Is it possible to buy when "cash on cash" > 3% in California?

5 Replies

hi,

I am thinking to become a RE investor. Reading this site (forum and articles) I see that people are talking about 10-15-20% for cash on cash :)

Honestly speaking maybe I calculate wrong or missing something. I understand that Bay Area is out of picture with crazy gap between house price and rent. But even looking around Irvine/San Diego I cannot find anything near these numbers.

It seems 3b SFH is about ~$780K (720-850) in these areas. Rent is about $3500. So, even if I buy "all cash" it is just 3% for cash on cash. If I take any mortgage... it goes negative :)

Does this mean that RE Investment is not real in major California markets?

Originally posted by @Den S. :

hi,

I am thinking to become a RE investor. Reading this site (forum and articles) I see that people are talking about 10-15-20% for cash on cash :)

Honestly speaking maybe I calculate wrong or missing something. I understand that Bay Area is out of picture with crazy gap between house price and rent. But even looking around Irvine/San Diego I cannot find anything near these numbers.

It seems 3b SFH is about ~$780K (720-850) in these areas. Rent is about $3500. So, even if I buy "all cash" it is just 3% for cash on cash. If I take any mortgage... it goes negative :)

Does this mean that RE Investment is not real in major California markets?

Real estate investing is real in major California markets. I could fill a stadium with the people who've made millions in California real estate over the last four years.

It's just that buying a market-priced SFR and renting it out isn't the right strategy for California.

 

It depends.  Ca is more about appreciation however, people can house hack and actually do quite well.  It all depends on your comfortability if you watch/listen to the latest BP show. ;)

There are ways to add value so try searching for those options as well as it can greatly help your return.

No.  This is why people are leaving the Bay Area.  SF Chronicle has documented this extensively.  I can't find the article anymore because they took it down, a few years ago in the annual survey of whether or not people were going to move and where, 50% of respondents in SF said they were going to move.  OF the 50%, I think it was 75% said they were leaving SF and moving out of state.

Reasons: Cost of Living, Housing, High Tax, Homelessness, Politics, and Drug Use.

Wish I could find that article.  Media takes stuff down they don't want used.

Many in CA were using Tax Advantages to get cashflow.  Many opportunities coming on market during this period.

I agree with Jon and Collin. Most of the RE investing in CA is done for appreciation. If you are also able to cashflow then its a bonus. Multi-Family maybe a little different. But for SFH most of the value is in appreciation.

Being more specific, look at value add opportunities to increase the number of rooms, in-law units, dens to bedrooms, unfinished basements/attics, garage conversions to ADU, large land + ADU. You can do it but could require a certain amount of personal sacrifice (sleeping on the couch and renting out all the rooms) or capital to build an ADU. But there are ways.