Hi, Mike.
Welcome to BP (kind of strange coming from me, still feeling like a newbie here.)
I am one of those people who was lucky enough to have begun investing in the SF Bay Area during the last bust. The prices were so low that, even as a person who never considered buying anything beyond the primary residence, I became what I later learned was an "investor." Times were tough for some people, especially for those who could no longer afford to pay their ever-higher adjustable-rate mortgages - while the underlying value of the property was still looking for bedrock.
I see that you are from Arizona. I think I heard something about that state and the Great Recession.
I recall that back during the bust, 1bd condos in Vallejo were going for $30k. They were also going for $15k in Antioch (I believe they are 10x that now.) Craigslist (my preferred source at that time) was full of those. CL was also full of "first month free rent" in those cities back then. Instead, I bought where I had to pay more, but was able to rent immediately - judging from CL. And the properties I got were 15 minutes away from where I lived. The only "drawback" was that I had to pay cash, because no (conventional) lender would underwrite these loans. This was 2010. If I were smart - and had the cojones - I would have bought in Antioch and Vallejo, which went through municipal bankruptcy before you moved here.
Were it not for the (positive) experience that my local tenants gave me, I would not have begun to look OOS when I was ready to expand in 2015. But the Bay Area no longer provided the cash flow I was looking for - appreciation, maybe.
I've lived here through three recessions - I do not have a crystal ball to know when the next downturn will come; and it will come (If anyone in this thread pushing for RE investing in California today knows when that will happen, please PM me. There is a $5 Starbucks gift card in it for you - if your timing is right.) So, never wanting to get stuck holding a local flip when the market turned, my strategy has been cash flow. And that has meant OOS, at least from 2015 on.
Some people here have suggested to aim for 1% return; for example: a $100k property (regardless of downpayment) yields $1k/mo in gross rent. That is what I have been aiming for. Sometimes I do better, once (with a brand-new property) worse - but in all cases, I cashflow. I simply cannot do this in the Bay Area. You also have to consider the possibility of natural disasters (perhaps based on recorded history,) which may reflect in the cost of insurance - and out of pocket expenses - in future years (what will happen to the rates in Texas and Florida in the coming years?), property taxes, local income tax (in some places, even if you do not live there,) rent control/city oversight of rentals (again, in some markets,) transfer taxes (like in Pennsylvania, for example, if you plan to change to an LLC at a later time.) This list is not all inclusive, but all of this should be part of your math around the "1% return." And, sure, you can still consider the potential for market appreciation, as well as depreciation.
I should also warn you to not let stories about 2%+ yield that you may read here, or hear elsewhere, dissuade you from buying a property in a good area, etc. with "only" around 1% yield.
Btw, as for natural disasters: We are familiar with earthquakes here. Our new construction code reflects this possibility, to an extent. But few people in Memphis, for example, know/remember that they are in a historic earthquake zone. I still invest there because of the yields, though. I am also making an exception there for the apparently-shrinking population. You may have a different tolerance level - and that's ok. Everything for you must be about your own "comfort."
You mentioned looking at large cities online; that is a lot of work. When I first started considering OOS, an investor friend suggested Real Wealth Network. They typically have meetings in the East Bay and the Peninsula once per month (Friday and Saturday respectively,) where they invite "affiliate" turnkey providers from different markets to present to RWN members. It's free to join - if you decide that you need more than the basics, the only cost then is $10/mo for "Academy" access, all of which RWN donates to charities. Since people often ask: RWN makes money when members buy from an affiliate. It also makes money as a "manager" of syndication deals.
But you still must do your own due diligence on each market and on each affiliate. Once you decide on a market, start asking specific questions about it/the affiliate here. For example, I was the first RWN member to have bought from Alliance Wealth Builders (REI Management Services, LLC) in Birmingham AL, when RWN began its affiliation with them in early 2016. My experience there has been terrible - what AWB/REI tells investors at RWN presentations (and on its own website) has not been the case in my reality. As for RWN itself, I think that its heart is in the right place - but, having come of age during the Cold War, "trust but verify" is always my motto in RE investing.
For anyone not from California reading the whole thread: there was reference to paying $2k-$4k/yr in property tax on a $500k-$700k property because of "the proposition." Let me make you jealous with rage by telling you that some people here pay even less than that, even on more expensive properties. But here is the deal: "the proposition" is Proposition 13, passed in 1978, that took 1975-76 market values of (then-existing) properties, and allowed the assessments to be increased by no more than 2%/yr. That is great for anyone who bought, and still holds, from a long time ago. But any new purchase/construction is assessed at the minimum of 1% (plus special districts, schools, etc. fees) of *current* market value (based on the last, arms-length, sale price of that property.) And Bay Area voters (many of whom are renters) have been more than willing to vote in favor of additional government bonds (financed by property taxes) over the years. So, 1% of the assessed property value is but the beginning here. Perhaps, as a flipper, if you are lucky to buy a $1MM property that last changed hands in the '90s, you may - originally - see a $4k/yr property tax bill. But your buyer will not be so lucky, and if you continue to hold, neither will you.
For anyone who forgot how bad the last recession was for California RE values - it was the only year since 1978 that property assessments actually went down.
