Out of State Investing for Californians?

[Hector Valadez]

Hi, my name is Hector and I decided to get into the Real Estate world last year. I live in Lancaster, CA and own a single family home rental. I have been a lurker on these forums and soaked up a lot of knowledge so thank you all.

I have been considering investing out of state and I was curious where other investors in California were investing in. 

I would also appreciate if you could shed knowldege on a newbie as to how you determine if a certain market is desireable. Thanks again for all the help.

[Robert Reynolds]

Congrats @Hector Valadez,

I'm still personally bullish on investing in California. I'm looking to buy a STR in Joshua Tree right now. CA appreciation has always been solid and my house has been appreciating at least 10% a year out here and more than doubled in 8 year. If you can I'd recommend house hacking and doing live in flips and just keep buying homes out here in LA and then renting out your homes to traveling nurses or executives.

Robert 

[Nathan Murith]

@Hector Valadez welcome and congratulations on doing the work!

We're currently in California and invest exclusively out of state in the Midwest.

Happy to connect and share all the failures success tips tricks and tools if you're interested.

Reach out connect and DM. Happy to spend the time sharing what we know

[Young Ho Yoo]

I've seen a lot of clients investing in Texas, Florida, New York, Minnesota, and more. If you are looking for cash-flow you go out east. If you want appreciation you stay in California (or Texas now a days. Property tax sucks but lower price than California and appreciating at a fast rate.)

[Ali Boone]

Super cool... I lived in Lancaster when I first moved to California! I took a transfer with Lockheed and landed there from Atlanta. Is that where your rental is?

All but one of my properties are out-of-California. As far as what markets are desirable, it really depends on what you're looking for. What's your price range, what kind of property do you want, any other buying criteria, etc. Not a super-helpful answer I know, but the options are pretty vast! Have to narrow it down a bit.

[Nick Shri]

Quote from @Hector Valadez:

Hi, my name is Hector and I decided to get into the Real Estate world last year. I live in Lancaster, CA and own a single family home rental. I have been a lurker on these forums and soaked up a lot of knowledge so thank you all.

I have been considering investing out of state and I was curious where other investors in California were investing in. 

I would also appreciate if you could shed knowldege on a newbie as to how you determine if a certain market is desireable. Thanks again for all the help.

You didn't indicate your reasoning for OOS investing, below are the reasons why and where most investors target.

CF, almost no Appreciation, meet the 1% rule - Mid-western states

None to minimal CF, mid to high appreciation - TX, FL, TN, CO, ID

Hope this helps..

[Nathan Gesner]

Quote from @Hector Valadez:

Hi, my name is Hector and I decided to get into the Real Estate world last year. I live in Lancaster, CA and own a single family home rental. I have been a lurker on these forums and soaked up a lot of knowledge so thank you all.

I have been considering investing out of state and I was curious where other investors in California were investing in. 

I would also appreciate if you could shed knowldege on a newbie as to how you determine if a certain market is desireable. Thanks again for all the help.

Welcome to Biggerpockets!

There are a lot of markets that make sense for you. Kick around the forums to see where others are investing, then look at those markets to see if they fit your tastes and goals. I'm currently investing in Columbus, Ohio. It's a solid bet, but there are literally hundreds of others that could work just as well if you take the time to investigate.

[Tanner Connelly]

A ton of my California clients are investing heavily into the Austin market, and largely into South Carolina. Happy to connect! 

[Patrick Drury]

@Hector Valadez
I work with a lot of out-of-state investors from California that are investing in Columbus OH. A market that has profitable price points, lots of job opportunities, and population growth is a good starting point. Columbus is a solid hybrid market of cash flow and appreciation. I also live and invest locally here in Columbus and would recommend it.

[George Red]

Hey Hector, I live in CA and within the last year started buying duplexes in Kansas City Missouri. I was initially looking in Atlanta but got priced out as properties kept skyrocketing… also looked in Jackson Mississippi before landing on KC. Reasonable priced major city but looking at other cities now potentially but haven’t invested the time into understanding another market yet.  Let me know if you have any questions or I can help with anything.

[Mio Chee]

I am from Honolulu, Hawaii where housing prices are crazy expensive just like some parts in CA. I invest in Avon, IN, Moore, OK, and Cordova, TN and all of the rentals are cash flowing nicely.

[Carlos Ptriawan]

For cash flows, I invest in midwest.
For appreciation and BRRR projects, I invest in CA/Bay Area itself.

From total return standpoint, CA is a winner at all. For Cashflow, you could invest in any private funds.

Serious money can only be made in CA. Paying bills is from the midwest.

[Jordan Moorhead]

@Hector Valadez we have a lot of great investment properties coming to the market here in Austin

[Reggie Powell]

@Carlos Ptriawan

I’m glad I’m not the only one praising California. It seems crazy to me that people invest out of state when they have deals all around them here in California. Good news is, more for us :)

[Vicky Nguyen]

Quote from @Robert Reynolds:

Congrats @Hector Valadez,

I'm still personally bullish on investing in California. I'm looking to buy a STR in Joshua Tree right now. CA appreciation has always been solid and my house has been appreciating at least 10% a year out here and more than doubled in 8 year. If you can I'd recommend house hacking and doing live in flips and just keep buying homes out here in LA and then renting out your homes to traveling nurses or executives.

Robert 

 @Robert Reynolds I’m moving to LA for a job and I’m new to California market and I am looking to buy my first property and house hacking to get started with RE investing. Would you mind sharing your advice where to get started in California ~ of course within my budget 450k-500k? Any advices would be very grateful. 

[Jennifer Jo McCallon]

Hey Hector! I have a fun group on Facebook called 49 States Real Estate Investing. You can ask this there. I buy in Pittsburgh, PA and Braddock, PA. Feel free to give me a call for info on those areas. Good luck to you!

[Carlos Ptriawan]

Quote from @Vicky Nguyen:

Quote from @Robert Reynolds:

Congrats @Hector Valadez,

I'm still personally bullish on investing in California. I'm looking to buy a STR in Joshua Tree right now. CA appreciation has always been solid and my house has been appreciating at least 10% a year out here and more than doubled in 8 year. If you can I'd recommend house hacking and doing live in flips and just keep buying homes out here in LA and then renting out your homes to traveling nurses or executives.

Robert 

 @Robert Reynolds I’m moving to LA for a job and I’m new to California market and I am looking to buy my first property and house hacking to get started with RE investing. Would you mind sharing your advice where to get started in California ~ of course within my budget 450k-500k? Any advices would be very grateful. 

Just buy an 'uglier' house in a good school district. Actually even in the bad school district, we had so much appreciation but it's just more in a good school district. Buy in December, lower competition. There's software that can tell even which blocks has the highest appreciation per zip code. this is for rehab or buy-and-hold long term.
The inside factor that really makes higher appreciation is good school districts as parents wouldn't need to pay private schools for their kids. 

[Young Ho Yoo]

San Bernardino is a decent area in the 400-500 range

[Vicky Nguyen]

Quote from @Carlos Ptriawan:

Quote from @Vicky Nguyen:

Quote from @Robert Reynolds:

Congrats @Hector Valadez,

I'm still personally bullish on investing in California. I'm looking to buy a STR in Joshua Tree right now. CA appreciation has always been solid and my house has been appreciating at least 10% a year out here and more than doubled in 8 year. If you can I'd recommend house hacking and doing live in flips and just keep buying homes out here in LA and then renting out your homes to traveling nurses or executives.

Robert 

 @Robert Reynolds I’m moving to LA for a job and I’m new to California market and I am looking to buy my first property and house hacking to get started with RE investing. Would you mind sharing your advice where to get started in California ~ of course within my budget 450k-500k? Any advices would be very grateful. 

Just buy an 'uglier' house in a good school district. Actually even in the bad school district, we had so much appreciation but it's just more in a good school district. Buy in December, lower competition. There's software that can tell even which blocks has the highest appreciation per zip code. this is for rehab or buy-and-hold long term.
The inside factor that really makes higher appreciation is good school districts as parents wouldn't need to pay private schools for their kids. 

@Carlos Ptriawan thank you for your advice. Would you mind telling me the software? I would buy good district for now. I’m new to US so I want to stay in safer areas. Do you have any specific areas? 

[Vicky Nguyen]

Quote from @Young Ho Yoo:

San Bernardino is a decent area in the 400-500 range

 Hey Young, thank you for your recommendation. I looked into San Bernardino but people saying it has higher crime rate. If it is my first house, do you have a specific area in San Bernardino that is with safe neighborhoods? 

[Young Ho Yoo]

Better Cities in San Bernardino

Quote from @Vicky Nguyen:

Quote from @Young Ho Yoo:

San Bernardino is a decent area in the 400-500 range

 Hey Young, thank you for your recommendation. I looked into San Bernardino but people saying it has higher crime rate. If it is my first house, do you have a specific area in San Bernardino that is with safe neighborhoods? 

This shows the list of some of the better cities

[Vicky Nguyen]

Quote from @Young Ho Yoo:

Better Cities in San Bernardino

Quote from @Vicky Nguyen:

Quote from @Young Ho Yoo:

San Bernardino is a decent area in the 400-500 range

 Hey Young, thank you for your recommendation. I looked into San Bernardino but people saying it has higher crime rate. If it is my first house, do you have a specific area in San Bernardino that is with safe neighborhoods? 

This shows the list of some of the better cities

 Hey Young, can you send the list again? I don’t see it here.

[Young Ho Yoo]

Quote from @Vicky Nguyen:

Quote from @Young Ho Yoo:

Better Cities in San Bernardino

Quote from @Vicky Nguyen:

Quote from @Young Ho Yoo:

San Bernardino is a decent area in the 400-500 range

Click on the blue link CITIES IN SAN BERNARDINO

 Hey Young, thank you for your recommendation. I looked into San Bernardino but people saying it has higher crime rate. If it is my first house, do you have a specific area in San Bernardino that is with safe neighborhoods? 

This shows the list of some of the better cities

 Hey Young, can you send the list again? I don’t see it here.

[Patricia Berman]

Hi Hector,

I'm not in California but I am in Denver and I invest in Iowa, Texas, and even California.  Texas and California are where I hold properties that are short term rentals, and they were pretty pricey.  I've found that Iowa has been a great market with affordable single and small multi-family homes for purchase.  The rents that I've been able to pull have been excellent and my cash flow remains amazing from those properties. 

My next city that I will be looking to invest in is St. Louis.  I know that you can get single family homes that should cashflow nicely and also hopefully appreciate in value, although, as you probably know we can't bank on appreciation in this difficult market climate. 

Good luck!  

[Dan H.]

I invest in CA for both the appreciation and the cash flow.

I would put my rent to purchase ratios against virtually all other markets.  This is because long term cash flow has little correlation with the initial cash flow.  This is not happenstance.  RE markets are efficient and based on numerous criteria.  Two of the bigger criteria is expected appreciation and expected risk.  Areas with cheap properties and good initial rent to purchase ratio typically are so because they are not expected to have poor appreciation or they have something that makes them perceived to be high risk.  When a property appreciates, what do you think happens to the rent?

According to ApartmentList.com, the average rent increase in my primary market for 2021 was in excess of 20%.  I recognize rents have gone up nationwide, but 20% in my San Diego metro market is ~$500/month rent increase on average.  What do you think that does to my cash flow?  If it is not obvious, it quickly improves the cash flow.  If you have ~25 units at $500/month rent increase you $12.5K/month of increase or $150K/year in the increase.

I recognize that there are Californians that cannot afford to purchase a turnkey non owner occuppied property via traditional financing in CA. This is where learning about other options come into play. House hacking a FHA duplex with high LTV, off market purchases, a BRRRR that allows you to extract all or virtually all of you investment, lease to own, etc.

My first property was a value add house hack that became a BRRRR (when everything was done being rehabbed we refinance then moved out renting it as an LTR).

We have only one rental that has not had all of our investment extracted (it was not a BRRRR). Every one of our rentals have rent to purchase ratios over 1%, many over 2%, and we have one that is an STR that had over 4% ratio in 2019. I recognize comparing ratios of LTR and STR is comparing apples to oranges, but a property that was purchased for $375K had STR rent in 2019 of ~$160K (no matter that it is an apples to oranges comparison, the numbers make it clear this was a homerun purchase).

Learn your options on how to acquire RE in CA for little out of pocket.

BTW my initial protege I believe started in 2015.  He was initially my handyman.  Best handyman I ever had.  I think I was paying him $30/hour when he quit being my handyman.  He now has ~15 rental units in the greater San Diego metro area.  We still talk and he is trying to catch me in unit count.  I point out it is not only the number of units, but the quality of units.

Good luck

[Carlos Ptriawan]

Quote from @Vicky Nguyen:

Quote from @Carlos Ptriawan:

Quote from @Vicky Nguyen:

Quote from @Robert Reynolds:

Congrats @Hector Valadez,

I'm still personally bullish on investing in California. I'm looking to buy a STR in Joshua Tree right now. CA appreciation has always been solid and my house has been appreciating at least 10% a year out here and more than doubled in 8 year. If you can I'd recommend house hacking and doing live in flips and just keep buying homes out here in LA and then renting out your homes to traveling nurses or executives.

Robert 

 @Robert Reynolds I’m moving to LA for a job and I’m new to California market and I am looking to buy my first property and house hacking to get started with RE investing. Would you mind sharing your advice where to get started in California ~ of course within my budget 450k-500k? Any advices would be very grateful. 

Just buy an 'uglier' house in a good school district. Actually even in the bad school district, we had so much appreciation but it's just more in a good school district. Buy in December, lower competition. There's software that can tell even which blocks has the highest appreciation per zip code. this is for rehab or buy-and-hold long term.
The inside factor that really makes higher appreciation is good school districts as parents wouldn't need to pay private schools for their kids. 

@Carlos Ptriawan thank you for your advice. Would you mind telling me the software? I would buy good district for now. I’m new to US so I want to stay in safer areas. Do you have any specific areas? 

I am paid member for both software but don't want to promote them openly :) haha the first is true home valuation software but I guess their most value is finding blocks that have highest potential growth based on past historical performance and ability to forecast up to three years. Other public forecasting apps only available up to 6 months.

For the second software , it analyzes the contractor/BRRS activity in many metro thru MLS listing and measures the ARV based on previous condition sale and after selling ARV.It will tell which house has the most potential.

I will tell you all over if you want to rehab, do it in appreciating markets like CA, WA or CO. I don't think it's worthed the hassle to do out-of-state rehab-fix-rent outside CA if you live in CA.

About the school district just enter niche.com ; find the best 5 school district in your metro and buy-hold there.

All this software opens your eyes that the opportunity is actually located in front of your eyes.

For cashflow I still invest in midwest primary for the following reasons :  we need those rentals to maximize tax and cash-flow(gross rent is twice mortgage stuff); I prefer just turnkey for midwest. The downside of midwest is the repair ; the cost differences are actually not much different when you fix/repair something large. Also for CA rental, I can manage myself and not using PM. For STR I'm all invested in Hawaii.