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 like life here but I have lived in several states while in the Army and I enjoyed most of the areas I was stationed, I can adapt pretty well. When I was gone there were some things I missed about CA, just like I miss things about AK, doesn't mean I want to move back and freeze again. I believe there are opportunity costs and trade offs for every place.
As far as the charging for recreational activities, they do that here as well, there are lake fees, state park fees, trailhead parking fees, just saying every state I have lived in charges fees.
I work with many clients from California that have found their own private Idaho. If you are looking to uproot your family and move - I would be looking at the quality of life just as much as the investing potential. Good luck with you decision!
Simply move to a lower cost state. I've lived in CA, NJ but only started really cranking it when I moved to Texas. Yes, my pay actually went up when I got a better job w/a company based in Austin, while my cost of living dropped well over a 1/3. You can invest anywhere, but if you can get an increase in pay or get paid the same as you transition to a new job but lower your cost of living by a 1/3 or more, that's where I'd start. I'd also look at states that show strong future population and job growth trends so that if you feel comfortable investing more locally, then you have just won twice.
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.
$300/year in Mello Roos on a home purchased for $300k is effectively only a .1% higher tax rate. In San Diego, for instance, regular property taxes are ~ 1.115%; so, even with this additional .1% in MR, you would only face an effective tax rate 1.215%. That is still just 60-70% of the rate you see in states like Texas, Jersey, Illinois, etc.
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.
$300/year in Mello Roos on a home purchased for $300k is effectively only a .1% higher tax rate. In San Diego, for instance, regular property taxes are ~ 1.115%; so, even with this additional .1% in MR, you would only face an effective tax rate 1.215%. That is still just 60-70% of the rate you see in states like Texas, Jersey, Illinois, etc.
I realize in my post I didn't specify this but it is $300/mo. if anybody is curious about this, google Lincoln Ca Mello Roos or Placer County Mello Roos. Side note I have no interest in Jersey or Illinois.
@David Thompson Your post goes along with my thoughts, which is simply I feel like I could scale much faster than my current area. Could I invest out of state? Absolutely, but I am also looking for a new place to live for personal reasons as well.
@Jonna Weber I really do like Boise and you live in a great area but I replied recently to a "ROI of Boise" thread that gives my thoughts on the area. I wouldn't be shocked if some of your buyers were previously my sellers as a little while back I had several Cali refugees destined for Boise.
Nice numbers there, @Joe Bertolino, congrats on getting those. Do you use a wholesaler, auctions, or what to find those?
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.
$300/year in Mello Roos on a home purchased for $300k is effectively only a .1% higher tax rate. In San Diego, for instance, regular property taxes are ~ 1.115%; so, even with this additional .1% in MR, you would only face an effective tax rate 1.215%. That is still just 60-70% of the rate you see in states like Texas, Jersey, Illinois, etc.
I realize in my post I didn't specify this but it is $300/mo. if anybody is curious about this, google Lincoln Ca Mello Roos or Placer County Mello Roos. Side note I have no interest in Jersey or Illinois.
Well, although that does make a HUGE difference (1.2% vs .1%); I am not sure how this, in and of itself, would make in-state investing unfeasible. Also, keep in mind that Mello Roos is not an ad valorem property tax, so it is assessed independent of value (MR is the same for a 300k home as it is for a 600k home in the same community). Are there not more expensive homes in the area that help to mitigate the impact of the MR assessment?
Per your advice, I did a quick Google search and Wiki says that Lincoln County is only 20 Square Miles. So, in regard to the original topic at hand, this is certainly not a reflection of the CA market as a whole.
In your case, though; there must be other areas in the surrounding counties where Mello Roos is much less of a factor, no?
As for you having no interest in Jersey or Illinois, I was merely using those for comparative purposes. By the sound of your response, it seems like you do have an interest in Texas, which if I'm not mistaken has one of the highest property tax rates in the Country just below 2%. I believe CA's effective tax rate is actually somewhere around .7-.9% due to prop 13 so, even with that outlandishly high Mello Roos, the rates turn out to be right around the same.
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.
$300/year in Mello Roos on a home purchased for $300k is effectively only a .1% higher tax rate. In San Diego, for instance, regular property taxes are ~ 1.115%; so, even with this additional .1% in MR, you would only face an effective tax rate 1.215%. That is still just 60-70% of the rate you see in states like Texas, Jersey, Illinois, etc.
I realize in my post I didn't specify this but it is $300/mo. if anybody is curious about this, google Lincoln Ca Mello Roos or Placer County Mello Roos. Side note I have no interest in Jersey or Illinois.
Well, although that does make a HUGE difference (1.2% vs .1%); I am not sure how this, in and of itself, would make in-state investing unfeasible. Also, keep in mind that Mello Roos is not an ad valorem property tax, so it is assessed independent of value (MR is the same for a 300k home as it is for a 600k home in the same community). Are there not more expensive homes in the area that help to mitigate the impact of the MR assessment?
Per your advice, I did a quick Google search and Wiki says that Lincoln County is only 20 Square Miles. So, in regard to the original topic at hand, this is certainly not a reflection of the CA market as a whole.
In your case, though; there must be other areas in the surrounding counties where Mello Roos is much less of a factor, no?
As for you having no interest in Jersey or Illinois, I was merely using those for comparative purposes. By the sound of your response, it seems like you do have an interest in Texas, which if I'm not mistaken has one of the highest property tax rates in the Country just below 2%. I believe CA's effective tax rate is actually somewhere around .7-.9% due to prop 13 so, even with that outlandishly high Mello Roos, the rates turn out to be right around the same.
There are areas in the surrounding communities that have zero Mello Roos, I am not stating that this makes or breaks people. It was a reply to another poster who was stating that property taxes are something to watch out for and I said yes, another thing to watch out for are bonds such as MR.
Yes, Texas is of interest even though the property taxes and insurance are high. Due to growth, diversified economy and current price to rent-value it is still on my list.
For CA investors who are under the impression I am saying you cannot make money here, that is not the case. I do feel like I can scale quicker in some other markets but my goals are to move out of CA for personal reasons, since I plan to move anyway it would be nice to have boots on ground in a market that I have interest in.
My goal is to make one million dollars in real estate by the time I am 40. I am 37 now and because of the Austin Texas market, I'll be 1/4 of the way to my goal by June.
Austin is booming! You still have to be smart about what and how you do things but the potential is there.
Thank you for sharing that, it is very motivating. In relation to your son going off to college, both my boys are pre-school age so making a move now does not require much strain in the changing schools and making new friends aspect. I don't have many ties except our family lives here, more incentive to move...jk in case they stumble upon this thread. My family is very resilient and adaptable from our time in the military so I feel like now (with kids not quite in school) would be a great time to move, before the roots get too deep.
I look forward to bouncing ideas off of you, I will send a PM
@Joe Bertolino Are you using using the BRRR strategy as your primary strategy here & if so do you plan to keep these forever, or 1031 up? Also, are you going with 15 or 30 yr loans? Thx
Hey Chris, we recently moved from San Jose to Austin TX for what sounds like some of the same reasons you may be looking for; hot and comparatively low-cost real estate market, great public schools, lower cost of living, etc. Austin fits our personalities much better as people are very friendly, extremely helpful, and they are genuinely happy and proud to live here. It is so refreshing to be a part of this culture. My father was military as well and that seems to lend adaptability in any envirinment so I'm completely sure you'd enjoy it here and put roots down as quickly as you'd like.
There are a few items that northern CA has on Austin; more available fresh produce, more available and quality ethnic foods (Asian especially), more ethnic diversity (mostly Caucasian), more impressive geography, and more moderate weather. Although everything is cheaper here we do have to drive further to get it; granted we did move to the suburbs (for the fantastic schools) and if we lived near downtown it would be a different story.
Our real estate strategy upon leaving California was this;
Cash-out refi an investment property and use that money as a down payment to purchase our primary home (called "second home" by the lender as we were living in a primary residence in CA at the time).
After living in Austin and doing research on the market we then sold the investment property that we refi'd and 1031 exchanged it for multiple properties. It literally is unbelievable what we acquired with that tear-down SFR.
Yes, property taxes are higher (almost 2X) but there's no state income tax and frankly, I would rather pay higher property tax on a house that is less than half the price when also considering the overall cost of living being so much lower (nearly half). Property taxes are still a small portion of your annual net when considering how much you are able to save here.
I don't see why more young California families don't move this way. It makes so much sense from a quality of life standpoint especially financially.
Nice numbers there, @Joe Bertolino, congrats on getting those. Do you use a wholesaler, auctions, or what to find those?
Direct mail and driving for dollars using a list of homes with pending code enforcement issues.
@Joe Bertolino Are you using using the BRRR strategy as your primary strategy here & if so do you plan to keep these forever, or 1031 up? Also, are you going with 15 or 30 yr loans? Thx
Yes, BRRR then refi quickly to a 30 year loan. I will eventually sell my SFR's and 1031 into large multi family.
So, if all of the people here are saying Memphis is "on fire", then doesn't that mean boat-loads of competition? I've had it to here with spam from companies in "hot" areas peddling their "amazing deals". </rant>
I was looking at Austin as my industry lives there, but as @Jerry Padilla mentioned, wew, those property taxes had me shy away!
Like you, I wish I could invest elsewhere and look at them whenever I feel like. The grass is always greener (actually, most certainly greener in areas that aren't in a drought) Also, if you're an agent, I assume you already have deep connections with the businesses / owners there?
I would imagine it would be time consuming to start from the ground up.
@Alice K. Bankrate published an article way back in 2013 listing Memphis as the #1 market to buy SFR rentals. So to answer your question, yes, more competition the more time goes by. Memphis has been a "hot" market for years.
We are having a blast servicing clients from around the world, who have chosen Memphis as their city of choice to invest in SFR.
I had a client from Honolulu in this past weekend, Japan the week before, and New Zealand the week before that.
All of these client said the same thing. "It's too expensive to buy SFR, where I live."
However, Memphis has proven to provide great sales prices and GREAT rental income!
I am a RE Broker in Memphis and I help my client from around the world buy, sell, build, rehab and manage Awesome properties!
I'm not sure what the big deal about property taxes is. Yes, they're very high in TX, but as long as your property is rented, what really matters is the differential between the rent ratio (which is healthy in TX major markets) and the tax rate, plus the relative rate of insurance, maint,, and other expenses.
If I was moving to TX w/RE investment and a better quality of life as key considerations, I'd give San Antonio and some of the nicer surrounding areas (Boerne, Helotes, Alamo Heights, New Braunfels, etc.) a hard look. I've lived in Austin nearly half my life, and loved it, but the traffic and over-crowding has significantly decreased the quality of life in recent years, and I only see it continuing to worsen. Too bad, it used to be such a special place (and still is, when you're not stuck in traffic or trying to park downtown for a reasonable price), but has gotten over-loved.
Have you considered investing in Tucson or Flagstaff, AZ? They are a drivable distance from SoCal and quite affordable.
First question - aside from investing potential, are there other issues that are pushing you out or pulling you towards a different area?
I'm quite familiar with Northern & Central California - I was stationed in both areas for a few years each. (Shout out to @Joe Bertolino - I've torn down Bass Lake road on a motorcycle more times that I could count!)
I couldn't get back to Florida fast enough. Plenty of topics there, but suffice it to say that I wouldn't blame you for getting out, and I'm very happy to be in Florida (Tampa Bay area).
As to investments, there are always deals to be had. I'm sure if I landed back in Sac, I could find whatever I needed for investment properties.
Certainly, some markets are better - no one is running to invest in Detroit, right?
But move because you want to move. There's nothing wrong with that. You & your wife agree, so you need no other permission.
If you happen to move to an area that has a vibrant market, so much the better.
Find someplace you love, figure out how to make it work.
You'll both be happier for it.
Wow you called that one wrong!
I too left California lived in all three of the major metropolitan areas.
Orange County was the one I escaped to Detroit from. Glad I left.
Glad I chose Detroit!
Nice to hear this. The "rules" are sometimes just not reachable in some areas.
Can I ask, on average, what kind of time frame you're doing before you've hit the 2% "rule" (if you didn't start out at 2%)? What's an acceptable starting percentage for you?
LOL @Richard Dunlop!
I know the guys on the podcast love to dog on Detroit, so why not?
Honestly, I have no idea what Detroit's market is like.
Glad it is working for you.
Too dang cold for me regardless.