying you'd prefer to pick a strategy and move to a market where that strategy works ... that's cool too, just realize that it is NOT the only strategy. Plenty of money to be made investing in CA and Memphis both ...
I can understand your frustration about the California real estate market and your interest in moving.
While I believe that this is more a personal decision that you have to make, I do like to add an international perspective on this issue.
As we are based in China, we see a high amount of interest for California homes. The number of inquiries from Asian buyers for California real estate continues to go up and we expect that will continue to be the case for many years to come. Their main reasons remain immigration (and living in an area with good climate and fresh air), education for their child (as a good range of great schools) and diversification of their assets (better value for their money compared to many cities in China). California houses are for these Asian investors ideal (compared to other markets). As such, you should feel good about the location where you are based now. Of course, the interest of Asian buyers for California houses also could create problems which I am not going to go into here.
If you are looking for better investments generating higher cash flows, then locations such as Memphis and Orlando might indeed be more suitable. I am not sure though whether this would be a good reason for you to move there versus purely investing in those cities (and staying where you are in California). Interesting enough, we have Asian investors who first bought houses in California to live in and they are now asking us to help them to purchase houses in Memphis, Orlando and other cities for investment reasons.
Good luck!
I think that @Erik Nowacki may be able to provide some unique insight here, since he recently did exactly what the OP is considering ... moved from San Diego to Memphis ...
Interesting, a few years back in Sacramento we had a bunch of Chinese investors buying up bank foreclosures by the bundle. I remember it stood out because a friend of my father's (who are both agents) ended up selling like a hundred properties in a month to one client, can't remember exactly how many but it was a good month for him.
@Joe Bertolino I am interested to hear where you buy and what your returns are? I can't speak for the other cities cited but as far as Memphis I would have to argue that your return probably does not compare, at least in cash flow. I am not saying it can't be done and you may have nice cashflowing properties that don't require police escort to look at I am just saying... probably not, unless you picked them up 09-12.
I feel like people are under the impression that I think there is no money to be made here, which I know is not the case. I do very well by my clients and they are happy, but most will not see a return until they sell.
@David Faulkner thanks for calling me out... :)
@Chris Isaacson I'm happy to share my experiences, maybe it can be of some help to you.
I got to a point where a few things lined up for me and I made the move from San Diego to Memphis last year. I buy and rehab class C apartments. I had finally gotten to the point where it could be my full time occupation. Then, my son went off to college and I'm no longer tied to San Diego. Then I read the Gary Keller book "The Millionaire Real Estate Investor" which told me that my next level of investing is to receive a million a year from my investments.
Processing all this information, I realized that it would take an absurdly expensive portfolio of San Diego properties to cash flow $1M/yr. So, I started looking at other parts of the country and was really impressed with the numbers here in Memphis.
I found a couple of deals on Loopnet and 1031 exchanged 18 San Diego units for 250 Memphis units.
I'm in the process of selling the house in San Diego and moving the wife and dog out to Memphis. I told my wife that she can pick anywhere in the Memphis area to live as we could probably rent Graceland for half of what our house cost in San Diego... :)
There are definitely some differences, but I'm happy with my move and in a couple of years, my cash flow will allow me to do whatever I want and live anywhere.
The gentleman who sold me one of the apartment complexes here in Memphis retired to his beach house in Hawaii, sounds good to me...
I suggest you take stock of where you are at in life and your investments and weigh the pros and cons of making a move. How would you make a living if you moved? If you're going to continue as a real estate agent, how many houses would you have to sell to make a living? If you sold your CA investments and 1031 exchanged, what would you get? Can you live on that amount (makes a huge difference)?
I'm happy to bounce ideas with you if you want to.
Happy investing (and moving?)
Erik
most will not see a return until they sell.
Not trying to re-hash the age old appreciation vs cash flow argument here, but I have to respectfully disagree here. I have been a buy-and-hold investor in CA for 12 years, I have literally never sold a property (only bought) and my returns are just fine. I make money on cash out refinances and I make money on cash flow. It is a great misconception in my opinion that cash flow in CA is horrible, just because it doesn't hit the 2% rule day one ... my cash flow has been phenominal. Net cash flow on one of my CA houses is more than gross rents on a similar house in Memphis. I don't need a portfolio of 50 units to produce serious monthly income.
It doesn't happen over night, but it does happen ... and to those that say it is all speculation, please consider that I've been doing this through one of the worse RE downturns in recent history and have never lost a dime on any one investment ... never even had negative equity or cash-flow, except for odd months where the water heater goes out or the roof gets replaced.
Thank you Joe, those are good numbers and I am glad those areas work for you. I personally do not like those areas and they are not on my radar. I used to go to school in that area, lived there for a short while, but the area is not what I would consider safe to say the least. This is my personal opinion of course and others may differ.
How much do you enjoy life in CA? As others have said - you can invest anywhere.
I moved out of SoCal in 2004 and it was the worst financial decision I've ever made. California is expensive; taxes are high, cost of living is high. Yet if you love CA like I do then your cost of living increases dramatically upon leaving. Now I spend money on travel related expenses to enjoy what I used to enjoy for nothing more than the cost of living there. Plus my cost for groceries more than tripled upon leaving, and the quality of fruits and vegetables is just not there on the east coast.
There are so many other factors, as well. So much of the lifestyle in CA has no fees attached. You can go to the mountains and park without paying. You can park at the beach for free. You can hike for free, surf for free, and even camp for free is some areas. Maybe some of the other western states have this but on the east coast everything has a price tag. Perhaps we don't share the same interests, but think about your lifestyle before packing up and moving out.
Californians love to complain about how expensive everything is. I know because it's where I was born and raised. I learned that there is a reason California is so expensive; add up all you get for what you pay and it's the most cost effective state in the country. I can't wait to move back and start paying those high taxes again.