Investing outside of California

47 Replies

With the new rental laws in California, I have been looking to flip my current two rentals a (4/2 and 3/2 ) to another more landlord friendly state. I recently purchased “The book on Rental Property Investing.” By BT. I’m looking for a multi family, what states would my fellow Bigger Pockets friend’s recommend? Currently I am looking at the Rio Grande Valley area (Texas), and a little bit in Idaho.

This is my first bigger pockets post, any advice would be appreciated. Have a great weekend.

Houses in California are paid for and are renting out for $1300, and $1100 a month.

Located in the Fresno area.

It's totally doable. Many of my partners are based in California or were when they got started. Cash flows are much better in other markets. Texas is great. I don't know Idaho, but I know that others are liking it right now. Georgia and the rest of the southeast are popular as well. I would not recommend Virginia, most of our larger markets are fairly overpriced and it's a long flight from CA for you. 

@Trent Jackson why are you looking to leave CA? The new rent control laws don’t apply to your houses unless they’re owned by a Corp.

Even then, you should stay. Rent control has caused values to skyrocket. Look at SF, Berkeley, San Jose, LA, NYC. Rent control for decades. Most expensive real estate in the country.

@Jonna Weber thanks, being such a die hard Fresno state bulldog fan. Investing in Boise sounds tough haha. Just kidding it’s a great town. I haven’t looked to hard in Idaho we have a family friend who attends BSU, Idaho is very pro business so I thought it would be a good place to start. Do you deal with lots of out of state investing?

Hey @Trent Jackson welcome to bp. I am also reading the book on rental property investing by  @Brandon Turner . I have already read over 10+ real estate books this year and so far have listened to the first 320 bp podcasts.

I currently live in McAllen, Tx and plan to buy my first rental, a 4 plex next year. I have been following the MCALLEN market for the better part of this year and I have noticed that there are a lot of new single family homes and multi family being built. There is also a lot of land on which to build so there are a lot of things for sale and rentals have been offering more and more concessions. Over the past 10 years annul appreciation has been about 1.5-1.8%. Mls deals down here generally follow the 1% rule. 

I’m curious how you heard about the rio grande valley and what attracted you to it. 

Bp podcast episode 317 has great info about out of state investing and they also recommend certain places such as Houston, Austin, San Antonio, Dallas, Carolinas, Atlanta. Also, rich dad series Abc’s of real estate investing and advanced guide to real estate investing by Ken McElroy talk about finding great markets and what to look for.

 And of course there is David Greene’s book on long distance real estate investing! Hope this helps and good luck!

@Joseph Ryan I believe McAllen has a lot of potential. I am a farmer in California, labor laws and water practices have made it almost impossible here. Long story short I have made 8 trips to McAllen in the past year in search for a new area to farm. In September I found some farm land I purchased in La Sara. I have seen all the growth there and want to invest more. I guess you could call me more than a winter Texan... maybe we can meet up at top golf or something sometime?

@Trent Jackson have you looked at Midwestern cities? Typically higher returns on your investment. I am in KC and we have tons of California investors diving into the area. [Solicitation/Request to Contact Removed by Moderators]

Hi Trent,

Glad you posted and to hear some of your story. And I am following this conversation

I am just curious whats the attraction to Mcallen, TX ? What is it you look for when investing out of state?

Originally posted by @Trent Jackson :

With the new rental laws in California, I have been looking to flip my current two rentals a (4/2 and 3/2 ) to another more landlord friendly state. I recently purchased “The book on Rental Property Investing.” By BT. I’m looking for a multi family, what states would my fellow Bigger Pockets friend’s recommend? Currently I am looking at the Rio Grande Valley area (Texas), and a little bit in Idaho.

This is my first bigger pockets post, any advice would be appreciated. Have a great weekend.

Houses in California are paid for and are renting out for $1300, and $1100 a month.

Located in the Fresno area.

Welcome to the forums! Two things to consider about the reasons that you gave for wanting to invest out of state: 

1. The new rental laws in CA. These actually only apply to institutional investors, so do they even effect you if you only have 2 SFHRs? 

2. Taxes. The two states you mention (TX and Idaho), actually seem to have higher property taxes than CA does (CA 0.72%, TX 1.81%, Idaho 1.4% urban (where MF properties will be located), .9% rural). Unless you'd also be looking to become a resident in TX or ID I believe you'll still be paying CA income tax on any rents received from any out of state properties anyway so no tax savings there that I can see. 

Are you sure investing out of state will actually benefit you in either of the ways you mentioned, seeing as the new CA laws likely don't apply to your properties, and property taxes are actually more than double what they are in CA in the two states you're considering? 

Just some food for thought. I wouldn't make investing decisions based on feelings or emotions based on new laws that don't actually effect your business directly. Sounds like you've got some nice paid-off rentals out there in CA, if they're performing well I'd think hard about giving those up for uncertain returns out of state personally. 

I've moved some equities to middle Tennessee. Great appreciation. Good cash flow. Tenants often pay the utilities. No rent control. High growth area. Texas is cool, but the property taxes are a bit daunting, higher than CA in a lot of places. 

@Steve K. Very true, I think I have been falsely educated on the new laws. I guess really what I would like to do is either keep what I have and invest in multi family out of state, or sell and buy more in other states where my dollar goes farther.

Is it true you can only raise rent 5% every year now?

Thank you for the reply and correcting me I appreciate it.

@Eddy Udry lots of agricultural growth, from what I hear it’s one of the fastest growing areas in the country. It is warm there in the winter, people fly in to visit the beach at South Padre Island. I personally think it has a lot potential.

Originally posted by @Joseph Ryan :

Hey @Trent Jackson welcome to bp.

I currently live in McAllen, Tx and plan to buy my first rental, a 4 plex next year. I have been following the MCALLEN market for the better part of this year and I have noticed that there are a lot of new single family homes and multi family being built. There is also a lot of land on which to build so there are a lot of things for sale and rentals have been offering more and more concessions. Over the past 10 years annul appreciation has been about 1.5-1.8%. Mls deals down here generally follow the 1% rule I’m curious how you heard about the rio grande valley and what attracted you to it.


I like both Arizona and Texas but I turned down an opportunity in Laredo because of the cartel violence. Have I misunderstood something?


 

@Account Closed Laredo is over 2.5 hours from McAllen and is not a market I have looked into so I don’t know much about that area. I do know that McAllen and specifically north McAllen is a relatively safe, growing area. I’m comfortable raising my family here.

@Account Closed THIS!! I completely agree with everything you said. 


I too am so tired of many Californians and others giving up on Cali. It seems like everyone to be jumping on OOS investing bandwagon and can’t find the hidden gold mine in front of them.

I personally own 7 properties in expensive-*** SoCal. Los Angeles. You can’t beat the appreciation here on SFRs. Its rent control exempt!!! This is why im focusing on SFRs as the majority of my property asset type. They outperform my 4unit.... on rent and appreciation.

The new rent control laws are backfiring. In my opinion, it will force rents to go up 5-8% every year in the right markets. Because supply and demand. I see it now... its basically a license to raise rents every year. I have raised my rents every year at 4% and my tenants expect it and have never complained. Im cash positive on all my properties.... almost $200k in gross income after 10yrs of investing in SoCal.

I just opened escrow on a SFR fixer this weekend in SoCal. I was going to flip it but after running my numbers and after appraisal value came in... I have a $250k spread on "as is" value. After rehab (est $60-80k max), my LTV might even be under 80% LTV....Which i can refi into a conventional loan. If i rent at market rent, Rent will be negative about $15 bucks for the first year.... but i have $200k in equity off the bat.... and raising rent next year will cashflow.

You can find deals in Cali if you try hard enough. If I can do it in Los Angeles. There’s no reason you can’t...  you just need to find the right strategy for your market. 

@Alvin Uy  but I thought appreciation is gambling, right? If it doesn’t cash flow on Day 1 it’s a horrible investment. 

Making $100/month cash flow in the Midwest has got to be better than 6 figure appreciation right here at home right?

Kidding aside, majority of posters here on BP think appreciation is “icing on the cake”. My bud @Account Closed would say it IS the cake.

What people don’t talk about much is rent growth. Even if you’re a tad negative/break-even on Day 1, the rent growth in CA and other high value markets usually end up making all of our investments cash positive rather quickly. Some of my units were renting at $1,000/month 7 years ago. Same units today are $2,200/month. I know @Russell Brazil has seen similar things happen in his DC market. 

A $500/month rental in Cleveland was $500/month 10 years ago and might be $700/month 10 years from now. 

Solid rent growth + appreciation = road to riches. 

Originally posted by @Trent Jackson :

With the new rental laws in California, I have been looking to flip my current two rentals a (4/2 and 3/2 ) to another more landlord friendly state. I recently purchased “The book on Rental Property Investing.” By BT. I’m looking for a multi family, what states would my fellow Bigger Pockets friend’s recommend? Currently I am looking at the Rio Grande Valley area (Texas), and a little bit in Idaho.

This is my first bigger pockets post, any advice would be appreciated. Have a great weekend.

Houses in California are paid for and are renting out for $1300, and $1100 a month.

Located in the Fresno area. 


Hello Trent, Cleveland is one of the best turnkey market and the most popular for investors because of high rental demand and low cost of entry, property prices are pretty inexpensive here. I recommend taking a closer look at the Cleveland market. Good luck!!

Originally posted by @Trent Jackson :

With the new rental laws in California, I have been looking to flip my current two rentals a (4/2 and 3/2 ) to another more landlord friendly state. I recently purchased “The book on Rental Property Investing.” By BT. I’m looking for a multi family, what states would my fellow Bigger Pockets friend’s recommend? Currently I am looking at the Rio Grande Valley area (Texas), and a little bit in Idaho.

This is my first bigger pockets post, any advice would be appreciated. Have a great weekend.

Houses in California are paid for and are renting out for $1300, and $1100 a month.

Located in the Fresno area.

 Hello and welcome! CA is pretty crazy right now. Many investors are looking into the Midwest for properties that have a much lower entry point. Cleveland is a good example of this. Most properties hit the 1% easily.