Why appreciation matters in the SF/Bay Area

Real Estate News & Current Events
12yFollow

Why appreciation matters in the SF/Bay Area

Amit M.
Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes

check out this interpretation of the case-shiller index over the last 30 years. Basically several huge, long run ups, and a few short, minor corrections. Tricky and challenging to get in, but this is how you make the big bucks folks!

http://thefrontsteps.com/2014/06/26/case-shiller-new-jump-in-bay-area-home-prices/

6Reply
1,000 views

Most Popular Reply

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y

There is no winning the cash flow mid west debate and the SF Bay area appreciation game.

Unless you have lots of cash and credit so you can buy 20 to 50 homes in the MId west and manage them like a hawk,,, One or two homes in SF will out perform those in the long run over time... Everyone wants to live on the peninsula... Not everyone wants to live in KC or Indy... JOBS JOBS JOBS and more JOBS  buying power smart people.. it all happens there.... Were else could a painter make a million bucks painting a mural at company headquarters than at Google.. Not going to happen at Angies list in INDY.

The problem most investors get when they think they need to buy a rental or two and they venture out of state.. Is that so many of them end up making little or no cash flow because they just don't understand how dog gone tough those rental markets are.. And if they bought through a marketing company they paid far more than real value they can never sell without a big loss.. I know I  have been there done that.

If you go mid west or east coast you need to find the wholesaler yourself.. and get the true deal.. not a west coast marketer like we see here on BP...

And if CA is too expensive look at Vegas and PHX.. closer and better plays in my mind.

Again personal bias

All I know is I owned 4 primary residence in the SF bay area from 1979 to 2001.. and I enjoyed when I sold each of them individually over 7 figure profit in total .. No way I could have done that in the mid west.. Only in the very top echelon markets of the big cities no way one could do that in any of the So called cash flow markets.

Podcast Guest on Show #222
JLH Capital Partners51 Review
WebsiteView Page
6Reply
See this reply in the discussion

168 Replies

Jump to latestLatest
  • Manch Hon
    San Jose, CA · Member since 2011 · 160 posts · 167 votes
    12y

    @Account Closed 

    I am now a believer in investing in local markets. As I told you guys half of my portfolio is outside of the Bay Area. Had I known you guys earlier I would have put every cent I have in local markets. :)

    And I will never call other people stupid.

    4Reply
  • Account Closed
    Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
    12y
    Originally posted by @Christian Carson:

    One more note -- California does not have a monopoly on price appreciation markets. There are plenty of them out here in Ohio.

    I don't believe anyone is saying CA has a monopoly on appreciation.  CA just happens to be an appreciation market.  That's it.  Therefore, when one is investing in CA and doesn't factor in an average appreciation rate, the analysis is incomplete.  Also, our market is known to be cyclical.  Knowing where we are in the cycle of the market plays an important role in inputting the appropriate parameters into our analysis.

    Weren't you the one that has a property appraised for $90k, but you couldn't sell it for $82k?  To scale it up to our market, a $900k house would have sold yesterday for all cash had it listed at $820k.  In fact, there's a good probability that $900k house would have sold for $925k - $950k with multiple offer within 2 weeks being on the market.  That's how liquid our market compared to some other markets.  

    With respect to who is smarter than whom, it typically comes down to net worth.  Should an individual take advice from someone who is not doing as well as s/he does financially? People are where they are in life for a reason.  They are successful for a reason, or they are poor for a reason.  When someone says they're lucky, it's just a nice way of being humble IMO.  As Benjamin Graham said "Due diligence is the mother of all luck."

    3Reply
  • Amit M.
    OP
    Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
    12y

    this is getting to be a rather entertaining thread :)

    0Reply
  • Christian CarsonPro Member
    Cleveland, OH · Member since 2011 · 400 posts · 223 votes
    12y
    Originally posted by @Account Closed:

    With respect to who is smarter than whom, it typically comes down to net worth.  Should an individual take advice from someone who is not doing as well as s/he does financially? People are where they are in life for a reason.

    Show me a well-educated bootstrapping entrepreneur and I'll show you a thousand trust-fund Wall Street bankster multimillionaires who couldn't complete a Monday New York Times crossword if their lives depended on it.

    2Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    12y

    I think Ben is very smart. His 10 unit for 19k is just one example. Ben adds value with his management skills and that is brilliant. That kind of accumulation would not be possible in SF. An additional skill set would be required. I am sure he possesses as is. 

    Thanks,

    Matt

    1Reply
  • Sam M.
    San Francisco, CA · Member since 2014 · 6 posts · 4 votes
    12y

    Education and entertainment .. all in one spot - Love it! 

    1Reply
  • Bob E.
    Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
    12y

    Interesting thread.  I would suggest that appreciation of net worth is what matters.  In CA that can be done by purchasing and holding and individual property.  In other markets your property won't go up in value as much but you get a lot more cash-flow.  

    If you rivets the cash-flow over time you get a form of appreciation.  Instead of having one property that goes from 300 to 600k in value you might have 10 properties worth 300k that turn into 20 properties worth 600k.  

    You just have to adjust your strategy for the market you are in and you can make money.  Apply the wrong strategy to any market and you can lose money.  Making good management decisions can force appreciation in any market.

    3Reply
  • Sandeep S.
    Investor · Cupertino, CA · Member since 2012 · 118 posts · 121 votes
    12y

    We shouldn't be so harsh on Ben.  Poor guy already is so upset about all the real estate wealth we Californians are enjoying.  

    And I absolutely agree with Ben's analysis - especially looking at myself accumulating ton of wealth in the last 5 years. Although one wonders that when it is a "fact" that even brainless people can make easy money in the SF market, wouldn't one be even more stupid to know this fact and still not come and invest in the SF market?

    2Reply
  • Brian Tremaine
    Investor · San Jose, CA · Member since 2015 · 66 posts · 17 votes
    11y

    The Schiller Index does look good and I can attest to buying my first SFR in 1985 for $97k and today the market value is $670k (yes, I still own it). What troubles me is the affordability index in the BA is only 21% for Q12015. I know most my friends kids cannot afford to rent or buy in the BA. For a long time we have been seeing larger extended families living in homes together in order to afford the rents. This has to be putting some eventual limit on the appreciation growth. The modest 3/2 house for $670k rents for $2800/mo. It wouldn't make sense to but it today as a rental, even at $2800/mo, but as a buy & hold from 1985 its doing okay.

    Personally I would be happy with 4-5% appreciation. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Brian Tremaine

      I grew up in Cupertino and by the time I went into the housing market 1977 houses in Cupertino had surpassed 100k.. and as a new RE Agent I could not buy were I was raised neither could any of my friends.  of course not many of my friends were buying houses at 20 years old either. I ended up going WAY out of town all the Way to Milpitas to buy my first home for 80k  a brand new Shapel home.. I think this is just a trend that will stay

    And why place like Portland Oregon has some serious legs... My daughter works for intel. she started in santa clara and they were looking for their first home a starter home in Campbell for 850k.. I told her to get up here and check it out... only a 10% pay cut to work in Oregon they bought a beautiful 5 and 3  2700 sq ft home for less than 300k in the best school districts in the area.. and I think you will continue to see the brain drain from Silicon valley to silicon forest.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    1Reply
  • Johnson H.Pro Member
    Investor · San Francisco, CA · Member since 2010 · 910 posts · 889 votes
    11y
    Originally posted by @Jay Hinrichs:

    @Brian Tremaine

      I grew up in Cupertino and by the time I went into the housing market 1977 houses in Cupertino had surpassed 100k.. and as a new RE Agent I could not buy were I was raised neither could any of my friends.  of course not many of my friends were buying houses at 20 years old either. I ended up going WAY out of town all the Way to Milpitas to buy my first home for 80k  a brand new Shapel home.. I think this is just a trend that will stay

    And why place like Portland Oregon has some serious legs... My daughter works for intel. she started in santa clara and they were looking for their first home a starter home in Campbell for 850k.. I told her to get up here and check it out... only a 10% pay cut to work in Oregon they bought a beautiful 5 and 3  2700 sq ft home for less than 300k in the best school districts in the area.. and I think you will continue to see the brain drain from Silicon valley to silicon forest.

     Hi Jay, what area of Portland is this? I think the Portland market is a great long term play. Great standard of living in the area and its still relatively affordable, especially at less than $300k. 

    1Reply
  • Sandeep S.
    Investor · Cupertino, CA · Member since 2012 · 118 posts · 121 votes
    11y
    Originally posted by @Jay Hinrichs:

    @Brian Tremaine

      I grew up in Cupertino and by the time I went into the housing market 1977 houses in Cupertino had surpassed 100k.. and as a new RE Agent I could not buy were I was raised neither could any of my friends.  of course not many of my friends were buying houses at 20 years old either. I ended up going WAY out of town all the Way to Milpitas to buy my first home for 80k  a brand new Shapel home.. I think this is just a trend that will stay

    And why place like Portland Oregon has some serious legs... My daughter works for intel. she started in santa clara and they were looking for their first home a starter home in Campbell for 850k.. I told her to get up here and check it out... only a 10% pay cut to work in Oregon they bought a beautiful 5 and 3  2700 sq ft home for less than 300k in the best school districts in the area.. and I think you will continue to see the brain drain from Silicon valley to silicon forest.

    How interesting Jay!  I now live in Cupertino, and moved here from Milpitas 4 years ago!  And I agree the trend you mentioned  (I only know how we stretched to get into Cupertino from Milpitas)!  Of course, once you are somehow in Cupertino - things work out as the market here is incredibly strong (for last several decades!)

    0Reply
  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
    11y
    The definition of a "normal salary" is different in the Bay than everywhere else. I was talking to an insurance agency owner in SF and he could not hold onto a competent receptionist/assistant for $45hr. They would get trained and hired away almost immediately. Almost anybody who can speak and write clearly in English and presents remotely well can command 6 figures in SF with a little networking.
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Johnson H.

      Beaverton is where my daughter ended up.. 15 minute commute to intel.

    My son also owns his own place in Beaverton.. 

    I do believe this market will continue to be strong.. but not like the bay area there is only one of those in the world

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    0Reply
  • Tom V.
    San Francisco, CA · Member since 2014 · 345 posts · 281 votes
    11y

    Houzz was valued at a Billion dollars.  SF bay area is getting frothy.

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y

    http://www.marketwatch.com/story/could-the-san-fra...

    So $670,000 median price in 2012 to $1,120,000 in 2016!  Six years to gain $220,000 to get the customary doubling. 

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y

    So that'd be about $9,375 in appreciation each and every month for 48 months!  And I've been predicting this on the internet's since at least 2006! And personally since 1980.   And some fools still call me crazy.  Crazy akamai!

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free