Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
Wanted to get some Californians’ prospectives on the real estate market and owning property here during this current political climate and the overall situation in this state.
I just informed my tenants we are selling their rental. Partially because the currents state of CA and partially because I can avoid paying taxes on it if I sell this year.
Anyways, there is a lot of turmoil in the state right now. The homeless issue, the illegal immigrants, tax hikes, failing infrastructure, mass exodus of people leaving the state, diseases popping up that we haven’t seen in ages, push for low income/affordable housing and the fact that it’s a tenant friendly state.
Has the tipping point been reached? People have finally had enough and we are actually seeing them leave. No more bluffing. Is it time to fire sale your ca properties? Are we destined for a major economic blow in the near future?
Just want to get others take on it. Am I being paranoid or are the concerns valid?
No more bluffing. Is it time to fire sale your ca properties? Are we destined for a major economic blow in the near future?
Absolutely, and be sure to give me a list of the properties you are intending to "fire sale" in San Diego along with the "fire sale" price you are selling for to the first person that offers that price. :) I'll blast it out to my rather substantial California "investor" mailing list after checking with a San Diego Realtor to ensure these are actually "fire sale" prices.
No more bluffing. Is it time to fire sale your ca properties? Are we destined for a major economic blow in the near future?
Absolutely, and be sure to give me a list of the properties you are intending to "fire sale" in San Diego along with the "fire sale" price you are selling for to the first person that offers that price. :) I'll blast it out to my rather substantial California "investor" mailing list after checking with a San Diego Realtor to ensure these are actually "fire sale" prices.
Rental Property Investor · Park City, UT · Member since 2019 · 84 posts · 149 votes
7y
Sounds like you're watching too much Fox News ;)
Lived in SD for 6 years. Go back every winter. SD has never been a great place to be a landlord, nor is CA a great place to do business, and people have been leaving in droves for years. That said, Trump's tax law changes have made living/owning property in CA even worse, so it make sense that the real estate market is taking a hit. Just because the market is changing from a seller's market to more of a buyer's market doesn't mean the sky is falling, but it's probably going to make owning investment properties in a lousy place (for returns - I absolutely love SD and CA) even more lousy.
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
7y
@Jason Hendrickson the Trump tax laws are going to hit NEW owner/occupants, not investors. Schedule E has no limit on the amount of property tax you can pay. ;-)
It MIGHT put some overhead pressure on 800k and above properties, since they will hit the 10k property tax limit, but I doubt it.
Rental Property Investor · Park City, UT · Member since 2019 · 84 posts · 149 votes
7y
@Alan Grobmeier That's why I said "living/owning" property, not necessarily having investment property. Living in a high income tax state, as well as a high property tax state and having an unfavorable limit on what state-level taxes you can deduct from your fed taxes affects *every* person living/owning a home in CA (investor or other), and makes leaving CA for lower tax states more appealing. Doesn't matter if you can deduct every penny of your investment properties' taxes on Sch E if it's the changes to your personal taxes that are killing you.
Lived in SD for 6 years. Go back every winter. SD has never been a great place to be a landlord, nor is CA a great place to do business, and people have been leaving in droves for years. That said, Trump's tax law changes have made living/owning property in CA even worse, so it make sense that the real estate market is taking a hit. Just because the market is changing from a seller's market to more of a buyer's market doesn't mean the sky is falling, but it's probably going to make owning investment properties in a lousy place (for returns - I absolutely love SD and CA) even more lousy.
I don't know what about what he said has to do with fox news.
Rental Property Investor · San Diego, CA · Member since 2018 · 242 posts · 234 votes
7y
@Tanner Marsey
I also live in SD and have been investing in this market for 25 yrs.
It matters how much you own and when you bought.
I bought a bunch of condos in 2009 at a 50-60 discount in the last 10 yrs they Jane all gone up 2x+
In the last 15 months I traded 2 for 26 units in KS MO. My CashFlow went from $2k to$8k per month. Yes I think moving a little bit of your profit to other parts is the country is a very smart move.
I have access to more deals that I can buy so I'm happy to connect you w my broker. I'm getting 10%+ cash on cash return and projected IRR of 15-18%
Is that offer open to us other San Diego investors? I can't find numbers half that good around here, so I've been forced to start exploring remote markets.
Rental Property Investor · San Diego, CA · Member since 2008 · 89 posts · 65 votes
7y
I personally think that selling is a good option if you are going to another hot market. San Diego is a long-term appreciation play as the housing shortage is projected out to 2050. Don't invest in the rust belt or a dying part of America as that is where CA equity goes to die. I have seen family and relatives that bought in the 70s on both coasts and property has appreciated tremendously due to housing shortage compared to the increasing population growth. I personally don't want to pay for any freeloaders, but understand that is potentially my tenant base. San Diego may only have 1.3 million people, but combined with TJ is equivalent to 5 million residents.
You also have to consider where are the growing demographic groups and where are they moving to? I see a ton of diversity in San Diego and hear languages from all over the world. The housing situation is only going to get worse in San Diego, but guess what that will do for demand? If they vote for rent control in the future, then I will still hold until they realize how it will kill investment in the region. The only construction I see around San Diego are for new homes priced in the low $600s. More blue collar workers are leaving due to affordability, but I see more white collar workers moving into the neighborhoods.
Another thing to consider is what major coastal CA city is the most affordable? It is definitely not SF or most of coastal LA. My suggestion is to hold if you can and then cash out refi and buy other rentals if your current rental portfolio can cover the costs. Interest rates are so low and for every $100k you borrow is going to add another $500 to your payment.
Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
7y
Think I pick up on a little sarcasm in a few of these posts!
I don’t watch any Fox News. I don’t think ca will ever be a bad place to invest but the whole “the juice isn’t worth the squeez” is starting to pertain more and more. I think for big dollar operations, development and a few other niche markets there is still money to be made. Mom and pop investors are starting to see an uphill battle.
@Jason Graves I’m starting to narrow down my out of state markets. I’d love to get linked up with you and find out some more info.
Appreciate the insight. Either way.... I’m going to sell this place. Between hoa and property tax there are just too many expenses, rules and regs. I will reinvest in CA down the road most likely for the appreciation play but for now I’m trying to capitalize on the cheap money and get some rentals that I can pay off in 15 years to supplement an early retirement.
Real Estate Broker · Santa Ana CA [South Coast Metro] · Member since 2016 · 459 posts · 202 votes
7y
The news needs negative headlines to sell news! Yeah CA is friggin a mess, morons at the helm and the rich are getting richer and the poor can barely afford housing. But it is always that way in CA. But we have jobs[for now], huge demand [we are short like 3 Million housing units in CA], costs keep going up to build, interest rates are low. I think if prices start to subside investors will swoop into buy, the bottom is 5-6% CAP rate at worst. We are not at the same issue we had before, last time we did not have a real estate problem we had a wall street problem and an unprecedented over reaction. Now we have a debt problem and that might bring the entire thing down but who knows. All I know we get out bid on offers every time we turn around on a So Cal property. Either other people know what I do not know or everyone is crazy.
The CA housing cycle is always 2-3 x the national level. Jobs and People are leaving but just as many are coming in. It seems everyone else makes $300k per year I guess. Properties keep selling.
The CA market is up and is probably a good time to take some profits off the table and better utilize elsewhere. The rental you have might go up for next 2-3 years then down 2-3 years no one knows the exact timing.
If I were you I would take the rental and fix it up nice and sell for what you can. If you can get your 1031 or Homeowner's exemption then those profits are tax free, thats the best thing to do with property most the time when you have had a run up in value. Other parts of the country are going to keep going up as long as the Coasts keep going up, a rising tide lifts all boats and CA tides rise faster so you can arbitrage that difference and get better cash flow for sure.
Dont look at it as a problem but an opportunity. Keep us posted on what you do.
Sunnyvale, CA · Member since 2018 · 191 posts · 178 votes
7y
@Tanner Marsey i think headlines can be good references but I also take them with a grain of salt. News companies (including Fox and CNN) have their own agendas. Rich dad, Poor Dad guy says there’s always 3 sides to a coin.
It seems like you’re set on what your going to do.
The only thing I can think of is in the future, you should better financially position yourself that you can do nothing and be fine. I do like the idea of pulling equity out instead of selling.
You are getting a lot of sarcasm because your using “ridiculous” headlines as your thesis. There have been and for the foreseeable future, be more articles about how people are leaving CA, but SF is a hot spot for a lot of new jobs. Healthcare is the new hot industry. What about all these IPO’s which will make loads and loads of new millionaires? Maybe some high speed rails are built and people can commute further in the same amount of time. The fact that you think everything is bad makes it “relatable to fox news” because I assume they constantly spew negative headlines.
Anyways, GL on your next purchase. And don’t forget to have fun while investing :)
Rental Property Investor · Orange County, CA · Member since 2019 · 1 post · 0 votes
7y
@Tanner Marsey
I,m struggling with the same issue. IMO the biggest issue here in CA is that I have a $500+k property that gets $2400 in rent. $2,400-$2650 is the going rate, I'm ok with the low side as I have a great tenant. Seems like I should take the capitol out of state and get more bang for my buck.
I would not turn a blind eye to the situation this state is in. Is it as bad as the news says it is ? Probably not but it's not good and they will eventually unwind prop 13 first on business and then residential.
Rental Property Investor · Phoenix, AZ · Member since 2013 · 919 posts · 911 votes
7y
@David Fosmire, what did you originally pay for the property?
The 'grass is greener on the other side' syndrome is alive and well. There are risks/rewards to any investing philosophy.
If you go with the 'flyover cashflow' philosophy, you will probably give up future appreciation AND increases in rent. There are reasons those properties are 'cheap'. After all, rents dont rise much and the state govt is usually there waiting for their cut first. :-(
If you go with a west coast philosophy, it probably won't cashflow on day 1 unless you put down a BUNCH. But it WILL eventually as rents rise, providing you are in a nicer area.
If you go with this route, I would suggest that you not go out and buy 20 properties. Buy one, stabilize it, THEN move to the next. ;-)
Rental Property Investor · San Diego, CA · Member since 2018 · 37 posts · 37 votes
7y
@Jason Graves I just sold a 4 unit in San Diego and have my other 2- 4 unit buildings listed. I’m looking in other states and if your willing to give me the contact info for a good broker I would appreciate it. Thank you.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
7y
I think that CA property can go up in value fast, more so than other places, but it also crashes fast and more so then other places. So you can get great appreciation on property in CA, but can loose it all fast too.
If you are looking for regular cash flow, you will do much better in other states with lower taxes and landlord friendly laws.
If I were in your place, I would not fire sale anything, but would list it and sell it at market rate. Then reinvest in a growing area with better cash flow opportunities.
Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
7y
@Lynnette E.
Planning on going out of state to some proven markets that cash flow and may offer some appreciation.
Either way, I’m selling this property. It’s a condo with a pretty expensive, overbearing hoa that I feel is going to get even more expensive in the near future. Take advantage of the homeowner exemption and the current market. I should walk with about 130k. Bought it four years ago for 355k. Will sell for 450k-ish. Lived in it two years. Rented it for two years. If I use that money again now, in ca, it’ll be a small multi family. Won’t ever buy anything with an hoa again.