I recently joined BiggerPockets because the thought of real estate investment has been brewing in my head for about the last 6 months or so. Similar to many of you, long term being financially free owning several properties that provide good cash flow. The draw back is that I live in southern California where we know the real estate market is crazy expensive requiring large down payment and overall low ROI in terms of cash flow. So, I keep wondering where to invest? If I want to stay local, I have to travel at least a couple hours away from Los Angeles. If I want to cross state lines, which state? How much of headache is dealing with that?
I'm curious if there are others that are sort of in the same boat as me and what are some of the things your'e considering/thinking.
Welcome. I am in the same boat as you. I have chosen Atlanta, Philadelphia, and Las Vegas, so far, as out of state rental locations. Check out the new book Long Distance Real Estate Investing by David Greene for some guidance on this topic.
Southern Cali still has some potential. I have seen costal condos flip 10-30k in under 2 years. Even though the market is coming to a cap I believe you can still get a few years in before it flattens out.
@Rubik H. in this market I think you need to buy with cashflow. You are going to be tough to find in Ca. Live where you want but invest where the numbers make sense.
You're correct. You will either have to drive a few hours or fly out of state. So CA is not attractive for multi family properties that cash flow. Don't get lured into overpaying. Have you looked at San Bernardino or Bakersfield? Crunch the numbers first. If they work, then go see the property. Ugly properties in non-desirable areas, yet w steady rent history can have a lot up upside.
I agree that Southern California has cash flow if you look in the right cities. Bakersfield is only 2 hours North of Los Angeles and cash flows well. Many of my LA clients buy in Bakersfield instead of going out of state - it's cheap to buy here in Bakersfield and the rental market is strong. Plus, it's nice to be within easy driving distance for many reasons both during escrow and later when you own it. Message me if you'd like to discuss things further.
Thanks for the responses. Further up toward the grapevine is definitely something on my my mind. How about further east toward Palm Springs? How are things in that area?
As far as a different state, I’ll consider it if I can get there and back in the same day. Farther then that is just too far for now; perhaps later when I have more experience.
Hi @Rubik H.
I have seen a lot of success from investors coming out of town into Kern County. Being that you are in a higher price market, will definitely have problems with cash flow, and price point. You are still able to cash flow in Bakersfield and surrounding areas, and the price point is much lower.
Being that you are looking into getting into investing for the first time, I would recommend purchasing a property that would be easy to go and see within a few hours because even though you will want to have it professionally managed, you can make sure that everything is taken care of and god forbid there are any problems which are not being addressed by management, it is easier for you to take a half/full day to come see it and fix everything.
That would be my only problem with investing out of state. You are not able to see the property and if there is any mismanagement, you wouldn't really know. This has happened to a few people that I know who invest out of town. As a plus, it is really about finding your team that you can trust and things should get easier.
If you are looking into Palm Springs, the market there can be inflated as it is in other parts of the state right now, and it would come down to your ability to crunch numbers and find a deal.
Hope this helps!
Feel free to PM me if you would like to chat further
This is a great post. I have been wondering about Socal myself as well. I am currently looking in the Riverside Area, specifically Lake Elsinore.
How are you all gauging an area's cash flow potential. Sorry, I am not experienced. Thank you.
@Rubik H. I also live in the L.A. area and am facing the same dilemma: going out of state or stay close to home. Please share if you have made a decision. I am looking at Bakersfield and Palms Springs as well.
Hi @Richard V.
My two cents - if you have started investing and you are comfortable building a team of people that you are comfortable with taking care of the project then you have a good chance to earn good returns remotely, however, I have seen that when people purchase their first property within driving distance of their primary residence then you will be able to learn how to build a team and optimize your property, which will make you more comfortable and willing to take on properties in farther locations over time.
If you are in LA, the best markets would probably be in the central valley, i.e. Bakersfield or surrounding areas. There are still some good returns, you just have to know the different areas and what a good property looks like. If you would like to chat further or have any questions feel free to PM me.
Welcome. SoCal can be a tough nut to crack for us newbies.
A couple years ago I mailed out lots of letters to homeowners in LA County with no luck.
Then I tried rural Kern County and got a deal from a distressed homeowner in California City.
The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.
Have you considered an owner-occupied small multifamily for your first deal?
You only need to put 3.5% down, so cashwise it won't get in the way of your flipping, wholetailing, and wholesaling goals.
My first deal was a 4-unit up I bought with FHA 3.5% down here in Santa Clarita.
I lived for free (as opposed to paying rent) + enjoyed cash flow + built equity so it definitely didn't compromise my cash reserves.
I see 900–1200 orders (appraisals) a month in southern Cali and currently Palm Springs and Palm Desert is by far the most happening place. Price wise much lower compared to the cost and people are seeing good returns on flips and vacation rentals.
If you go with Palm Springs, make sure you look into the new vacation rental laws for the area.
Can't go wrong with any of the top 10 cities on list below. Though list came out in Dec'17, all cities went up for the first quarter of 2018. The top two cities in appreciation as a percentage are Seattle and Las Vegas, both over 14% plus, year over year for Mar'18.