Is it a good time to buy rentals in Long Beach?
Long Beach, CA · Member since 2017 · 34 posts · 13 votes
We have been looking to buy a rental property in Long Beach despite the negative cash flow and high prices. (I know, we kinda have to) and our budget is around 280k-330k. What I have noticed is that the inventory is extremely low, all the condos for sale are rehabbed and the sellers are mostly investors and the properties won't stay on the market more than a week! I would like to get advice from the experts that what is really going on?! Who is selling, who is buying these days and is it really a good time to buy investment properties in Long Beach? Thank you!
You are better off flipping or working as a RE agent in this market ... the time for buy and hold in CA will return, just not today IMO. B&H COULD work IF you find an excellent deal, and I'm not saying you should not buy if you find such a deal, I'm just saying that realistically it will be very hard to find in this market and if you don't find it don't try to force it. I remember feeling the same way in 2006 (not saying this market is that crazy yet) wanting to buy another property to rent, but I could never make the numbers work back then, so I kept looking and studying but did not try to force anything ... then the crisis hit, and I had a pile of capital I had been saving to invest, I had been studying the local market, and educating myself on REI analysis and strategy. It worked out great for me, and if you are patient and diligent I'm sure it will work out for you too, even if not necessarily in the same manner. Good luck and happy investing.
Hi Sara, the area can certainly cash flow for certain types of tenants. We have two rentals in Carson, cash flowing nicely. I know it's hard to believe. I am as well currently looking for another 4+ bed SFH or plexes in the cities bounded by Gardena, LB, Harbor City, and maybe San Pedro.
Thank you all for your comments, I have a feeling that people are worried about the rate increase and that's why the properties won't last long, but it seems that mostly the investors are selling now. and I am wondering what they will do with the profit? Do they keep it in the housing market?
Hey Sara. It's not just because of rate increases....Long Beach has been booming like that for at least a few years now. Most of LA has the same bidding wars going on and high prices, but Long Beach especially has been more up-and-coming for awhile. You mentioned acknowledging the negative cash flow and high prices but that you're stuck buying there? Why stuck there?
You are better off flipping or working as a RE agent in this market ... the time for buy and hold in CA will return, just not today IMO. B&H COULD work IF you find an excellent deal, and I'm not saying you should not buy if you find such a deal, I'm just saying that realistically it will be very hard to find in this market and if you don't find it don't try to force it. I remember feeling the same way in 2006 (not saying this market is that crazy yet) wanting to buy another property to rent, but I could never make the numbers work back then, so I kept looking and studying but did not try to force anything ... then the crisis hit, and I had a pile of capital I had been saving to invest, I had been studying the local market, and educating myself on REI analysis and strategy. It worked out great for me, and if you are patient and diligent I'm sure it will work out for you too, even if not necessarily in the same manner. Good luck and happy investing.
You are better off flipping or working as a RE agent in this market ... the time for buy and hold in CA will return, just not today IMO. B&H COULD work IF you find an excellent deal, and I'm not saying you should not buy if you find such a deal, I'm just saying that realistically it will be very hard to find in this market and if you don't find it don't try to force it. I remember feeling the same way in 2006 (not saying this market is that crazy yet) wanting to buy another property to rent, but I could never make the numbers work back then, so I kept looking and studying but did not try to force anything ... then the crisis hit, and I had a pile of capital I had been saving to invest, I had been studying the local market, and educating myself on REI analysis and strategy. It worked out great for me, and if you are patient and diligent I'm sure it will work out for you too, even if not necessarily in the same manner. Good luck and happy investing.
Well said David, I am looking for my first......yes first. I am stuck in the position of "forcing it to work", but it just makes no sense at the moment. Every "deal" I come across, the numbers don't make sense and miraculously it sells the next day.....I still don't understand it. I think I am just going to watch the market and wait for the collapse, sad to say. That being said, I am steering away from Long Beach at the moment and I came across Big Bear as a vacation rental, what are your thoughts about that?
You are better off flipping or working as a RE agent in this market ... the time for buy and hold in CA will return, just not today IMO. B&H COULD work IF you find an excellent deal, and I'm not saying you should not buy if you find such a deal, I'm just saying that realistically it will be very hard to find in this market and if you don't find it don't try to force it. I remember feeling the same way in 2006 (not saying this market is that crazy yet) wanting to buy another property to rent, but I could never make the numbers work back then, so I kept looking and studying but did not try to force anything ... then the crisis hit, and I had a pile of capital I had been saving to invest, I had been studying the local market, and educating myself on REI analysis and strategy. It worked out great for me, and if you are patient and diligent I'm sure it will work out for you too, even if not necessarily in the same manner. Good luck and happy investing.
Well said David, I am looking for my first......yes first. I am stuck in the position of "forcing it to work", but it just makes no sense at the moment. Every "deal" I come across, the numbers don't make sense and miraculously it sells the next day.....I still don't understand it. I think I am just going to watch the market and wait for the collapse, sad to say. That being said, I am steering away from Long Beach at the moment and I came across Big Bear as a vacation rental, what are your thoughts about that?
There's NO REASON to attempt to "force fit" - - that's a formula for sure disaster!
You are better off flipping or working as a RE agent in this market ... the time for buy and hold in CA will return, just not today IMO. B&H COULD work IF you find an excellent deal, and I'm not saying you should not buy if you find such a deal, I'm just saying that realistically it will be very hard to find in this market and if you don't find it don't try to force it. I remember feeling the same way in 2006 (not saying this market is that crazy yet) wanting to buy another property to rent, but I could never make the numbers work back then, so I kept looking and studying but did not try to force anything ... then the crisis hit, and I had a pile of capital I had been saving to invest, I had been studying the local market, and educating myself on REI analysis and strategy. It worked out great for me, and if you are patient and diligent I'm sure it will work out for you too, even if not necessarily in the same manner. Good luck and happy investing.
Well said David, I am looking for my first......yes first. I am stuck in the position of "forcing it to work", but it just makes no sense at the moment. Every "deal" I come across, the numbers don't make sense and miraculously it sells the next day.....I still don't understand it. I think I am just going to watch the market and wait for the collapse, sad to say. That being said, I am steering away from Long Beach at the moment and I came across Big Bear as a vacation rental, what are your thoughts about that?
Never done vacation rentals in Big Bear nor known anyone who has ... the two issues I see with it is they are management intensive and far away, so hiring a PM would likely eat your profits. If you were going to move there, self manage, and house hack a vacation rental or something like that it could work. The other issue is that the appreciation up that way is not as good. Empty land is more plentiful so if/when prices do go up they would build more and put a ceiling on it, and when a recession hits vacation would get cut back I'd guess making demand go down.
One comment on making the numbers work ... when you analyze deals in SoCal I'd advise analyzing ALL the numbers ... long term cash flow (with typical rate of rent increases), forced appreciation, market appreciation (long term historical average, not extrapolate out the last few years), mortgage pay down, and tax savings. The best way to combine them is with IRR ... if you just take day 1 cash flow and ignore everything else then spoiler alert you will never ever buy anything in SoCal, and that would be a real mistake IMO. Having said that, running all these numbers I agree buy and hold is really tough today ... flipping usually makes more sense but is still not easy. RE agents may have the best gig around at present because they are taking advantage of high prices without risking significant capital, but that is a J-O-B. And I'd just as soon flush money down the toilet than to send it out of state in RE ... if I'm going to give up complete control like that in a market with weaker supply and demand fundamentals (which is why it is cheaper and cash flows more day 1, BTW), that I am unfamiliar with, that may very well be just as over priced compared to its own historical pricing, and that I have to pay all these middle men to make (hopefully) or break my investment, I'd just put it into the stock/bond market index fund where it would be much more passive, more diversified and likely more profitable. There are no easy answers as prices are high just about everywhere you look and you will get no free lunch ... sorry if that's a downer, but I'm just not that into selling fairy tale dreams of puppy dogs and ice cream looking through rose colored glasses ... plenty others around here that would be happy to do that, though :)
You are better off flipping or working as a RE agent in this market ... the time for buy and hold in CA will return, just not today IMO. B&H COULD work IF you find an excellent deal, and I'm not saying you should not buy if you find such a deal, I'm just saying that realistically it will be very hard to find in this market and if you don't find it don't try to force it. I remember feeling the same way in 2006 (not saying this market is that crazy yet) wanting to buy another property to rent, but I could never make the numbers work back then, so I kept looking and studying but did not try to force anything ... then the crisis hit, and I had a pile of capital I had been saving to invest, I had been studying the local market, and educating myself on REI analysis and strategy. It worked out great for me, and if you are patient and diligent I'm sure it will work out for you too, even if not necessarily in the same manner. Good luck and happy investing.
Well said David, I am looking for my first......yes first. I am stuck in the position of "forcing it to work", but it just makes no sense at the moment. Every "deal" I come across, the numbers don't make sense and miraculously it sells the next day.....I still don't understand it. I think I am just going to watch the market and wait for the collapse, sad to say. That being said, I am steering away from Long Beach at the moment and I came across Big Bear as a vacation rental, what are your thoughts about that?
Never done vacation rentals in Big Bear nor known anyone who has ... the two issues I see with it is they are management intensive and far away, so hiring a PM would likely eat your profits. If you were going to move there, self manage, and house hack a vacation rental or something like that it could work. The other issue is that the appreciation up that way is not as good. Empty land is more plentiful so if/when prices do go up they would build more and put a ceiling on it, and when a recession hits vacation would get cut back I'd guess making demand go down.
One comment on making the numbers work ... when you analyze deals in SoCal I'd advise analyzing ALL the numbers ... long term cash flow (with typical rate of rent increases), forced appreciation, market appreciation (long term historical average, not extrapolate out the last few years), mortgage pay down, and tax savings. The best way to combine them is with IRR ... if you just take day 1 cash flow and ignore everything else then spoiler alert you will never ever buy anything in SoCal, and that would be a real mistake IMO. Having said that, running all these numbers I agree buy and hold is really tough today ... flipping usually makes more sense but is still not easy. RE agents may have the best gig around at present because they are taking advantage of high prices without risking significant capital, but that is a J-O-B. And I'd just as soon flush money down the toilet than to send it out of state in RE ... if I'm going to give up complete control like that in a market with weaker supply and demand fundamentals (which is why it is cheaper and cash flows more day 1, BTW), that I am unfamiliar with, that may very well be just as over priced compared to its own historical pricing, and that I have to pay all these middle men to make (hopefully) or break my investment, I'd just put it into the stock/bond market index fund where it would be much more passive, more diversified and likely more profitable. There are no easy answers as prices are high just about everywhere you look and you will get no free lunch ... sorry if that's a downer, but I'm just not that into selling fairy tale dreams of puppy dogs and ice cream looking through rose colored glasses ... plenty others around here that would be happy to do that, though :)
Really appreciate the thorough advice! All the research and studying I have done has always excluded the SoCal market and is more based off of purchasing 100k investment properties somewhere midwest..... I try to take all things into consideration, but I think what has really held me back is not wanting my first deal to steer me away from RE for ever. I am looking forward to really digging deep into BP and immersing myself with well versed individuals like yourself. Thanks
@David Faulkner Thanks David , appreciate your advice. You 2006 feeling really scares me when I am thinking about buying in CA now. But I think we will just keep looking for under market values and TLC properties in CA. And also out of state investment with cashing out from our CA properties.
@David Faulkner Thanks David , appreciate your advice. You 2006 feeling really scares me when I am thinking about buying in CA now. But I think we will just keep looking for under market values and TLC properties in CA. And also out of state investment with cashing out from our CA properties.
Cashing out from you CA properties and investing it out of state is just about dead last on the list of things I would advise you to do. Giving up complete control over your investments in a market you are not as familiar with, not easily accessible, 100% reliant on others, and thinking that just because it is cheaper means it is somehow not overheated as well is far scarier and riskier to me. No need to be scared, just disciplined ... in and out fast on new acquisitions makes the most sense to me in this market ... if that still scares you then work a part time job in RE (agent, etc.) to earn while you learn, risk little, yet be ready if/when the market turns. Either that or sit tight, study up, save up, keep looking, and prepare yourself for the next phase.
@Mike Halim - I'm a Commercial lender and investor and saw my borrowers experience more problems in Big Bear area / Lake Arrowhead than locally. Anytime you invest in a vacation home or 2nd home market, those are the first homes that get sacrificed when things get inverted. Whatever you do, ensure you're in an area where rents will carry you through another cycle if values turn; maybe invest with a partner if you don't have the capital to get LTV below 50% yourself...
I strongly recommend against buying in LB right now. There is a big fight for tenants' rights, including city-wide rent control, making credit reports valid for 90 days for screening tenants (meaning if a tenant has a credit report from 3 months ago, you as the landlord would not be able to run a new one on them for screening purposes - there is a LOT someone can do to ruin their credit in 3 months!), REAP (info at the link below), and many other ideas that are fantastically beneficial to tenants and seriously damaging to landlords. They even have their own tenants' union, "Housing Long Beach." The reason rental property owners in LB are selling is likely partly due to their distaste for the local politics and the potential legal and financial implications for their business (plus, the market is hot and values are up!) Check out the Better Housing for Long Beach website for more info on the current happenings.
I strongly recommend against buying in LB right now. There is a big fight for tenants' rights, including city-wide rent control, making credit reports valid for 90 days for screening tenants (meaning if a tenant has a credit report from 3 months ago, you as the landlord would not be able to run a new one on them for screening purposes - there is a LOT someone can do to ruin their credit in 3 months!), REAP (info at the link below), and many other ideas that are fantastically beneficial to tenants and seriously damaging to landlords. They even have their own tenants' union, "Housing Long Beach." The reason rental property owners in LB are selling is likely partly due to their distaste for the local politics and the potential legal and financial implications for their business (plus, the market is hot and values are up!) Check out the Better Housing for Long Beach website for more info on the current happenings.
Thanks Kelly and for the link. We need to do whatever we can to fight off. I know a lot of home owners who have lived in Long Beach for 30 or more years who would hate rent control or REAP.
Those programs have lead to blight in Los Angeles. If you drive through downtown Los Angeles and the areas surrounding it especially East LA, South Central you will see the blight it is SCARY. All the LAHD properties have peeling paint, thugs and boarded up windows where no one wants to go and people working on their cars in garages.
Home owners and landlords in Long Beach are pushing back. They don't want the community to have the same issues as Los Angeles
Did a little research
Thanks I didn't know the difference before and got them mixed @Kelly O'Quinn
@Kelly O'QuinnBetter Housing For Long Beach is for Tenants, Home owners, Renters, and the community
Housing Long Beach http://www.housinglb.org/resources/ is for tenants lower rent mainly. That has a strong lobby from out of the city and an agenda to create new beuracracies like they did in the Bay Area. In the Bay Area it backfired and big developers came in and tore down all the affordable housing because of the rent control. Now there's 30% less housing after 15 years of rent control.
There is a couple lobbyists in Long Beach like Josh Butler who has been trying to create a new city hall bureaucracy. It will cost tax payers more and really lead to blight. Essentially he wants to create a 6 figure job for himself and his outside allies. like Tenants Together
http://www.beyondchron.org/lessons-round-one-costa...
@Sara Soleimani Thanks Sara for the original questions.
I have family that have lived in Long Beach for 50 years and really contributed to building it up. They were the original homeowners and landlords that cleaned up streets, did beach and park clean ups, and really got Long Beach to where it is today. I literally have 20 family members in Long Beach.
A lot of my friends and family own 2-4 apartments and live in them symbiotically with their tenants. They keep their rents reasonable and their properties in tip top shape. I own several houses and duplexes there as well. They're beautiful Spanish 1920s houses that we spent hundreds of thousands on to fix up from when they were vandalized in the late 90s.
So this is from the Long Beach business Journal:
http://www.lbbizjournal.com/single-post/2016/08/01...
These landlord, home owner groups need to band together to allow property rights in California.
We're not asking for much, Califronia is already a very tenant friendly state. I'd like to keep housing healthy and affordable but not through these pushy organizations who essentially want to take away our property rights. We pay taxes and want the absolute best for our properties and communities
It's always a good time to buy & it's always a good time to sell. Depends on your investment thesis, liquidity, & time horizon with investments. Long Beach typically has nicer caps & ROI than other metros in LA county (vs anything 5-20 miles from DTLA).
A lot of foreign investment is scooping up SoCal properties.