Rental Property Investor · Los Angeles, CA · Member since 2010 · 804 posts · 230 votes
Yes L.A. and the OC are great places to live but not the greatest place for the average real estate investor. I did say average because those with cash are still buying. Some are even tearing down the old replacing them with brand new dwellings. Our market here is in a rising price spiral for now. Eventually it will crash again. The thing about this, is that in each cycle the prices go even higher. If you want appreciation LA/OC is the place. The problem lies can you buy when it is a buyer's market and hold on until it is a seller's market. If you can, you will be well rewarded. Many investors here are price out of the market and that is why we have to go the out of state route to invest. So what is best for you? Do you buy and hold for appreciation or buy and hold for cash flow? I myself prefer the appreciation for long term but everyday living requires cash flow for me. I think I covered the problem why investors have to go outside their local area to invest. So what do you do? Stay local and do nothing or head for the nearest exit and start making some headway in an out of state investment? You make the call.
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
11y
The reality is you have to invest for both.
If your area isn't appreciating long term, it's dying... if the area is dying, your property is dying, your cash flow is dying.
So invest in a place where the numbers work not only this year, but the forecast is the numbers will work long term. I fully intend to own these homes in 50 years and eventually passing them along to the kids.
The problem I have with appreciation is... what do you do with it? Hey, I just got $100k in extra equity?! Great... you can't cash it out and still cash flow... you could sell the property... but now what are you going to do with the $100k... go buy new properties? In your market, all the other properties have probably had similar increases so it doesn't really add anything. Sure, you could try to time the market... buy low in CA... sell high in CA... then go invest in cash flow in Indianapolis... but that's just gambling and market timing IMO.
I live in Venice Beach and I've always done out-of-state just because cash flow has been my focus for now. Buying for appreciation is definitely speculation, and being such a high-dollar market, it's a huge risk. However, that's not to say I won't ever do it. But when I do it, it will be with extra/fun money, not serious money. At least when I have enough money to risk losing. Not before. Not to say I assume I would lose it, but because it is speculation, I want something more fundamentally stable before shooting for the crystal ball. The crystal ball will be a blast when I do it, for sure, but I'm not there yet.
Ali I always enjoy your imput. Are you saying investing in LA is an appreciation speculation or you just rather invest for straight up cash flow? Btw Venice is the city, there is no city named Venice Beach. It would be like saying I live in Malibu Beach:) I was not sure if you knew as you always say Venice Beach...maybe they should change the name.
Scottsdale, AZ · Member since 2014 · 659 posts · 536 votes
11y
My wife lived there just before we met. She refers to it as Venice Beach as well. The community is basically centered around the activity on the beach.
My wife lived there just before we met. She refers to it as Venice Beach as well. The community is basically centered around the activity on the beach.
For sure, I lived here all my life and run Venice Beach Surf School...so I get it but locals and maps say Venice....we all know it is on the beach...There are cities formally named like HB, RB, MB and I think Venice should add beach one day to the name, I like it. You can always add anything it just sounds non local to a guy who works in Venice. I was a geography major:)
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
11y
Is there two types of appreciation in play? I am thinking one is the timing and another is built in with supply and demand fundamentals. These fundamentals are kind of perpetually working in the background like for London or NYC. The timing one is more speculative and the other one is not so much if you long haul hold multiple cycles. Go ahead and sprinkle some forced appreciation along the way if you wish. I think some of these guys pay .05 property tax too. Thoughts?
Rental Property Investor · Los Angeles, CA · Member since 2010 · 804 posts · 230 votes
11y
In L.A., appreciation is like the L.A. Lakers or any great sport franchise dynasty. It will have its lean years and have its stellar years where you can bet almost your last dollar on this winner and know you will come out ahead. That don't mean you can go out too far on a limb where it can no longer handle your weight because you are begging for pain.
Yes appreciation here in L.A. is like an earthquakes here. They come and they go. Another one will happen for sure in the future. You can bet on appreciation here in L.A. and win. To win you must be invested for the long haul. Like day follow night and vice verse, appreciation will return time after time.
I didn't realize there was a requirement for saying only legal city names? Venice by itself is definitely the official city name (although some Venice addresses actually are considered Los Angeles), but everyone I know who lives near the beach calls it Venice Beach. I really never put a lot of thought into being more formal about it... ? No one, formally or informally calls Malibu anything other than Malibu, but every Venice beach local I know says Venice Beach. So comparing Venice and Malibu doesn't quite fit. (I must admit I'm not quite sure why any of this matters...)
I'm saying both of those things- LA is a great place to go for appreciation, and (but) I personally buy for cash flow.
I didn't realize there was a requirement for saying only legal city names? Venice by itself is definitely the official city name (although some Venice addresses actually are considered Los Angeles), but everyone I know who lives near the beach calls it Venice Beach. I really never put a lot of thought into being more formal about it... ? No one, formally or informally calls Malibu anything other than Malibu, but every Venice beach local I know says Venice Beach. So comparing Venice and Malibu doesn't quite fit. (I must admit I'm not quite sure why any of this matters...)
I'm saying both of those things- LA is a great place to go for appreciation, and (but) I personally buy for cash flow.
Right on it is no biggie, just the geographer in me. Have you done a comparison to investing for cashflow vs LA last 3 years? I think the difference might change your thoughts about investing in LA. I always hear folks say appreciation is speculation...my thoughts are how is it speculation when it historically appreciates. The timing part I get and that happens nearly everywhere but the fundamentals for appreciation are exclusive to certain locations it seems.
Los Angeles, CA · Member since 2014 · 352 posts · 142 votes
11y
Appreciation and cash flow.
You can make an analogy of this and see this as an instrumentalist playing solos over the chords of your favorite song.
In western music, there are 12 notes. Thats it. But these notes form the structure and RULES of how music is assembled - chords and melodies.
So after your create your basic song structure (the chords that make up the song), you can get Eddie Van Halen, Orianthi Panagaris or Pat Metheny to play solos over this song that respects all the rules of constructing a song. Most of the time (not always), respecting the rules of song construction (the foundation of the song) allows the song to sound good to our ears.
So say in Milwaukee, WI - the "music" will be weighted towards cash flow with barely any appreciation (for now). And then in Los Angeles, you get the appreciation and some cash flow if you either lucky or managed to construct your real estate deal that way.
But in the end, the basic principles of Real Estate (constructing a song) must be adhered to otherwise, whomever is playing solos over your basic song structure will sound bad no matter how good he is BECAUSE the basic song structure that DICTATES what solos he plays will sound meh!
Alright, analogy over. Back to cash-flow and appreciation for real! :-)
I haven't looked into it, only because it just isn't an investing method I've been interested in or wanting to focus on right now. Not because I never will, just hasn't been my focus getting started.