2016 California - Feasible rentals at home or look out-of-state?
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Real Estate Agent · Los Angeles, CA · Member since 2015 · 201 posts · 82 votes
10y@Justin M. finding properties here that cash flow and still have a decent cash on cash return can definitely be difficult. I have found myself investing in Palm Springs vacation rentals because of this.
78 Replies
- Castaic, CA · Member since 2015 · 4 posts · 3 votes10yJustin, let's take a trip to Palmdale together. And if somebody else is interested, let's join forces. I believe Palmdale will grow. The defense contractor is supposed to bring in 10000 jobs. And if the high speed train project starts, that will make Palmdale very desirable.
- Flipper · Cincinnati, OH · Member since 2015 · 23 posts · 5 votes10y
@Dumitru Zah I would totally be down to check out Palmdale. I am very open to challenged and up and coming neighborhoods. When you see the prices Norwalk is getting I am shocked. I am pretty sure I have had two murders about 1 mile from me in the last 4 months and yet the housing is still high priced. I talked to a landlord friend of mine and she said their last couple deals in Norwalk and La Habra didn't pencil out like they thought. The buy and hold properties she is making money on are in more challenging neighborhoods like compton and Inglewood. I am just not sure I am ready to buy in compton. I know there are some super nice places in compton, but it has such a stigma.
@Justin M. Normally I just google for stats. There will be a variety of sources to check everything there. I think Palmdale is at 6.9% vacancy overall and much lower for SFH vacancy (3%ish) . Average rent is $1167ish overall, SFH would be higher. Rentfaxpro is also a more professional source for insider details and it is almost on the actual street level there. They claim lenders use rentfaxpro. You can also check rental prices on rentometer.
Air Force contract expected to bring 6000 aerospace jobs to Palmdale
KABC-TV-Oct 27, 2015Thousands of jobs are expected to come to U.S. Air Force Plant 42 in ... on Tuesday could mean thousands of new jobs coming to Southern California. ... Palmdale Aerospace Academy Headmaster Laura Herman said she ...
New Air Force bomber contract goes to Northrop Grumman in ...
LA Daily News-Oct 27, 2015New Air Force deal could bring thousands of jobs to the Southland
MyNewsLA.com-Oct 27, 2015$60 Billion Bomber Contract Expected to Revive SoCal Aerospace ...
Patch.com-Oct 27, 2015$60B Air Force Contract Could Create 6500 Jobs In Palmdale
In-Depth-CBS Local-Oct 28, 2015Northrop's deal to build new stealth bomber may create thousands ...
- Real Estate Professional · Dayton, OH · Member since 2015 · 423 posts · 187 votes10y
CA is a notorious boom/bust cycle. Timing plays are always difficult. Trying to hit it right is in reality, gambling.
You have to do business on today's market. If you find a deal that makes business sense, then move on it. You can what-if any deal to death.
As far as other markets, I get a lot of investors from your part of the world here in Ohio because 1) it is a stable market, and 2) the price of real estate is so low compared to CA that the cash flow is spectacular.
I have some turnkey rentals with returns well into double digits listed in MarketPlace if you are interested.
- Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes10y
Hi Justin,
As a seasoned and accredited investor with a old RE and stock portfolio accumulated over a 40 year period I'm very comfortable staying in my own farm of the North San Diego Coastla, South OC and Sough Riverside area's including the Palm Desert/Palm Springs area.
Having said that, I also must listen to the war drums beating in the distance if you'll pardon the metaphor. When I see some of the big hedge funders starting to go to cash and the bleak outlook of global dynamics rearing its ugly head I tend to do a little more listening.
Additionally, I'm starting to see properties' DOM extending a little more every month and I'm even beginning to see values start to decline across the board from entry level to high end. At least in my farm.
I have 4 grown children with families (14 grandchildren total) and have been advising them to keep saving and holding cash as long as possible for the next couple of years. However, my oldest daughter moved to Austin last year and currently rents in the lovely community of Stiener Ranch just outside of the city. I visited her over Thanksgiving last year and fell in love with the whole area and frankly the whole Texas thing that's going on right now.
Because she lives there I told her I would be very interested in helping her secure a home whee she and her husband could comfortably raise their 4 children. As @Aaron Gordy so aptly stated, "Buying and holding in Austin is a good pathway for building passive income". I couldn't agree more. But once again only if in the case of my daughter who lives there or were it my farm and I have no plans to move to Texas anytime soon albeit were I to move from SoCal it would be to Austin for a lot of reasons.
So where I'm going with all of this as a 70 year old Pops & Poppy is there's noting wrong with sitting on the sidelines and continuing to hold cash until the fog of the future lifts and we can begin to see things a little more clearly.
My 3 cents adjusted for inflation.
@John Arendsen Austin does sound great. I have only heard good things and the shinning hot star for Texas. When you compare hot Austin to SoCal head to head it comes in at just average run of the mill SoCal numbers historically. Unless you live there it becomes a why bother question if that is the case. This does not account for property taxes which might shave Austins numbers more. Sidelining still might be best option at this point.
- Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes10y
Originally posted by @Jeff B.:
@Jeff B. Agreed in the real world that is turnkey. I can assume you would not buy sfr out of state retail priced turnkeys normally. This new definition of turnkey I speak of is almost entirely sfrs and retail priced. No mls, no value add opportunities like you did. That is the big difference. So what you did is not what most others on bp call turnkey today for the most part.
And that bothers me that terms get created from a whim and don't apply to the real world. I'm sure that it's not misrepresentation nor intended to be, but I assume it became in vogue by consistent reference to it, beginning in a vacuum from limited experience.
Guess I've too many years in engineering where term are intended to convey accurate information.
Oh Well.
Oh I think it was intentional and not a whim that "turn key" means what it does today. Turn key is now used to sell properties at or above market value with accompanying services. It's totally inexact. Turn key could be where the property is truly ready to go and already rented. Or it could be where you pay for the repairs, and a PM places tenants after you buy. Turn key can mean anything at this point. It's being used to sell ease and comfort to new buyers.
Regardless, I've never heard turnkey used to describe your scenario. At least not in my 15 years in the biz. Buying properties with tenants in place can be so far from turnkey, as is evidenced by the years needed to bring your property up to full speed. The phrase means all you have to do is unlock the door. Hardly the case in a scenario where the units need work and/or the tenants are not paying market.
- 10yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Justin M. I get around the country quite a bit.. so know a little about a lot of markets.
but if you read the good news these days.. check out Portland Oregon.. I have nothing to sell here unless you want to buy one of my new constructions.. ( those are not really that good for cash flow).. but its the NUMBER ONE in migration state in the US. which is pretty astounding really.
what makes this interesting for those that want to put in some shoe leather.. is rents have risen 30% over the last few years.. still plenty of properties were rents have not been moved in 10 years leading to some very good upside.
Plus the stability of the renter demographic in PDX is right up there with SF or San Jose.
When you talk out of state most are talking about mid west deep south rust belt.
Those markets are there ,, will be there , have always been there.. No rush there the values as any of the folks that work those will tell you they just pretty much stay neutral.. its were the term I buy for cash flow I don't expect appreciation comes from. because that is exactly what happens there. I think the play in those markets is to get VERY serious and find a way to get to maximum doors as quick as possible... those with great success have multiple doors.
however there are 100 turn key type providers just shop and compare .. you want quality provider and bullet proof PM services with those two in tac you stand a good chance of having a good day... If you choose poorly... it turns into a very stressful situation.
- Professional · Palmdale, CA · Member since 2015 · 31 posts · 5 votes10y
@Matt R.@Justin M.@Dumitru Zah@Jessica W. If you guys would really like to come visit the Palmdale, Lancaster, Antelope Valley area I would love to show you around:-) I'm also always happy to run comps for a purchase, or rental if you are looking to buy in the area and want to nail down your figures.
I believe our market is going to be much more stable due to the Air Force contract and the lack of new development that we have had since 2007. Although, we probably won't see any significant changes from the contract for at least two years...
On a very related note, I have a listing coming up (not on market yet) for a 1bed, 1bath condo in lancaster that will rent for up to $800/mo and has an HOA of $235 asking $60k.
- Investor/RE Broker · Eugene, OR · Member since 2014 · 3k+ posts · 968 votes10y
Originally posted by @Justin M.:
Originally posted by @Larry Fried:
@Justin M.Hi and welcome to BP and the world of REI! Like others have said it all depends on your capabilities and your goals. I live on the West Coast as well, and if your like me when I started out in REI, after years of trying to get into REI locally, I finally took the plunge by investing out of state with a full service turnkey provider, which provided me a fairly passive way for me as the owner of an unrelated (to REI) business at the time. This has been a solution for many busy professionals, and others who live in non-cash flowing markets who want to get into REI, but it is not for everybody.
Interesting suggestion Larry. I'm going to have to do some more research on these turn-key providers. You always hear that you "make your money when you buy", which seems to imply that you're only going to find cashflow positive properties by locating needle-in-the-haysack distressed sellers, or winning at a foreclosure auction. I wouldn't have thought it would be possible to purchase a turn-key property with immediate cashflow. "What's the catch?" is my first thought, but it's certainly something I'll do some research on.
Yes you do hear that quote often, and the reality is that it is very difficult to both get equity in the property from day one and cash flow from day one. That is, "the catch" is if you buy turnkey with tenant in place, you should expect to pay close to or at market value for the property. To get built in equity you have to take more risks and be more involved. It just depends on whether you are willing to pay for the extra service and reduced risk and time, as well as be eligible for conventional financing from the first purchase, or not. So there are trade offs whichever way you go, and it depends entirely on the investor as to whether one method or another is best for them.
@Kristofer Schroeder Thanks for the offer. That is nice of you. I am not in the market for AV presently and thanks for helping the fellow bpers.
@Account Closed I am sure it is great for CF in Ohio. California is also notoriously stable in certain high demand areas when the whole world goes south. For example, this past GFC Santa Monica median 2007 was 850K at the peak and at the bottom of the market 2011 that was $825k. Today that is 1.4 mil. I am sure parts of Ohio were fine too but just saying everything is relative to actual locations when it comes to stable comps.
- Homeowner · VISTA, CA · Member since 2015 · 727 posts · 340 votes10y
For what it's worth I errored. I actually have 5 children 4 of whom still live in SoCal and my daughter who moved to Austin. Didn't have to say this but I just think it's bad luck if I leave one out. LOL!!
- Flipper · Cincinnati, OH · Member since 2015 · 23 posts · 5 votes10y
Originally posted by @Kristofer Schroeder:
@Matt R.@Justin M.@Dumitru Zah@Jessica W. If you guys would really like to come visit the Palmdale, Lancaster, Antelope Valley area I would love to show you around:-) I'm also always happy to run comps for a purchase, or rental if you are looking to buy in the area and want to nail down your figures.
I believe our market is going to be much more stable due to the Air Force contract and the lack of new development that we have had since 2007. Although, we probably won't see any significant changes from the contract for at least two years...
On a very related note, I have a listing coming up (not on market yet) for a 1bed, 1bath condo in lancaster that will rent for up to $800/mo and has an HOA of $235 asking $60k.
I am interested. I just started checking the area and I'm trying to figure out what's a good area and what's not. My hubby wants out first deal to be more of a flip fixer or something to gain more capital, but buy and hold is our ultimate goal.
- Investor · Madison, WI · Member since 2015 · 44 posts · 31 votes10y
@Matt R. @Justin M. @Dumitru Zah @Jessica W.,
I am interested in joining a field trip to the AV as well. I own in Santa Clarita and I love the idea of having properties within driving distance, and I had heard about the aerospace contracts. Definitely promising news for that area.
ROAD TRIP! :)
Hey Justin!
I'd say it totally depends on your goals. If cash flow is your objective, then you're going to have a hard time finding that in CA anywhere. Out-of-state definitely has cash flow, and I can tell you it's not necessarily that hard to do. I live in Venice Beach and my closest property is 2200 miles away from me, and I love it. Just the whole concept of out-of-state. None of my properties are in CA or anywhere near it. I actually like the out of sight out of mind theory. I just wait for the checks.
Now, of course there are some things that come with it. Property management being the biggest one, and making sure you have a good PM. Without that, you can be in trouble. But I promise if you have a good PM, there is little to no work or stress required on your part and you literally just collect the checks.
I know a couple folks down in Whittier, and one of my really good friends is in chiropractor school out there!
@Ali Boone Great point. Anyone could be cash flowing tomorrow if that is their goal. Easy investing for Cali is rarely ever better when it comes to REI total profits. This is not rocket science although I think Ali used to work and live in that exact field in AV. She could shed some light for AV too perhaps. Ali what do you think of AVs future?
- Investor · Milpitas, CA · Member since 2015 · 278 posts · 155 votes10y
@Ali Boone, do you feel that way about Fresno or Salinas? Sacramento?
CA is a large place. I agree it's probably hard to cash flow in LA or SF area, but there's a lot more to CA than those two that people still live in.
Originally posted by @Matt R.:
@Justin M. Normally I just google for stats. There will be a variety of sources to check everything there. I think Palmdale is at 6.9% vacancy overall and much lower for SFH vacancy (3%ish) . Average rent is $1167ish overall, SFH would be higher. Rentfaxpro is also a more professional source for insider details and it is almost on the actual street level there. They claim lenders use rentfaxpro. You can also check rental prices on rentometer.
Air Force contract expected to bring 6000 aerospace jobs to Palmdale
KABC-TV-Oct 27, 2015
Thousands of jobs are expected to come to U.S. Air Force Plant 42 in ... on Tuesday could mean thousands of new jobs coming to Southern California. ... Palmdale Aerospace Academy Headmaster Laura Herman said she ...
Yes vacancy is the bugaboo in Palmdale as it's basically a 'company town' and when the contracts end, so do the jobs.
- 10yGordon CuffePro MemberInvestor · Roseville, CA · Member since 2009 · 1k+ posts · 587 votes
@Justin M.The Midwest cities in St Louis and Kansas City offer the best cash flow with homes selling for 60k to 70k that get rents from $800.0 to $850.0 per month. The key is getting a honest and good property manager. I just found this interesting article about investing in the Sacramento region in case you want to stay in CA and lower prices than Southern CA.
http://www.bizjournals.com/sacramento/news/2015/12/15/why-blackstone-is-still-investing-in-sacramento.html
@Jeff B. Agreed. This one is a 10 year contract. Gov Job Recession Proof. But yes the 90s military cutbacks killed AV and a lot of LA. This might change who knows. LA Counties economy in a very large part used to be defense spending driven for decades. That has gone almost entirely away these days. If that spending ever comes back then really watch out. 60 billion to start ....ain't no joke. That is more than any tech company spends ever. ( I think) :)
- Real Estate Services · Olathe, KS · Member since 2015 · 329 posts · 57 votes10y
I'm in Kansas City and we wrk hand in hand with a few good management companies depending on the price range of home you are purchasing. Great returns are common around here. :)
Jason
Originally posted by @Matt R.:
@Jeff B. Agreed. This one is a 10 year contract. Gov Job Recession Proof. But yes the 90s military cutbacks killed AV and a lot of LA. This might change who knows. LA Counties economy in a very large part used to be defense spending driven for decades. That has gone almost entirely away these days. If that spending ever comes back then really watch out. 60 billion to start ....ain't no joke. That is more than any tech company spends ever. ( I think) :)
Matt, it seems like you've done a fair amount of research on AV. You mentioned the Palmdale high-speed train hub post in an earlier post I believe and it prompted me to read a few articles on the subject. Sounds very promising. Have you done any research into the anticipated long term affects of having a hub there? It seems like regardless of the government contracts that the hub would open up the area to commuters and encourage other development.
@Justin M. I have not done any extra REI research in AV other than I am aware of the area since I live in the same county. This was part of my territory back in my AC Nielsen / Dunn & Bradstreet days but I really did not pay attention too much working for Phillip Morris and such we did not cover REI. I used to 4x4, fish and create random harmless havoc as a kid there and with many friends is about extent of my REI familiarity to be honest. I did check out some homes to buy there back in the 1900s. I know nothing about this train although that talk has been going on since the 80s I think. There was a point in time there was talk about some LAX airport overflow stuff too. But seriously it is pretty much off my radar. I am in no position to direct you accordingly other than hey....check this out. I do know of some semi famous SOCAL investors who have absolutely killed it out there regardless of any economics etc....Sometimes I drive through on the way to the Sierras or Vegas. I will say it does look better each time I pass through.
Btw the place is less than an hour away. You could be there in minutes if you had to. 80 mph is about average I think on the 14 freeway.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes10y
Originally posted by @Matt R.:
@Jessica W. I assume you can chuck Lancaster, Palmdale on that list too. I heard there are some new aerospace multi billion contracts coming to AV that could help. Worth researching more perhaps. I have not invested in Bake or AV but many do very successfully.
Sidebar: One surprising stat last time I check was Bake had twice the crime of AV per capita. Good luck with your search!
Roger that ... Northrop Grumman has won the contract for next gen Stealth Bomber, which will be assembled in East Palmdale. I have done well with rentals in the AV eastside; it is not as bad crime-wise as most people assume it is, you just need to be selective on the neighborhood as there are definitely some rough ones. Even though rents and price are increasing, cashflow is tight today, even there ... probably can't hit the 1% rule unless ghetto, for example. If folks are young w/out kids, it would be a great area to house hack as it is ~1/3 the price of LA proper; that's how I got started. Beware, though, when the market tanks, the AV tends to tank hard, so it still may be better to wait for the next fire sale to get in if your intention is to buy-and-hold, or at least make double sure you (and the property's equity & cash flow) can afford to hold through the next downturn if you get in now.
We were in a flipper's market for the last couple years, but those margins are now getting tight too ... I think the developers are killing it at the moment, which to me means we're late in the cycle and buy-n-hold "should" come back around in the next few years or so, but probably not to the extent of 2009-2012 since mortgage lending has not gone crazy (not yet at least) ... just my opinion, but my crystal ball is just as hazy as the next person's ... I always try to make sure I have significant value add AND positive cashflow so I can flip OR hold; if I can't find it, I don't buy it ... thus, I haven't bought anything for awhile.
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