All Forum Posts by: Leonard L.

Sounds like you are already talked out to Hemet, but I just want to chime in that I had the worst landlord experience of my career there.  Bought a distressed 4plex there for a steal of a price, and didn't even consider not doing it.  After complete rehab, I had 6 months of 100% vacancy, multiple break-ins, used needles and actual feces left on carpets, and entire windows and doors taken off frames and stolen.  Gang members asking prospective tenants what side they are from, etc.  Almost comically bad experience.  I gave up and sold.  Luckily, great price plus great timing meant I made profit, but since then I have steered clear of Hemet  except for flix/flip.  And that is coming from a guy who buys a lot of deeply distressed houses in questionable neighborhoods.  That Hemet 'hood took the cake.

Riverside market is hot, hot, hot. Not sure about multifamily per se, mostly invest in SFR. But you can look up data and find that values bottomed about 2011 and have been moving strongly and consistently upward. When I do a fix/flip in Riverside, there has been extremely strong buyer interest on the flip side of deal. Job growth has lagged coastal areas unlike last up cycle, but is also going in right direction. Biggest question in the future - are we in 2nd inning, or 8th?

I am not a wholesaler usually but have a deal I might consider flipping.   I am in contract to close next week on a flix/flip in Lake Elsinore.   $105k for 1 bed, 1 bath.  Scheduled to close next week so you would have to move fast.  PM me if interested.

Welcome Beto.  How many rentals do you have and where are they?  I have about 20 and most are in the Lake Elsinore area.

We rehab smaller homes in Riverside and have spent as little as $10k and as much as $75k.   The average is probably about $25k though.  We try to limit most of budget to kitchen and bathroom, then flooring and paint throughout.

@Matt R.  I definitely agree that if you hold for very long term, as opposed to trying to time the cycles like I do, you are better off in CA than anywhere else.

One point about SF, LA and SD being the best markets, though.  I don't have data for cities.  But if you look at counties rather than cities, San Diego is not among the giants.  SF (for which city and county are the same) has been a rocket, going from $420k to $1.2M (185% increase).  LA from 200k to 502k is a 150% increase.  San Diego went from $251k to $548k, only a 118% (or only 7.8% per year).  In contrast, Orange County, where I live, rocketed from $271k to $710k, for a 161% increase (beating LA, by the way).  And Riverside, where I invest, went from $147k to $348k, a 136% increase, significantly beating SD.  (all data Jan 1 2000 to Dec 31 2015 from CAR website)

Again, city data probably different, but I personally like the price points and population growth of the Inland Empire.  So far, that bet has been rewarded, especially on the land speculation side.

@Account Closed

@Dan H.

Since you both asked, I will confess I do not know San Diego well and am not involved in his SD portfolio.  I have walked several of his houses but not sure what neighborhood is called.  About 10-15 minutes east and slightly south of downtown, very working class neighborhood (mostly hispanic) that is now gentrifying.  He used to rent to people who pretty much were in the lower rungs of the economic ladder, but suddenly over the past two years he has grad students and young professionals moving in.  

I am very encouraged to hear that both of you have been through downturns without reducing rent. But I saw him go through hell of trying to hold rents, rising vacancy, rent abatement and finally reduction, which brought him to the financial brink.  Now that he survived and the area is gentrifying, his rents have gone up 40-60%, portfolio is appreciating like mad, and life is very good again.  His experience has been a lesson to me, though, that rents can and do weaken in a downturn, although I respect that your experiences are different.  Now that I have a rental portfolio of my own, I am hoping to have your experiences, and not his, in the next downturn.  Just in case, though, I am buying very conservatively (i.e., largely without using debt).

You want a metric?  How about just three of my actual residences.  Boom examples -- Bought Santa Monica 1995 $300k (for which someone had paid $600k 4 years earlier), sold 1997 $600k.  Bought Danville 1998 $420k, sold 4 years later $840k.   Bust example - bought LA 1989 $165k, worth about half of that a few years later when I wanted to move to Santa Monica, so I was forced to hold and rent 10 years, at negative cash flow, until values finally crept back and I sold at break even (loss if you could holding costs).   Someone bought that same LA house in 2005 for $615k, but it sold again recently for about half that again.   So for every boom story, there is often a guy on the other side who is feeling a great amount of pain from what he sees as the bust.

Rents and appreciation are a straight line up only if you are looking at chart that only goes back to 2009. On the rent side, my partner has 75 SFRs in San Diego and none have more than 50% LTV debt, but almost lost entire portfolio in 2008 when tenants just couldn't pay rent anymore. His net rents actually declined by 50% from 2007 to 2010 if you factor in vacancy and abatement necessary to keep tenants in the units.

So, yeah, in these heady, booming days, it is easy to forget the pain of a bust.  But it will come again.   And in the meantime, your return on return on capital on most CA deals when you buy at today's prices is pretty mediocre, never mind the prospective potential loss of capital if you have to sell during a bust.

There is only one question I need to ask, which always allows me to determine if the buyer has made money or not on any real estate deal  -- WHEN did you buy it?  In real estate, Realtors all tell you is it location, location, location.  Not true.  It is timing, timing, timing.   I agree with OP that there are still deals to be found in CA that make sense as buy and hold.  But as  @Matt Leonardpoints out above, if it also a riskier game.   The OP is saying he has 10% appreciation since 2013. Yeah, so has everyone else.  The question is what happens when you buy in CA and the elevator is going down instead of up.  

Don't get me wrong.  Like the OP, I am buying all my deals in CA (Riverside County).  Shifted from mostly buy and hold to mostly fix and flip.  But that means that if I marked portfolio to current market, I would also have to admit I am only getting a 5% return (although a 15-20% return on capital, thanks to appreciation).  At some point (not yet), I will take most or all of my chips off the CA table and place them in a more stable market in another state while awaiting the next CA correction. [Winter is coming...]  

So yes, appreciation makes you wealthy.  Yes, you can still find deals in CA that make sense if you do this full time and stay highly motivated.  Yes, the signs look good for next year or two at least to keep investing in CA.  Yes, I could tell stories about properties I bought in 2011-2013 period that would make me look very smart.  But whether buying in CA makes sense for YOU or not depends on your goals. If it is capital preservation, buying in CA at this point in the cycle may not be the smart bet.

All the other have been fix and flips, so I will post a mobile/land flip.  Land is many times more risky than housing, but can have a larger upside for sophisticated buyers.  

Bought 2 mobiles on 3 acre lot in Wildomar, CA at Riverside County tax auction in Spring 2014 for $135k.   Knew I had great deal right off but not sure of exit strategy.  One mobile was occupied and in terrible shape, other was vacant but had been rehabbed.  Cash for keys on existing tenant.  Takes about a year to clear tax lien auction title in CA, so in meantime I developed exit strategies.  Researched idea of subdividing, since zoning and general plan allowed parcel map subdivision into four lots.  Or I could just split lot and sell each mobile with 1.5 acres of land.  Meanwhile, I approached owner of adjacent commercial property to see if he had a use for this 3 acres.  He was interested right away, but at lower price than I wanted.   We continued talking while I worked on rehab and subdivision strategies   Ultimately, he decided to meet my number and bought entire property in Fall 2015, 18 months after acquisition for $325k.  

Basis about $150k.  Sales price $325k.  Profit $175k in 15 months.  

I have SFR fix and flip examples too, but none of them are this profitable.