All Forum Posts by: Robert C.

@Jeff Lundeen, My only beef with the "California exodus" posts is that the conversations always make it seem like this is THE END for the state, and everyone is getting out of here. I just want to point out that it's not mutually exclusive. There can be lots of people leaving the state, and California can still continue to grow and succeed. Even if it is the case that Cali is past its prime, it would take a long time for places like the Bay Area to unravel. 

That being said, I think your list makes plenty of sense currently, and there are plenty of Californians to go around. There seems to be loads of data from the last several years already showing where they've been going. However, if the remote working gospel spreads in a significant way, that could actually disrupt existing migration trends. At the end of the day, people have been leaving California for places that are less expensive but that also still have good job opportunities - so often other metros. But if people really are allowed (and decide to) work from anywhere, then they will no longer be restricted to places that have strong job markets, because the company they work for is going to be based somewhere else anyhow. 

@Amit M., Hey Amit - so I'm like 90% with you. And for the most part, I'm already proceeding in this market as if the worst is over, and not much else is going to rock the boat. I think that last 10% is just my paranoia making sure I'm not caught off guard, or stick my neck out too far in the short term. 

For the sake of argument, though, you could also ask how come it took so long for tech companies to take away cubicles and create open work environments. Sometimes trends just need the right timing and the right spark. Apple revolutionized our lives with touchscreen phones/tablets, but Microsoft tried and failed about a decade before. 

There's also my little theory that if people get stuck in their apartments, they'll realize how crappy and old most of the housing stock is here. Whereas before, they were gone most of the day so it didn't matter as much. That could work to the advantage of apartment owners with nicer units, or it could also spill over to people wanting to get out to places where they can afford a nicer/larger place. Of course, that depends how long it takes to open things back up again. 

@Swati Patel, I'm not a tax professional, so you should talk to one. But my understanding is the loss would carry forward. There is no such thing as taking partial depreciation. You either use it or lose it (depreciation recapture will happen if you sell later no matter what, excluding inheritance). Although, if you think about it, the carry forward loss does the same thing as if you could hypothetically take partial depreciation this year, and then take more in a later year (once again, you can't do that).

I don't think there's as much to worry about if employees are taking pay cuts... haha. I can relax now!

Facebook employees may face pay cut if they move to cheaper areas to work from home

@Jay Hinrichs, Building ADU's is definitely a huge opportunity in California now, especially since they streamlined the process. There's some headwind with local jurisdiction making the adjustment. That's true for new builders but also your everyday investors can zero in on properties with specific attributes to value add.

Interesting perspectives and analysis from everyone. Thanks for the responses. 

I think what I'm finding fascinating about this market disruption is that I'm not getting a sense that there's much damage to multifamily in the immediate term. There's certainly a Covid-19 discount on certain properties where the sellers are either fearful or just need to sell. But it's not some giant drop. The dangers to multifamily seem more about these tangential potential trends over the medium to long term. And if you're not paying attention, its quite possible one of these trends could have a major effect on your local market before you notice. De-urbanization? Remote work? Less consumerism? Retail/restaurants not coming back? There's a lot of moving parts, and its hard to figure out which ones will stick, and whether it's a bad or good thing for rentals. 

Sure, 6-12 months out, maybe things change. I find myself thinking back to 2008 and how long it took multifamily owners to be in trouble on their investments. My first purchase was 2010 with prices on the rise from that point on, so I guess it's possible that we're just not there yet. However, 2008 felt like a much more immediate impact to a wider breadth of apartment owners. This time, people seem to have reserves, and with the stock market continuing to go up, I think that could imply that there's a lot of investment money still looking to find a home. 

Facebook, can definitely be a trend setter, though, and that's why the article got my attention. It could be a pretty big gamble if they follow through. The bay area has been a battle ground for tech companies scooping up land and leases for offices. So if they give up some of their real estate footprint, they may be out of luck in the future if they make the wrong bet. 

Well, this could definitely be a market mover around my neck of the woods and across the country. Facebook will permanently shift up to half of its employees to remote work.

Will people choose to live in the Bay Area if they don't need to be near work? I've got to give this some thought!

@Lawrence Leung, Also, just in case the herein predicted gloom and doom does come to San Francisco, and people start fleeing urban zones, I imagine that would only benefit San Mateo County, Santa Clara County, and other surrounding suburbs. 

Even with layoffs at startups, I’m just not getting the sense that this is going to be that bad for multifamily in the Bay Area. I think there’s a lot of shifting parts in the market over the short term, but it’s not going to be like the 2000 bubble burst. I was a little nervous last month, but things are still renting for me in the peninsula and people are still paying their rent. 

California investors are going to do just fine. Yes, the politics here keep ramping up, but it gives advantages to  the investors who stay in the loop.