Best time to invest in North Cal

11 Replies

I would like to get started investing in multI-unit properties in North Cal. It seems like Sacramento and Stockton are my best choices for lower entry fee and good cash flow. 

The concern that I have is keep hearing recession, recession, recession. I’m worried that if I enter the market and recession hits next year, rents may decrease in these areas and I could be upside down.

Should I try to get in the market now or be patient and wait?

@Soul Luciani there are always opportunities and good deals in every market. Just make sure you factor in downturn potential and have plenty of reserves in case of a major economic event. 

Don’t bet on speculation or appreciation to make a deal work. It needs to stand on its own where it is today and be able to weather a downtown.

I am more concerned about the rent control and tenant laws than the overall economy. I would keep a sharp eye on that.

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Although many people had their homes foreclosed on during the last recession, most of those home owners ended up as renters...Sacramento market continues to strengthen since almost all areas continue to grow.  Job market is doing really well which keeps attracting people to come and settle here.

@Soul Luciani. The best time to buy in northern CA was 20 years ago or more.. the second best time is now.

Originally posted by @Caleb Heimsoth:

@Soul Luciani. The best time to buy in northern CA was 20 years ago or more.. the second best time is now.

 best time was the mid 70s to be exact.. by 1980 prices had started their historic appreciation rise second to none in the US.

anyone who bought in the 70s in the right areas is a multi millionaire on equity alone.. and if it was the exact right area SF peninsula you could be a multi millionaire with exactly ONE single family home.. I just cant think about it growing up in it..  Man.. appreciation in the right areas is the way to becoming very very rich.. 

there is a post on a recent  thread  "Rent control sweeping the US"..  one investor in SF  Amit  makes some great points.. he has a total of 13 doors those 13 SF doors would be about 100 to 200 mid west doors.. its on a scale of 10 to one and as high as 20 to 1.

so who has it better.. manage 13 doors to make the same cash flow as managing 100 plus doors..  guess who makes the most money short term and long term.

Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

@Soul Luciani. The best time to buy in northern CA was 20 years ago or more.. the second best time is now.

 best time was the mid 70s to be exact.. by 1980 prices had started there historic appreciation rise second to none in the US.

anyone who bought in the 70s in the right areas is a multi millionaire on equity alone.. and if it was the exact right area SF peninsula you could be a multi millionaire with exactly ONE single family home.. I just cant think about it growing up in it..  Man.. appreciation in the right areas is the way to becoming very very rich.. 

there is a post on the thread  Rent control sweeping the US..  one investor in SF  Amit  makes some great points.. he has a total of 13 doors those 13 SF doors would be about 100 to 200 mid west doors.. its on a scale of 10 to one and as high as 20 to 1.

so who has it better.. manage 13 doors to make the same cash flow as managing 100 plus doors..  guess who makes the most money short term and long term.

We’re starting to see that now in my local market.  People who have owned in Raleigh for 20 years are starting to see major value increases.  From the people I’ve spoken to this area never really crunched during 2008, just plateaued.  This could continue for another 10 plus years as housing here (which seems expensive to me) is still extremely affordable compared to the the northeast and west coast  

Originally posted by @Caleb Heimsoth:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

@Soul Luciani. The best time to buy in northern CA was 20 years ago or more.. the second best time is now.

 best time was the mid 70s to be exact.. by 1980 prices had started there historic appreciation rise second to none in the US.

anyone who bought in the 70s in the right areas is a multi millionaire on equity alone.. and if it was the exact right area SF peninsula you could be a multi millionaire with exactly ONE single family home.. I just cant think about it growing up in it..  Man.. appreciation in the right areas is the way to becoming very very rich.. 

there is a post on the thread  Rent control sweeping the US..  one investor in SF  Amit  makes some great points.. he has a total of 13 doors those 13 SF doors would be about 100 to 200 mid west doors.. its on a scale of 10 to one and as high as 20 to 1.

so who has it better.. manage 13 doors to make the same cash flow as managing 100 plus doors..  guess who makes the most money short term and long term.

We’re starting to see that now in my local market.  People who have owned in Raleigh for 20 years are starting to see major value increases.  From the people I’ve spoken to this area never really crunched during 2008, just plateaued.  This could continue for another 10 plus years as housing here (which seems expensive to me) is still extremely affordable compared to the the northeast and west coast  

in the SF bay area and of course some of LA  NYC  Boston north side Chicago and some other areas.. but I just look at the first house in bought in Milpitas in late 70s for 75k  brand new construction 1400 sq ft rancher.. today just under 1 million.

I then bought a house in Palo Alto early 80s for 185k..  3 and 1 900 sq feet built post war.. did not even have a dishwasher or garburator.

Today value well over 2 million   684 Encina Grande Palo Alto Lots in Palo Alto are now 2 million.   and I built another spec late 80s there that I sold for just under 750 and that would be worth at least 4 today.. so you take all the folks my age and older who bought in those areas and lived there their whole life and you can see the massive transfer of wealth that is happening when they pass.   But would a shoulda coulda ..  sold them all made some pretty big money doing that and it propelled me to build business's  so all good in the end. cant take it with you..  actually right now I spent the weekend studying  when I can take my SSI and when I can get on medicare  LOL.. 

@Soul Luciani  why invest in Nor Cal now? Not only are you at greater risk of losing your equity position in the near future, but the returns are terrible now. Wait til they're cheaper, the markets always cycle down & if you buy them low, you'll make your money from appreciation (which is the real appeal to CA investing anyways, it's not the best cash flow option regardless of market phase). 


In the meantime, deploy an alternative strategy. Flip or wholesale here. Invest in rentals in a different market. Or just wait it out. 

Originally posted by @Caleb Heimsoth:
Originally posted by @Jay Hinrichs:
Originally posted by @Caleb Heimsoth:

@Soul Luciani. The best time to buy in northern CA was 20 years ago or more.. the second best time is now.

 best time was the mid 70s to be exact.. by 1980 prices had started there historic appreciation rise second to none in the US.

anyone who bought in the 70s in the right areas is a multi millionaire on equity alone.. and if it was the exact right area SF peninsula you could be a multi millionaire with exactly ONE single family home.. I just cant think about it growing up in it..  Man.. appreciation in the right areas is the way to becoming very very rich.. 

there is a post on the thread  Rent control sweeping the US..  one investor in SF  Amit  makes some great points.. he has a total of 13 doors those 13 SF doors would be about 100 to 200 mid west doors.. its on a scale of 10 to one and as high as 20 to 1.

so who has it better.. manage 13 doors to make the same cash flow as managing 100 plus doors..  guess who makes the most money short term and long term.

We’re starting to see that now in my local market.  People who have owned in Raleigh for 20 years are starting to see major value increases.  From the people I’ve spoken to this area never really crunched during 2008, just plateaued.  This could continue for another 10 plus years as housing here (which seems expensive to me) is still extremely affordable compared to the the northeast and west coast  

To put this all in perspective... in the local area (for you and me), our 'indexed' appreciation via housing price points of apples to apples property (not counting for McMansions, etc.) is shown below. Of note, per an inflation calculator that can show that $1.00 in 2000 is worth $1.49 today, Chatham, Harnett, and Johnston counties have home prices that have not kept up with inflation. Wake, Durham, Orange, and the collective R-C MSA have prices that are only beating inflation by about 1% annually over the past 20 years. 

The reality is California markets are outpacing the NC markets over the long haul. Not that NC is a bad place to be... but we aren't like the bay area, especially over the past 40 years. CA might not have the case flow, but appreciation... as Jay says... 

Originally posted by @Elliott Elkhoury:

@Soul Luciani  why invest in Nor Cal now? Not only are you at greater risk of losing your equity position in the near future, but the returns are terrible now. Wait til they're cheaper, the markets always cycle down & if you buy them low, you'll make your money from appreciation (which is the real appeal to CA investing anyways, it's not the best cash flow option regardless of market phase). 


In the meantime, deploy an alternative strategy. Flip or wholesale here. Invest in rentals in a different market. Or just wait it out. 

Elliot, I have never done a flip. I have thought about it but I'm not even sure where to being. I also thought about investing in out of state. Any suggestions you have are more than welcome. 

Thanks.

@Soul Luciani if you don't want to flip properties and go through the trouble of learning how to do it, then definitely do not. Taking the passive route is certainly easier- even if it means buying a stable property out of state.

Out of state rentals can cash flow even in this toppy phase of the market. They may also depreciate less in the event of a crash. They will also appreciate less when things come back. They're a good choice for investors that prioritize cash flow in their investing criteria. 


Regardless of where you choose to invest- a mistake investors make often... they run an overly optimistic pro forma. Make sure you're crunching your numbers conservatively (but not overly so) and market selection/purchase decisions will become a little more formulaic, and therefore easier to make.