Is any city in Southern California good for rental investment property for cash flow?

[Zahra Fathollahi]

Hi, I am new and want to learn. I am in Los Angeles. The prices are way out of reach. Searching for ideas. Where should I start?

Appreciate your input. 

[Dan H.]

Quote from @Dan Portka:

Quote from @Zahra Fathollahi:

Hi, I am new and want to learn. I am in Los Angeles. The prices are way out of reach. Searching for ideas. Where should I start?

Appreciate your input. 

 I agree with Nathan here.. socal historically hasn't been great for cash flow and in the current high interest rate & low inventory environment its even harder. Investors have pivoted to other approaches such as direct to seller marketing to find their own deals, creative financing, house hacking, or just accepting lower cash flow

 >socal historically hasn't been great for cash flow

I do not know where you get this opinion but for long term holds it is not just mistaken but possibly Southern Ca has historically had the best cash flow of any region in the country. 

Case Shiller ranks large cities residential rentals by total return since 2000.  Top 3 cities are San Fran, Los Angeles, San Diego.  The total return includes property appreciation but rent growth has strong correlation with property appreciation.  So it is not surprising that markets with the most appreciation typically have the highest rent growth.  

My market is San Diego. According to Rentometer, 3/2 SFH in San Diego had average rent increase of $700/month. I believe in dollar term (not in percentage terms) that it was the highest in the nation (and top 5 in percentage).

There is a poor relationship between initial cash flow and actual cash flow over a long hold.  This is not happenstance.  The good initial cash flow market typically has poor appreciation outlook and therefore poor rent growth outlook.  The poor initial cash flow market typically has good appreciation and rent growth outlook.

The market with the higher rent growth will always eventually be the better cash flow market (it is mathematically the case) which is why coastal southern CA markets have historically produced great cash flow for long holds.  

By the way I agree with the rest of your post. The market is more challenging than it has been for many years. Investors are using more labor intensive strategies like rent by room, STR, MTR, etc to make the numbers work. These alternate strategies can work, but realize they are not passive (I do not consider LTR to be passive, but these other strategies are less passive).

Good luck