Cannot find cash flowing deals in CA

Fresno, California
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Cannot find cash flowing deals in CA

Sahil Rajput
Sunnyvale, CA · Member since 2015 · 7 posts · 13 votes

Hello BP community. 

I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?

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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
2y

You won't find cash flow even if you go to the Midwest. It may pencil on paper, but you'll likely be underwater net of all costs of truly owning a physical asset. Don't just look at excel, look at the cost of owning and the real intention with it. @Becca F is a good example of that in her big post.

Your better bet is to go after a really high quality properties--maybe not Cali--but other areas like Tennessee, Carolinas, pockets of Texas, etc., if Cali is too rich for you. At $350-$400k you'll be hard pressed to find much, no asset is truly intrinsic. In the yester-years that made sense and assets were intrinsic. That's just not going to work when you add up higher rates, less supply, and net population growth. Your better bet is to get in front of entry-level starter homes in a good to great areas, and hold the asset for it's investment strength not it's Day 1 intrinsic properties.

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @Sahil Rajput:

    Hello BP community. 

    I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?


     That is reality. 

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  • Carlos Valencia
    Lender · 92703 · Member since 2022 · 326 posts · 538 votes
    2y

    Hello Sahil, 

    Unfortunately that is the reality cash flow is hard to come by especially in this market. A few strategize people use to attempt to cashflow or at least break even is rent the house by the room instead of renting out to a family. Adding value to your property like an ADU/DADU but those also cost money to build so overall you still wont cashflow. The good thing is that at least your property will gain appreciation so its great for long term hold. Another strategy is looking at short term or mid term rentals thats one way to cashflow but it does take more work as your basically running a hotel business but once you figure how to automate things it will get easier at least thats what the short term rental investors tell me lol. Last thing I would suggest is to start with house hacking strategy where you buy a home as your primary weather it be singe family or 2-4 unit and rent out the other units or rooms. This is the best way to get started with lowest risk as you will only need as low as 3.5% -5 % down and you will also have a place to live. This is a great opportunity to learn a lot and make mistakes where you wont be sweating bullets.

    @Albert Bui @Matthew Kwan

    3Reply
  • Lucas Moncada
    Member since 2024 · 7 posts · 4 votes
    2y

    In a particular area in Fresno? I too am looking for my first deal and have seen quite a few for under $350k in Fresno 3 bed 2 bath.

    Would it be over $400k what it is all said and done?

    Open to anyone's input.

    1Reply
  • Sahil Rajput
    OP
    Sunnyvale, CA · Member since 2015 · 7 posts · 13 votes
    2y
    Quote from @Lucas Moncada:

    In a particular area in Fresno? I too am looking for my first deal and have seen quite a few for under $350k in Fresno 3 bed 2 bath.

    Would it be over $400k what it is all said and done?


     I was looking round Clovis. Yes there are quite a few around 350k, with lesser rent potential

    0Reply
  • Sahil Rajput
    OP
    Sunnyvale, CA · Member since 2015 · 7 posts · 13 votes
    2y
    Quote from @Carlos Valencia:

    Hello Sahil, 

    Unfortunately that is the reality cash flow is hard to come by especially in this market. A few strategize people use to attempt to cashflow or at least break even is rent the house by the room instead of renting out to a family. Adding value to your property like an ADU/DADU but those also cost money to build so overall you still wont cashflow. The good thing is that at least your property will gain appreciation so its great for long term hold. Another strategy is looking at short term or mid term rentals thats one way to cashflow but it does take more work as your basically running a hotel business but once you figure how to automate things it will get easier at least thats what the short term rental investors tell me lol. Last thing I would suggest is to start with house hacking strategy where you buy a home as your primary weather it be singe family or 2-4 unit and rent out the other units or rooms. This is the best way to get started with lowest risk as you will only need as low as 3.5% -5 % down and you will also have a place to live. This is a great opportunity to learn a lot and make mistakes where you wont be sweating bullets.

    @Albert Bui @Matthew Kwan


     Thanks for your suggestions

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    2y
    Quote from @Sahil Rajput:

    Hello BP community. 

    I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?


     This is why 100s of investors from Ca have been buying in the Midwest for many years, 10% net caps ( used to be 25- 30% ) are to be had. I live in FL and do all OOS, 

    4Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    2y

    The most important things to learn as a REI are:

    1 - Use as little of your cash as you can. The less cash you use, the less the property costs you as the REI. Your ONLY actual cost is the cash you spend, so spend as little as possible, and spend it wisely.

    2 - You are a REI not a property collector. If the deal doesn't work, and/or if you can't find deals that work, don't buy just for the sake of buying.

    7Reply
  • Chad Delhotal
    Member since 2024 · 3 posts · 3 votes
    2y

    I live in Santa Barbara. Talk about difficult to find cashflow! Highly recommend investing out of state.  There are a few companies that will help connect you with out of state turnkey properties and management companies.  I have been working with Norada (https://www.noradarealestate.com/) and have been very happy so far!  Marco has a great podcast with tons of valuable info as well.

    3Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    2y

    Lots of places don't cash flow and putting 75% down for it to cash flow is not how to do it.  Start looking for places out of state.

    3Reply
  • Samuel DioufBusiness Member
    Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes
    2y

    If you're interested in out-of-state investing, there are some great opportunities in the Ohio markets. Many investors from California, are investing in the midwest because of the yearly returns making more sense in these lower priced markets. Ohio markets show up 3 times in Zillows 2024 hottest markets, with Columbus and Cincinnati taking the top 2 and 3 spots. I moved from Florida to start investing in Columbus.

    https://www.zillow.com/learn/hottest-housing-markets-2024/

    [email protected]614-662-1652
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    6Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    2y
    Quote from @Sahil Rajput:

    Hello BP community. 

    I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?


     Looking out of state will likely be your best option. The Ohio and even Northern Kentucky market are doing well though! Let me know if you have questions. I have quite a few properties I can send you in the range

    [email protected]859-443-4952
    Sam McCormack Realtor
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    2Reply
  • Allen MarisPro Member
    Investor · Santa Ynez, CA · Member since 2008 · 375 posts · 175 votes
    2y
    Sadly this is the reality if you are looking with an agent who only looks at the MLS. If something is on the MLS for more than 3 days and there are not 20 offers, it's not a deal. I used to be in the Fresno market but got out a couple years ago. Start looking for opportunities to add value. ADUs, adding footage, major fixers. 
    If you have to put down 75% on a property to make it work, that 75% is lost opportunity. At 5% interest that you can get at a bank now, you'll get more cash flow sticking it there. You lose any appreciation play, but you also lose a downside loss when the market dips. Anyone that says the market won't slow/reverse is ignoring history and you can say the same about people who always say the stock market goes up and so does bitcoin. At some point, you'll be on the wrong buying and selling side and it'll be a loss. 
    I can't see buying in CA unless something turns. 
    2Reply
  • Daniel Brown
    Investor · Springfield MO · Member since 2023 · 30 posts · 21 votes
    2y

    Most people who buy in CA or high-priced markets are for an appreciation/equity play, not cash flow. Cashflow would be better found in the Midwest where homes are still cheap and rents are OK. If you are new new I would do what others have suggested and house hack, buy a 1-4 unit with an FHA loan, live in one, and rent the others, I wish I had done this when I first started.

    4Reply
  • Sahil Rajput
    OP
    Sunnyvale, CA · Member since 2015 · 7 posts · 13 votes
    2y
    Quote from @Allen Maris:
    I used to be in the Fresno market but got out a couple years ago. 
    Thanks Allen for the great insights. Are you investing in other markets now? 
    0Reply
  • Allen MarisPro Member
    Investor · Santa Ynez, CA · Member since 2008 · 375 posts · 175 votes
    2y

    I'm exploring other markets at the moment. It'll most likely be in the southeast unless something local drops in my lap. 

    0Reply
  • Mike PaolucciBusiness Member
    Realtor · Columbus Cleveland Dayton, OH · Member since 2022 · 495 posts · 551 votes
    2y

    Hey @Sahil Rajput, I'm originally from San Francisco, CA and ran into the same issue when I started in 2021. It was pretty hard to find properties where the numbers and landlord laws made sense which is what ultimately led me to investing in Columbus, OH.

    The numbers and landlord laws out here made sense then, and they still do today. I've been able to get a healthy combination of both cashflow and appreciation from all my properties after a little TLC.

    Also, take a look at this link. Looks like they're trying to revive the old Prop 10 legislation from previous ballots and renamed it the "Justice for Renters Act" -->"Justice for Renters Act" Just another reason why I'm glad I'm not investing in CA.

    Happy to share my experiences. Good luck on your REI journey and property search!!

    [email protected]614-892-9184
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    3Reply
  • V.G JasonPro Member
    Investor · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    You won't find cash flow even if you go to the Midwest. It may pencil on paper, but you'll likely be underwater net of all costs of truly owning a physical asset. Don't just look at excel, look at the cost of owning and the real intention with it. @Becca F is a good example of that in her big post.

    Your better bet is to go after a really high quality properties--maybe not Cali--but other areas like Tennessee, Carolinas, pockets of Texas, etc., if Cali is too rich for you. At $350-$400k you'll be hard pressed to find much, no asset is truly intrinsic. In the yester-years that made sense and assets were intrinsic. That's just not going to work when you add up higher rates, less supply, and net population growth. Your better bet is to get in front of entry-level starter homes in a good to great areas, and hold the asset for it's investment strength not it's Day 1 intrinsic properties.

    7Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    2y
    Quote from @Sahil Rajput:

    Hello BP community. 

    I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?

    Hey Sahil, totally can relate with you being from an expensive real estate market - I moved to Columbus a few years ago (from Portland, Oregon which was super expensive) to become a full time real estate investor, and ever since, I've completed quite a lot of BRRRRs, flips, and own a successful rental portfolio here in Columbus Ohio. There's so many catalysts for population and job growth (Intel, Honda, Amazon, Nationwide Hospital, etc). I can definitely tell you there's still a lot of positive cash flowing and 1% rule deals and you get amazing appreciation. As an investor and agent here in Columbus Ohio, if you have any questions or want to connect, definitely reach out!
    [email protected]614-300-7535
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    1Reply
  • Alfath AhmedBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Sahil Rajput:

    Hello BP community. 

    I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?


     Hi Sahil, properties unfortunately will never pencil out in popular west coast areas. Most investors that live in California turn to the Midwest and invest in cash-flowing and highly appreciating assets. 

    I would say you should take the money you would invest there and look to invest it across multiple good assets in the midwest. 

    I work with investors from California and Seattle and they love investing here for all of the benefits.

    [email protected]614-802-5698
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  • Jake AndronicoBusiness Member
    Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
    2y

    @Sahil Rajput

    Yep, sounds about right! 

    A lot of CA's invest out of state and those that want to be able to drive to their properties typically look at Vegas and Reno. Or, just have to be willing to put more down. 

    I moved to Reno from Northern CA and my family and I have been investing here for years. 

    Biggest difference from CA are much more favorable landlord laws, taxes do NOT reassess on the sale, and still high appreciation due to land constraints, proximity to Lake Tahoe, tech and manufacturing job growth, Tesla continuing to expand, etc. 

    There are properties here that cash flow w/ 30% down, but that's about the lowest we see. 

    415-233-1796
    3Reply
  • Stephen Montez
    Real Estate Agent · Las Vegas, NV · Member since 2024 · 50 posts · 18 votes
    2y
    Quote from @Sahil Rajput:

    Hello BP community. 

    I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?


    Hey Sahil! Cash flow is going to be tough to come by especially in these bigger markets like SF and here in Vegas and even more especially with interest rates where they are now. 

    I've heard investors finding better prospects in the Midwest if pure cash flow is your goal but I would also say don't take away from the value of equity appreciation in a market. Here in Vegas that's the main focus with all the Californian's coming in but also some cash flow available if you're open to some creative strategies. 

    Hope that helps!

    1Reply
  • Simon Ashbaugh
    Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
    2y

    Hey Sahil, if cash flow is your top priority, I suggest that you look into the market in the Midwest. Cleveland offers a strong rental market driven by a growing population and can help ensure a steady income stream. Additionally, with affordability and a median home price below the national average, Cleveland stands out as an attractive option for investors seeking a promising return.

    2Reply
  • Mike K.
    Member since 2024 · 84 posts · 106 votes
    2y
    Quote from @Samuel Diouf:

    If you're interested in out-of-state investing, there are some great opportunities in the Ohio markets. Many investors from California, are investing in the midwest because of the yearly returns making more sense in these lower priced markets. Ohio markets show up 3 times in Zillows 2024 hottest markets, with Columbus and Cincinnati taking the top 2 and 3 spots. I moved from Florida to start investing in Columbus.

    https://www.zillow.com/learn/hottest-housing-markets-2024/


     No!  Stay out of my state. Already too much competition.

    0Reply
  • Kurt Grossman
    Member since 2018 · 6 posts · 1 vote
    2y

    Add bedrooms and or an ADU to make money in CA. CA Law allows for the construction of an ADU. You can rent it out. The interest rates are high now. The prices are high. But the money per room and bathroom makes sense. If you add 1,400 square feet you can easily put 3 Br/2 BA on it for $210,000. Your payment goes up $2,200 and your rent goes up $2,600. The property value goes up about $350,000.

    1Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    2y
    Quote from @Kurt Grossman:

    Add bedrooms and or an ADU to make money in CA. CA Law allows for the construction of an ADU. You can rent it out. The interest rates are high now. The prices are high. But the money per room and bathroom makes sense. If you add 1,400 square feet you can easily put 3 Br/2 BA on it for $210,000. Your payment goes up $2,200 and your rent goes up $2,600. The property value goes up about $350,000.

    I do not know how many appraisals on ADU properties you have seen but I have analyzed dozens. I have yet to see a hands off ADU addition obtain a valuation to cost ratio anywhere close to approaching what you site ($210k cost to add $350k of value). Can you provide this property address for me to analyze?

    A vast majority of appraisals are valuing the ADUs less than the hands off cost of adding the ADU. Look at posts on ADU appraisals on bigger pockets or go to RE meetups and talk to investors.

    Those doing best with ADU addition appraisals have an active role (flippers, developers, etc) and are adding them in areas that have traditional MF.

    Adding ADUs in pure SFH areas are getting appraisals that are lucky to get 50% value for the ADU versus the cost of adding the ADU.

    Best wishes

    1Reply
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