IE & OC SFR markets overvalued according to CoreLogic report

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Here's the article

Below are some snippets from the article:

"The housing stock in Orange County and the Inland Empire was “overvalued” as of August, while home values in Los Angeles County and the overheated San Francisco peninsula were not, according to a recent analysis by CoreLogic, an Irvine-based real estate data firm. "

"Rising home prices are expected to occur for at least another year. U.S. house prices are projected to rise 4.7 percent more by August 2018, CoreLogic reported. Still, the pace of market gains is showing signs of slowing down."

And the point is? If you aren’t buying, someone else will. A common generalization like this will just give you analysis paralysis, if you don’t have one already.

Southern California counties are huge. Riverside and San Bernardino are two of the biggest in the country. It has not had quite the run out coastal communities have had and from an affordability perspective, both will likely enjoy steady and slow increases. I forget how CoreLogic looks at valuations but in Riverside County alone, you've got Palm Springs, riverside, Moreno Valley, hemet, Temecula, etc. widely different markets with different things happening. I feel county-wide forecasting isn't always helpful. I wish I would have bought more for the long haul.

@Aaron Norris , yes I totally agree with you about large counties and how countywide forecasting/reporting should be taken with a grain of salt. It's kind of like when the weathermen in So Cal talk about micro-climates, the same is true for REI, in that there are pockets and areas within a county that are different from each other. To your other point, yep, definitely one of those things were we all wish we would have bought more.

I used to think like so many others that you could not invest in the So. Cal area unless you had huge money. I started looking out of state mostly in the lower AZ area. Then thanks to the BiggerPockets podcast i tuned my attention to So. Cal local micro areas and found that just in the Inland Empire alone it has a vast variety of real estate for investing. Going from Barstow to Lake Arrowhead and down into the San Bernardino Valley you have the full array of  real estate value and income levels. Heck upon that you can do any type of investing as well short term rental, long term rental, flipping, etc.. Looking at the last twenty years of the market in the Inland Empire some areas were hit badly during the crash and some did not crash to bad. I have talked with investors in the Big Bear area and have heard that short and long term rentals of all values do very well, I hope to invest up there sometime. Any way just my two cents let me know what ya think. Thanks

@Brian Grant What is your take on investing in the Lake Arrowhead or Big Bear areas up there? It seems counter-intuitive that long term rentals would do well since there is not much work to be had. Short term vacation rentals seem to do better since they have peak seasons, but that comes with low volume in the fall. Love the area as it seems like a nice getaway from the craziness down here.

@Brian Grant   I think you're absolutely right, the IE is full of pockets that investors can do well in.  The IE is obviously not as expensive as LA & OC and honestly the entire So Cal area is a LL's paradise, in the sense that there is always demand for properties.  Every time I drive through LA, i'm shocked by the number of apartment buildings that are out there.  

@Matthew Marcley I have seen the Short term vacation rental take off in the areas and do very well provided they are monitored and kept up. I have also talked with folks who have seen an or had problems with the short term rentals in the community to the point where the community has started to frown a bit on them. This opinion is mostly in the Crestline and Lake Arrowhead areas though. The Big Bear area has a huge amount of short term rentals which from my understanding do very well during the summer and winter months. In both areas there is a strong working class population maintaining good long term rental market.  I guess my opinion of short vs. long term rental would be how much time a person has to put into the rental. I'm focused more on the long term and will probably make less per month but will have less time per month toward the rental. A person who can properly market, maintain, and monitor the short term rental as well as being attentive to the guest could really make great money. Thanks

@Matthew Marcley I did want to add that I am definitely not against the short term rentals though, just don't have the time in life to properly do it right not. But it is something that really intrigues me and I will be trying it out some day. Airbnb gave me an estimate of $589 weekly average for a 2 guest, entire home in the Running Springs area. Thats pretty good.

Totally agree with you! thanks for posting.

@Brian Grant , I'm just about under contract on a vacation rental in Crestline. I would love to talk more with you about the area up there since you seem to be pretty familiar with it. 

Hi Chad, 

There has been a lot of news recently about there being a "bubble" happening or about to happen in certain markets, especially in California.  But, the most important thing to remember is that real estate historically has cyclically patterns of up and down markets.  But, if you buy your property with equity going into it, meaning you're paying less than full fair market value, then you're short term market appreciation is not the only way to leverage the property for equity.  Of course finding a deal to buy for less than full fair market value is not easy.  There are a lot of different ways to do it: Networking with wholesalers and agents who work with investors, getting to know title reps and getting lists of distressed properties to market to, door knocking, etc. 

The point is that there is always a way to make money in real estate if you recognize where you are in the cycle of the market, adjust your strategy to buy/sell accordingly and get equity from the start.  Don't let the news scare you away from hustling for deals! Feel free to DM if I can ever help with anything :)

Happy Investing, 

@Ryley Marble - How big is  your place in Crestline? Is it a flip or a turnkey? I am looking at one there also.  Any idea if adding a garage would add value?

Aaron, How about the Moreno valley, I read it has a lot of potential but my friend who has a relative lives there told me it is not good area to invest since there are too many low income tenants, is that true , how can I find out?
Originally posted by @Aaron Norris :

Southern California counties are huge. Riverside and San Bernardino are two of the biggest in the country. It has not had quite the run out coastal communities have had and from an affordability perspective, both will likely enjoy steady and slow increases. I forget how CoreLogic looks at valuations but in Riverside County alone, you've got Palm Springs, riverside, Moreno Valley, hemet, Temecula, etc. widely different markets with different things happening. I feel county-wide forecasting isn't always helpful. I wish I would have bought more for the long haul.

Everyone has a different formula, @Dong Yan . There are some very nice parts of MoVal and some rougher areas. But, some people don't mind that if the cash flow is there. Some investors who purchased from 2009-2012 are sitting pretty with a very low tax basis. They may never want to move. However, others think that even with another 20% increase in price that they'd rather move into different markets. It's already been a very exciting run for much of Riverside and San Bernardino when it comes to price growth. 

For Moreno Valley, you want to keep an eye on the World Logistics Center. It's the biggest project in the region that's been embroiled in years of lawsuits. If it goes through, it could change Moreno Valley drastically. It's a 2,600 acre site right before you go through the badlands going to Palm Springs. It would create some 40 million square feet of new buildings, mostly commercial from what I've seen. These would likely be logistic-focused business which have been highly automated because of robotics and AI. However, it could potentially add much needed higher paying jobs for those people that have a more technical background. We'll have to wait and see. 

The last article I can find on where the project is at is http://www.pe.com/2017/07/22/world-logistics-cente...

From what I understand, there are still many more legal challenges ahead. 

Hi Aaron ,

I read the similiar article online that is the source to intrigue me at first place otherwsie I know nothing about MV.
Is MV a good place to acquire SFR or multi-family?

Thank you so much for sharing the article.

Currently I mainly invest in OC area, the competition is so tough there , the market is super saturated with investors from all over the places.
Therefore I am looking for the new investment area.
Base on my analysis, the rent is pretty low in MV compare with OC area, my understanding is the supply and demand from MV is quite balanced, on the contrary, the OC's population density is extremely high therefore drive the property value goes up continuously.
If you theory comes true in next decade than I believe the increaseing demand from higher paid professionals will drive the rental price higher.
Originally posted by @Aaron Norris :

Everyone has a different formula, @Dong Yan. There are some very nice parts of MoVal and some rougher areas. But, some people don't mind that if the cash flow is there. Some investors who purchased from 2009-2012 are sitting pretty with a very low tax basis. They may never want to move. However, others think that even with another 20% increase in price that they'd rather move into different markets. It's already been a very exciting run for much of Riverside and San Bernardino when it comes to price growth. 

For Moreno Valley, you want to keep an eye on the World Logistics Center. It's the biggest project in the region that's been embroiled in years of lawsuits. If it goes through, it could change Moreno Valley drastically. It's a 2,600 acre site right before you go through the badlands going to Palm Springs. It would create some 40 million square feet of new buildings, mostly commercial from what I've seen. These would likely be logistic-focused business which have been highly automated because of robotics and AI. However, it could potentially add much needed higher paying jobs for those people that have a more technical background. We'll have to wait and see. 

The last article I can find on where the project is at is http://www.pe.com/2017/07/22/world-logistics-cente...

From what I understand, there are still many more legal challenges ahead. 

@Dong Yan , I do have some investors still buying in MoVal but cash flow is getting harder. Again, every investor has their forumula of what they are looking for as far as cash flow. For instance, the 1% rule is very popular. So if you're buying something for $100,000 it rents for $1,000. That is getting far harder to achieve in the Inland Empire but if you're buying all cash with no finance costs, maybe that will work. I encourage you to seriously do some homework. Come to Moreno Valley AT NIGHT and drive the areas you are looking at. Being outside the area puts you at a disadvantage. For me personally, I go into a property for the cash flow. Equity gains are strictly a plus and I don't assume they will happen. I assume the market might go up but just as likely go down. I'll strategically try to get in the way of markets I think there's more opportunity but, again, I'm there for the cash flow. I believe in Inland Empire. There are several bright spots and specific cities like Riverside have laid some serious groundwork for future growth. Moreno Valley is so close, they will directly benefit as well. Anyway, probably way more than you wanted. :)

I will be so happy if the investment in OC can produce 10% gross ROI. that's why I started to look the area closed by  rather than only focusing on OC area.I am looking at cash flow as well , I usually invest in cash, so the positive cash flow and high NOI is my goal.

I believe in Inland empire's potential as well, check the article below:
http://www.ocregister.com/2017/10/25/southern-cali...

However some friends argued base on historical data, Inland Empire was never able to outperform than OC area. Not sure in this market, whether historical growth can predict the future or not, dynamics change, the OC market gets more and more saturated , no much potential to grow in my opinion.

Do you manage property on you own, do you have any good property management companies to recommend? 


Originally posted by @Aaron Norris :

@Dong Yan , I do have some investors still buying in MoVal but cash flow is getting harder. Again, every investor has their forumula of what they are looking for as far as cash flow. For instance, the 1% rule is very popular. So if you're buying something for $100,000 it rents for $1,000. That is getting far harder to achieve in the Inland Empire but if you're buying all cash with no finance costs, maybe that will work. I encourage you to seriously do some homework. Come to Moreno Valley AT NIGHT and drive the areas you are looking at. Being outside the area puts you at a disadvantage. For me personally, I go into a property for the cash flow. Equity gains are strictly a plus and I don't assume they will happen. I assume the market might go up but just as likely go down. I'll strategically try to get in the way of markets I think there's more opportunity but, again, I'm there for the cash flow. I believe in Inland Empire. There are several bright spots and specific cities like Riverside have laid some serious groundwork for future growth. Moreno Valley is so close, they will directly benefit as well. Anyway, probably way more than you wanted. :)

Hi @Dong Yan , I do a combo of self-managing and outsourcing. It's getting a little difficult to manage these days. In Riverside, there are a number of experienced management companies. O'Neill Property Management is one of the larger management properties. 


Thank you!
Originally posted by @Aaron Norris :

Hi @Dong Yan , I do a combo of self-managing and outsourcing. It's getting a little difficult to manage these days. In Riverside, there are a number of experienced management companies. O'Neill Property Management is one of the larger management properties. 

Formative property management in Riverside has special prices for investor properties. He also had a lead on a couple duplexes in banning by for around $200k.

Thank you Maggie for your information.
I will keep it in mind.
Banning has little growth potential not much movement base on my research. Thank you anyway!
Originally posted by @Maggie H. :

Formative property management in Riverside has special prices for investor properties. He also had a lead on a couple duplexes in banning by for around $200k.

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