Looking to kick off my first rental property in CA

[Rahul Ram]

Residing in the San Francisco Bay Area, I am currently exploring the prospect of acquiring a long-term single-family home (SFH) rental property in California or a location within convenient driving distance of the Bay Area—particularly eyeing regions like Sacramento or the Central Valley. The motivation behind this endeavor is to mitigate the overexposure of my investment portfolio to index funds and the stock market, seeking to establish a diversified foundation with the inclusion of real estate assets.

Given that this marks my initial venture into real estate investment, I am eager to dip my toes in the proverbial waters and assess whether I possess the aptitude for this venture. As I navigate through this decision-making process, a question has surfaced: Is my perception correct in thinking that California leans more towards appreciation-heavy investments rather than prioritizing cash flow? I am keen on gaining insights from seasoned individuals on this forum who have weathered similar phases in their investment journey. Your experiences and advice would be immensely valuable as I navigate through this exciting but unfamiliar terrain.

[Arlen Chou]

@Rahul Ram Keep in mind that cash-flow is a function of how much you put into the deal. If you buy all cash, it cash-flows day 1. If you buy 100% financed it is very difficult to cash-flow. There has always been a debate of cash-flow vs appreciation on BP and online in general. A few dollars of cash-flow off a single property will have very little effect on your lifestyle. You need to have a large number of properties to truly change your life. However, significant appreciation from a single property can have an outsized effect on your wealth. As an investor you should try to attain both sides of the coin, get some cash-flow and go after the appreciation... find a deal that gives you both. 

Most people will tell you that is impossible to do in California, let alone the Bay Area. I will be the first to tell you that these deals do exist, you just have to be prepared to deal with lots of negotiation before buying and headaches after closing. But if you can deal with those burdens, you will be able to add 6 figures to your wealth within 2 years. This is not hyperbole, I have been doing this for nearly a decade in the greater SF Bay Area as a buy and hold investor. 

If you are currently priced out of the Bay, @Nick Maugeri has made some very good suggestions on places to look.

Good luck,

Arlen