Where do you invest? (San Francisco is insane)
Hello All,
I've been involved in 2 out-of-state offers so far and feel like I've hit a wall in the areas I was planning to purchase a home/multi-family in.
My primary question: Where would you / do you invest?
Past experience
Eastern Washington: Little/no appreciation and meager cap-rates for anything decent (I know there are other factors but for simplicity, cash-flow is only so-so). Last offer took some wind out of me (thankfully, nothing bad *knock on wood) and I realized I have the entire world to look for property.
Seattle: Rising far too fast, not sure if it's sustainable. I don't want to put all my eggs in one basket (heavy reliance on tech alone). Who knows if that will burst with San Francisco (where I live). On top of that, rents don't justify the high costs. (I haven't aggressively looked for "deals" but from what I've seen for the average joe that doesn't plan to spend 10k on postcards, such as myself.)
I was looking at job growth/diversity, running numbers, looking at charts, patterns, etc. and thought, heck I should ask people on here.
Would be so appreciative for any thoughts!
Cheers,
Alice
Originally posted by @Account Closed:
Alice,
Patience is a virtue. If history is any indication, the data is suggesting our housing market is approaching the top. If you can wait, I would wait till 2020 before consider buying. If you have to buy now, write-off appreciation for the next 5-7 years. Be sure you can service the debt with a 20% rent reduction if you plan on house-hacking.
OMG! The end is near, So you are really calling the top? And predicting 20% rent reductions? Yikes! How do you get both of them in yer pants at the same time? LOL
http://curbed.com/archives/2016/01/27/buying-homes...
I have totally zoned out on this since I retired but it seems that good properties have not quite doubled since the last decades stabilized high. Usually it over shoots by 10% and then pretty much stabilizes at 90-100% over the last high. Has this happened?
Rents declining? I usually see them stay flat for awhile and sure the last landlord to extract the max from some poor tenant will see that tenant leave and a not quite as desperate tenant replace them at a little lower rate.
I'll admit the lack of "widespread" inflation for so long is killing some of the anticipated appreciation.
Is this call for all asset types or just multi's?
I would still recommend buying today unless you are in a major bidding war to grab the lowest interest rate loan for 30 years. I think the next big jump is going to take peoples breath away so better to be in the game at this markets high instead of being late to the game on the next one.
I'll concede to your better market knowledge at this time but I do have history on my side.
I agree with all that a top is likely forming in CA. Having said that, though, nobody knows for sure when, if, or how soft it will get ... I think the time to buy is when you find a great deal on a place that you can afford to hold indefinitely. If you are disciplined about only pulling the trigger on great deals, you will be fine in the long run regardless of if you buy at a cycle top or bottom ... just make sure you can afford to hold (through cash flow, W2, or some combo thereof) to make it to the long run. To effectively do this, it is as much an emotional discipline to override fear and greed (or fear of "missing out") as it is an intellectual one to analyze and let the numbers guide you. As an added bonus, only buying great deals by default tends to do your market timing for you, as good deals are much more plentiful at bottoms than tops. Similar sentiments (but the opposite direction) for selling, but just starting you have nothing yet to sell. Good luck!
I have been investing in the west side of Cleveland for the past 10 years with great success. If you have local help, you can make very nice returns on your investment (15-20% COC ROI). The key for out-of-state investors in any market is to develop relationship(s) with local investors, investor friendly real estate agents, and/or property managers. When you get the sense that you've found good relationships and people you can trust, you are ready to do serious business.
I have had out of state investors fly into town, tour the city, look at property, get a feel for what we do, how we do it, how we screen tenants, how we manage property, etc to help them feel like their investments are in great hands.
350 successfully managed units can't be wrong, right?
@Logan Allec, I just look at historical data and make my bets. I could totally be wrong if it's different this time. Rents have plateaued in my San Jose market. Although I expect a 10% rent reduction during recession, I'm budgeting for 20%. I'd rather be safe than sorry. My partner and I bought an 8-unit building last summer for $1.225M. We've spent close to $100k on the building and raised rents by $3k/month. We're looking to do a cash-out refi, and our lender came back with a $1.9M value. I'll sell it for $2.4M, but nothing less. We also bought another building last summer or $1.175M, spent $15k on it, and got an unsolicited offer for $1.65M from a 1031X buyer. We told them to take a hike. We'll consider selling it at $1.9M. LOL! We were fortunate enough to pick up 4 of these deals last year. :>)
I'm not a doom and gloom guy. Just an opportunistic guy. I'll buy for the right price, and I'll sell for the right price. Did I mention I raised $1.2M to buy small businesses that can potentially generate $100k/month in net profit? I know it sounds too good to be true. I disclosed to my investors that I have no experience in this arena and I may lose all of their money. They said here's my money. Three of them are BP members. Sigh....I can't believe they trust me. I'll let you know in 2 years if this venture will blow up in my face, and I will lose all investors' money. :>)
You can get slightly positive cash flow in Stockton and Sacramento to a lesser extent. Your tenants can cover the rent while you wait for appreciation.
giving KC a shot, won't see appreciation like we do here in the bay area.........but the cash flow can be nice/easy.
Also can get a plane ticket fairly easy from OAK/SFO for couple hundred bucks which doesn't hurt.
I think you can get some good deals in northern Florida or south Georgia, basically anywhere along the coast. I invest in that area and I usually get around 10% cash on cash. If you have cash, you can still get good deals. Of course south Florida is really crazy but I truly believe cash is king in northern Florida. With the growth of the Jacksonville expanding, the growth should be expediential going forward. In November, I purchased two properties that wound up in a bidding contest and I was the lowest bidder for both and wound up winning both because I was the only cash offer on all offers. I paid 88,000 and 90,000 and they were listed at 112,000 and 119,0000 respectively and had them rented out within a few weeks of purchase for around $1200 a month. With two military basis and the Mayo Clinic located in Jacksonville, Florida, I think it should be something worth looking into. Just be careful not to get caught with high HOA fees as those will eat your profits away. God Luck