Cannot find cash flowing deals in CA
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?
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.
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,
There are deals to be found everywhere, but even in the Midwest we are having to work hard for them. People here are even saying there are no more deals.
I have done about 500 in Cleveland yes 500 . I get 10 a week. Just put 5 more under contract this week. If you are being told " there are no more deals" that is simply not true. Its ALL about your network, I can get as many as I want. I will do about 100 this year, keeping about 20.
All the best
@Sahil Rajput if you want to invest in CA, the only area I know that you can potentially cash flow would be parts of Inland Empire in Southern California and those would be D class areas. Investing in CA is better for flipping vs cash flow rentals. Study on different markets you may be comfortable investing in, visit the the market and build a team. I invest in Cleveland personally while living in the Bay Area.....I have a team out there that handles all the work for me.
Your cash on cash and cash on equity will be low in CA, more so in bay area or LA. But Your return on investment considering appreciation has been great historically. And this has been very steady tier 1 markets. So you need to choose. For example to invest a million, you can buy one house with 250k down payment, 2-3 years later you can double your investment as house appreciate to 1.2MM. rents will be low, and you will loose 30-40k on interests net of rents. Still you will make 160k net in 3 years. But you should already have money to get in.
I invest in the Bay Area and Indianapolis metro area but I acquired the Bay Area properties before 2013. I know investors in Bay Area that are doing house hack, mid-term or short term rentals - they do have quite a lot of capital. I'm not a fan of putting down large payments like 75% - you would be typing up a lot of money on one property.
As far as the Midwest, it's affordable but if you're trying to get cash flow, that's difficult to come by now at higher interest rates. My Indy property taxes go up with no limit, 17% with the recent assessment. There's no Prop. 13 in Indiana. I was cash flowing decently on a Class A property but now it's been significantly reduced. I bought 2 Class C homes in 2023 - my thought was to scale and grow my portfolio. After going through some headaches (tenant called for repairs 6 times in 7 months) the Class C#1 is stabilizing hopefully. I was -$300 to -$700 a month during those repairs. So much for positive cash flow. And typical Indy appreciation is about 3% (with 2019 to 2022 being outliers). Still figuring out Class C#2 (needs repairs before it can be rented out).
I'm learning more each day. That house was renovated (by seller, not me) and passed inspection (minor issues repaired) but until a house is stressed by daily living with the occupant turning of faucets, heat/AC, opening windows, etc., a renovated older home will still have issues. If you buy OOS I highly recommend having an unbiased party (not your agent or anyone trying to sell you something) maybe an experienced investor doing a very detailed video tour of the house and paying them something like $100 or so before you submit an offer - I wish I had done this. Get a full inspection and sewer line scope after you get in contract.
If your budget is around $400,000 I would try to find something in Northern California, Nevada or Arizona and play the appreciation game. NV and AZ have low property taxes and appreciation is higher than Midwest. I compared notes with an AZ investor with my Indy properties and his AZ house. If I add up the monthly payments of my 3 Indy houses, I could buy one high quality appreciating home in NV or AZ, or NorCal (maybe) - may 1031 exchange in near future.
For the homes you were looking at, if you did 20% down, how much negative cash flow would you be?
Flip in high cost markets, like California. Then invest with your profits in the Midwest for cash flow. It's done all the time. I've helped many REI's, and partnered with some) do this very thing.
Yes, you may be able to cash flow in Midwest but the best combination of low-priced single family homes in great neighborhoods with better cash flow in growing cities can be found in cities in the SouthEast and South.
Flip in high cost markets, like California. Then invest with your profits in the Midwest for cash flow. It's done all the time. I've helped many REI's, and partnered with some) do this very thing.
Yes, you may be able to cash flow in Midwest but the best combination of low-priced single family homes in great neighborhoods with better cash flow in growing cities can be found in cities in the SouthEast and South.
Cash flow in California has to be “created” vs found. Hunting on the mls along with the other millions of buyers will not have deals that jump up and bite you with cash flow. My last few California cash flow deals were off market 1) abandoned hoarder house 2) litigation with heirs 3) relative/tenant not paying rent . 4) relative/tenant not paying rent property in foreclosure . Majority involved creative financing