Investor · San Mateo, CA · Member since 2011 · 47 posts · 4 votes
Good evening BP!
My name is Sophie and I have been passively following the forums on biggerpockets for several years. My goal is early retirement after paying for my kids' college, but I want to have something to do and keep making money after I retire, so I started looking into REI.
I own a small rental in SF Bay Area, but this market became very inflated and I’m thinking perhaps I should 1031 out of here. I also travel to Seattle quite a bit but this market is too very hot and difficult to enter.
Out of state investment is not my #1 choice. However, being a college mom, the idea of student rentals in college cities has recently crossed my mind. I'm still in the research phase, looking for advice on how to approach this particular type of investment. Syndication is also of interest for commercial REI.
I’m looking forward to learning from the BP community!
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Jad Boudiab that's correct and for newer investors that is just what they are doing. Many of the ones I'm dealing with in my area are more seasoned or the baby boomers looking to downsize larger properties into condos or small multifamilies. They are most concerned with the tax shelter considering their high income levels and appreciation.
Let's connect! I'm always looking for out of state agents to have as referral partners.
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Sophia Maler welcome from the Bay Area! Specifically San Mateo :) You are not alone in looking to 1031 here! Most of our sellers are doing just that or moving out of the area. Let me know if you ever have any questions. I'd also check out a couple of meetups here: https://www.biggerpockets.com/forums/521-events-an...
There are a couple focused specifically on out of state investing!
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Sophia Maler it honestly varies based on the individual but I've seen people exchanging out to Texas and Arizona recently. Also in our county in particular, many are exchanging within the county for tax shelter. Their new properties don't even cash flow but it allows them to shelter the money from taxes since their previous property appreciated so much.
Investor · San Mateo, CA · Member since 2011 · 47 posts · 4 votes
9y
My tax will not be significant, so I'm not even sure 1031 makes sense. I didn't do my homework on this yet to decide if I should keep the current rental or not.
Real Estate Broker · Cleveland, OH · Member since 2015 · 255 posts · 248 votes
9y
@Ariel Smith assuming your local market is nearing the peak, I would think going out of state/area would make more sense in the long run. Wouldn't you be "overpaying" for the next property if the area has already seen great appreciation? It does make sense as a tax shelter, I just look at the opportunity cost there and think they're missing out.
I do agree that most of your sellers are looking outside of the area, we've had many out-of-state clients reach out to us for help with selling in the Bay Area and buying in our local market.
Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
9y
Identifying college town rentals where there is shortage in housing can be a real challenge. Every year I get request in SFBA looking at a college student rentals within walking distance-Santa Clara U, UC Santa Cruz, St Mary College, De Anza College etc. Must have put 10 offers last few years. Most home buyers do not realize every other parents with more than 1 child going to private school have similar intention. Often there are 5-15 offers way higher than asked. I would say you look after school is out see if you can find a fit. Never mind 1031 if you are buying up. Out of the area like Merced, Monterey I have been asked to show. After I run the numbers I see all that skeptism and hesitation. " I don't intent to live there so I can low ball"..
The parties, maintenance etc all suggest you need someone to watch the rental before a fire, liquor, drug bust wreck one's investment.
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Jad Boudiab that's correct and for newer investors that is just what they are doing. Many of the ones I'm dealing with in my area are more seasoned or the baby boomers looking to downsize larger properties into condos or small multifamilies. They are most concerned with the tax shelter considering their high income levels and appreciation.
Let's connect! I'm always looking for out of state agents to have as referral partners.
Rental Property Investor · San Diego, CA · Member since 2016 · 306 posts · 205 votes
9y
@Sophia Maler honestly if it's cash flowing here, I'd keep it. Rents have only historically gone up and as long as there are jobs here, there will be people who need housing.
Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
9y
Hi @Sophia Maler, if you ever want to take your appreciation out of CA and defer your capital gains, you might want to also consider syndications if you qualify as an accredited investor. If you like to be somewhat active, great, do that locally but for distance and diversification, it's worth looking at being a part of institutional grade $50-125M projects in strong markets that offer potential cash flow, tax shelter and appreciation.