It's a perfect storm for California's REI or is it really?

1 Reply

You can make money in any market. I see many in Cali investing seemingly random all over the nation. There is definitely a market for that. That is fine except some missed the best time in modern history to invest here. Some promoters still seem to overlook this. That was mostly horrible investment advice looking back and on BP we can. I see their post from past years 11,12,13,14 and many "pros" completely failed to recognize opportunity by sticking to silly mantras. 

It can never always be the best time to buy. Today there are inland Cali areas that have easier entry points as they are more normalized with supply and demand. The grass always will look greener somewhere else but is it really? In an effort to learn more and for BP transparency, what do you think moving forward? Are you on the sidelines, looking in state or out of state? What do you think?

Originally posted by @Matt R. :

You can make money in any market. I see many in Cali investing seemingly random all over the nation. There is definitely a market for that. That is fine except some missed the best time in modern history to invest here. Some promoters still seem to overlook this. That was mostly horrible investment advice looking back and on BP we can. I see their post from past years 11,12,13,14 and many "pros" completely failed to recognize opportunity by sticking to silly mantras. 

It can never always be the best time to buy. Today there are inland Cali areas that have easier entry points as they are more normalized with supply and demand. The grass always will look greener somewhere else but is it really? In an effort to learn more and for BP transparency, what do you think moving forward? Are you on the sidelines, looking in state or out of state? What do you think?

 First, for transparency I'm a long term contributor to the Allen Matkins/UCLA annual developer survey. I happen to agree with most of the findings in the 2015 report.

The southland CRE market is very strong, and with a widely accepted view of minor headwinds in the foreseeable future through the Feds inevitable pre-programmed incremental interest rate raises to get rates to historical averages, the market should continue to steam full speed ahead well into 2016. Projections by local economists further suggest a robust market through mid 2017 before any systemic issues might cause a slowing down of the local commercial real estate markets (impact market anomalies excepted).

This is being proven out by the continued compression of CAP rates, rising rents, and increased valuations. Offshore capital has landed and increasingly seeks the safety of gateway metropolitan investments. Los Angeles has been a benefactor of such foreign investment.

I'm not necessarily in the camp that it isn't always a good time to buy. I think strategies must shift towards the opportunities markets present rather than avoiding the markets. As a value add and opportunistic investor my strategies for market penetration have traditionally swayed away from capturing a simple spread driven yield. My strategy is to seek yields adjusted for development risks.

Personally, I'm of the opinion many real estate classes are frothy and we are shifting our focus towards a short term capital growth strategy. This is for both personal capital needs as well as our assessment of current local market dynamics.

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