CA, Nevada, or Arizona?

[Rhyna Orillaneda]

Hi all,

Wanted to get your inputs.

Background about me..

My primary home is in San Jose, Ca which has appreciated a lot. I also converted my garage to an ADU (permitted) and is renting very well.

I’m a busy mom with 2 kids. Part time W2 job. Husband has a full  time W2 job.

I have $100,000 to start. My goal is long term. Not much on cash flow. 

Choosing between California, Nevada and Arizona. 
It would be amazing to have your inputs. I built my ADU through my own research and inputs here and the info here is so amazing!!!

Nice day to all!

Rhyna

[Manny Vasquez]

Rhyna - I believe California some great opportunities out there. However, these properties won't be low hanging fruit.  In other words, "great deals" are not going to automatically pop-up on Zillow at every page. You will have to do a little more research, dig a little deeper and turn a few more stones.  But I guarantee that good deals are out there.  In some cases, you may also have to get your "hands dirty" in order to make these properties look nice or up to your standards. Just last year I expanded my property portfolio by purchasing a four-plex in Los Angeles County (Inglewood area) and a Single-Family Residence in Riverside County.  Property appreciation in California is second to none and rents always go up here. You get the best of both worlds.

You don't have to look out of state. Look at Riverside, San Bernardino, Kern, Fresno, and Tulare counties. There may be some excellent opportunities there. I am ALWAYS looking at properties up and down the state, because i have investor clients that are always looking to buy. In these past 3 months, I have already sold some properties in Tulare and Kern Counties to my Los Angeles clients. These deals weren't easy-to-find "low-hanging fruit" but there are great deals are out there.

If you need any help or additional advice, feel free to reach out I have helped a lot of my investor friends purchase properties in other counties in California. I hope this helps and good luck in your journey!

[Bryan Forst]

Hi Rhyna, 

What investment strategy are you interested in? Fix and flip? More rentals? Airbnb or long-term tenants?

I'm in Southern California, and could help you with boots on the ground if you locate any properties in my area. 

Phoenix/Scottsdale is a great market as well, especially airbnb's during spring training. 

[Bradley Buxton]

@Rhyna Orillaneda

There are some good options in CA and people still want to live there despite all the bad press. I'm a former CA resident now in Tahoe Reno Nevada. Nevada has many of the draws of CA and the added benefits of low property taxes that don't assess on sale, landlord friendly, no state income tax, and multiple tech and manufacturing jobs like Tesla, Apple, Google in the area. Tesla is in the middle of building the Semi truck manufacturing plant. Reno is also geographically restricted from over building forcing appreciation. While not the cheapest market in the USA there are all the signs of strong appreciation without the hassles of CA investing. There are also multiple strategies STR at Lake Tahoe, MTR and LTR that can be used. Happy to share more data and insights.

[Karan Singh]

Quote from @Account Closed:

Quote from @Rhyna Orillaneda:

Hi all,

Wanted to get your inputs.

Background about me..

My primary home is in San Jose, Ca which has appreciated a lot. I also converted my garage to an ADU (permitted) and is renting very well.

I’m a busy mom with 2 kids. Part time W2 job. Husband has a full  time W2 job.

I have $100,000 to start. My goal is long term. Not much on cash flow. 

Choosing between California, Nevada and Arizona. 
It would be amazing to have your inputs. I built my ADU through my own research and inputs here and the info here is so amazing!!!

Nice day to all!

Rhyna

I'm in Scottsdale, so I'm biased for Arizona. We moved here from Seattle for a reason . . . investing. We looked at CA and found it wanting for good deals.

Whichever state you decide to invest in, you may want to consider using off market strategies utilizing creative finance. Instead of 20% per property it's closer to 5%. That means your investment dollars are multiplied.

 @Account Closed you mentioned you moved to phx and I am curious why. Was the for cheaper primary residence or investments? 

How do you like the phx area? 
If you had 100k to Invest, which zip codes/cities would you do it in?

Have you invested in multi family In phx? Are you seeing a flood Of new inventory as the news reports are saying? 

[Elizabeth Pruett]

Hi Rhyna,

Another Bay Area native here! I recently moved to a small town in Arizona and it's been amazing to see it growing.

I noticed you're more focused on appreciation than cash flow with your investments. Did I understand that correctly?

If so, getting hyper-local with your research is key, no matter which state you choose. Both have advantages and disadvantages.

As someone who thrives on new industries, I love seeing them come to town. Here in the Southwest, agriculture and military are big, but there's a booming manufacturing sector too!

My advice: target towns with average prices that fit your budget and then deep-dive into your research from there.

Good luck with your search!

[Doug McVinua]

@Rhyna Orillaneda Arizona has performed very well overall. I have multiple San Jose investors for whom we have located properties and now manage as long-term rentals in the general Phoenix area.

With $100K to invest, we could find you an excellent property.

Happy to answer any further questions you might have.

[Becca F.]

Congratulations on the ADU and getting it rented out!

Wow. I had the same question. I invest in the Bay Area (2 properties) and Indianapolis metro area. I'm looking to exit of the Midwest - I've gotten different feedback on appreciation in Indiana but so far I don't think it will outpace the property tax increases, 17% (on nice suburban home) and 16% (Class C) recently and repairs on Class C. Being 2000 miles away is difficult. I bought Class C inexpensive properties in 2023 ...I recommend not doing this if you live far away. I was trying to go for cash flow (on paper)  but I'm losing money every month, not sure when these properties will stabilize. I think it's better to go for a long term appreciation strategy. 

I'm also looking at Sacramento since it's within driving distance but prices are a little more challenging. I was looking at doing a combination of LTR and MTR/STR (to travel nurses/business people) to have a little better cash flow.

So far I feel positive about Nevada and Arizona from talking to agents - more landlord friendly than CA, low property taxes and good appreciation. I compared notes with an AZ investor and his property tax is half of my Indianapolis suburban rental (owned almost 11 years) and his house is worth twice as much. 

I'd be interested in hearing from NV and AZ investors the pros and challenges. 

[Brian Toleno]

I'll let you know about my journey in Reno, NV in a few months. Currently in escrow on a townhouse (cap rate ~ 5.25%).  Finding the right partners and doing the math upfront are the best ways to find the right fit for you, based on your finances and goals. 

[Scott Scoville]

Hey Rhyna, it sounds like you're in a great position. For long term buy and holds, I always recommend CA. While the barrier to enter is higher, and you do have to navigate the tenant laws, there is nothing better than long term appreciation in CA. There are always cycles in real estate, but because of the size of the housing shortage, lack of new builds, and the largest economy in the country, it's hard to envision where we won't continue to see price and rent appreciation. If you're looking for cashflow, you may want to consider out of state or getting creative on STR/MTR's in CA. I'd be happy to chat if you're ever interested. My own personal portfolio is in Sacramento, and I'm continuing to buy. Best of luck!

[Mike Arias]

Quote from @Bradley Buxton:

@Rhyna Orillaneda

There are some good options in CA and people still want to live there despite all the bad press. I'm a former CA resident now in Tahoe Reno Nevada. Nevada has many of the draws of CA and the added benefits of low property taxes that don't assess on sale, landlord friendly, no state income tax, and multiple tech and manufacturing jobs like Tesla, Apple, Google in the area. Tesla is in the middle of building the Semi truck manufacturing plant. Reno is also geographically restricted from over building forcing appreciation. While not the cheapest market in the USA there are all the signs of strong appreciation without the hassles of CA investing. There are also multiple strategies STR at Lake Tahoe, MTR and LTR that can be used. Happy to share more data and insights.

Besides Reno, any other good cities to look at in Nevada?  I assume Vegas is not. Thanks.

[Bradley Buxton]

Quote from @Mike Arias:

Quote from @Bradley Buxton:

@Rhyna Orillaneda

There are some good options in CA and people still want to live there despite all the bad press. I'm a former CA resident now in Tahoe Reno Nevada. Nevada has many of the draws of CA and the added benefits of low property taxes that don't assess on sale, landlord friendly, no state income tax, and multiple tech and manufacturing jobs like Tesla, Apple, Google in the area. Tesla is in the middle of building the Semi truck manufacturing plant. Reno is also geographically restricted from over building forcing appreciation. While not the cheapest market in the USA there are all the signs of strong appreciation without the hassles of CA investing. There are also multiple strategies STR at Lake Tahoe, MTR and LTR that can be used. Happy to share more data and insights.

Besides Reno, any other good cities to look at in Nevada?  I assume Vegas is not. Thanks.

There are some opportunities in other cities but they are small and depending on your strategy would not have the same appreciation or cash flow potential as Reno or Vegas. Vegas does have opportunity the appreciation and equity building is not as strong.  I do have some references in Vegas if you're interested in exploring.  Reno has geographic constraints to building that is squeezing supply driving the appreciation vs Vegas where there is still room to build on flat land. 

[Richard Reynolds]

Hey Reyna, investor/realtor here in á Vegas. Had a quick question, your primary residence garage conversion in San Jose that you said is doing very well. That's awesome! Based on your numbers, do you have a general idea of the total valuation of your entire property prior to and after the junior ADU?
do you know your total valuation model number before and after the permitted garage conversion? 
It's a different location of course, but wanted to get a general idea of the increase on your SFR. Thanks!

[Dan H.]

Long time California RE investor. 

My belief is there are 2 primary plays in coastal CA cities 1) patience (long term coastal CA RE has always produced good to great return) 2) value add. Sure maybe you can find something off market that is rent ready at a big enough discount to make money near term, but maybe you will find a unicorn. You may also find certain markets where alternative rent strategies (MTR, STR, rent by room, etc) produce enough extra income to justify the increased work involved but the difference in income from the different rent strategies in many markets is just sufficient to justify the increase in effort involved.

$100k is going to be challenging in coastal CA cities. using 80% LTV without including closing costs you can purchase a $500k property. With closing costs you are possibly down to a $460k property.

Patience is obvious.  With time appreciation and rent increases will produce a good return on leveraged coastal Ca cities RE.

For those with a bigger pot to invest…

If you do value add on residential, currently commercial residential is beaten down but non-commercial is not. In addition, the value add is cleaner in under writing for commercial residential. At a 3 cap, a dollar increase to NOI is $33 of value. Add a half bathroom to each unit that increases rent $100/month ($1200/year) and add $39,600 in value per unit. 10 units and you have added nearly $400k in value. How much would it cost to add a half bathroom?

note more sophisticated value adds could have better cost to rent valuation.  

I just completed a rehab on a non-commercial residential unit. It included adding a new half bath. Comps showed in the market a valuation of about the same (~$40k) for an additional half bath, but getting it from an appraiser on a refinance would be challenging (probably very challenging). It is so much cleaner to have value based on NOI than relying on an appraisal based on comp. Due to rate increases, I was not planning to refi after this rehab so the challenge is not a problem in this instance.

In addition, non-commercial residential in my market has shown no decline and is up significantly YOY.  This contrasts with valuation on commercial residential which is down significantly.

Some things to ponder for those thinking about investing in Coastal CA real estate.

Good luck

[Seth Rosellini]

Hi Rhyna,

I'm new to RE also and I have not posted much on the forums, but I can tell you that your situation is very similar to my aunt and uncle and cousins. They have always been in San Jose so their properties have doubled or more in value over the past 10 to 20 years. They all moved to Arizona in and around the Phoenix area, within the last year or 2, and they've invested in a number of properties there now. They are doing very well. And they say it's very clean and nice where they live at and invest at. Hopefully that helps.

[Art Martinez]

Hi Rhyna,

I’ve had great luck with Arizona. I built a house out there in 2015 and overtime the Defense industry, then tech industry moved into our city.
 
Things are a bit pricey right now, however, there will always be an influx of snowbirds and transplants. 

Best of luck

Art

[Andrew Daughtery]

Hi Rhyna, 

I live in Las Vegas and have invested here, and surrounding rural towns in NV and AZ, for the last couple years.

The short term market in Las Vegas is very tough, Clark County is pretty strict on Airbnb/STR. It is doable but you have to find the diamond in the rough.

However, downtown on the Strip, there are high rises that are outside of Clark county that I have seen do well! 

Also, the east side of town (as well as on the other side of the border in Kingman/Laughlin area) has a ton of off market properties that are great fix and flip opportunities, or even low barrier to entry LTR, if that is a route you would like to explore. 

I am also an agent in the area and would happy to answer any questions you may have about the area!

[Scott Scoville]

Hey Rhyna, I'm buying and investing in Sacramento. It's an appreciating marketing, with steadily increasing rents. Demand is high, and inventory is low. The inventory issue will not be resolved anytime soon. It's also the #1 place people are relocating to from the bay area. Let me know if you'd ever like to chat more about the Sacramento market. 

[Johnny Hernandez]

@Scott Scoville are you familiar with what areas in Sac still allow short term rentals?

[Johnny Hernandez]

Quote from @Becca F.:

I'm also looking at Sacramento since it's within driving distance but prices are a little more challenging. I was looking at doing a combination of LTR and MTR/STR (to travel nurses/business people) to have a little better cash flow.

 Becca, we are also looking in Sac. Ideally we would do a hybrid str/mtr. Since we go to Sac often, we would like to also get use out of having a furnished place to stay. What areas in Sac have you considered?  

[Scott Scoville]

Quote from @Johnny Hernandez:

@Scott Scoville are you familiar with what areas in Sac still allow short term rentals?

 Yes, be happy to chat about this. I'll DM you.

[Becca F.]

Quote from @Johnny Hernandez

 Becca, we are also looking in Sac. Ideally we would do a hybrid str/mtr. Since we go to Sac often, we would like to also get use out of having a furnished place to stay. What areas in Sac have you considered?  

My post didn't age too well. I haven't driven up to there to look around and I don't know the areas well.  I briefly looked online at Elk Grove, parts of Citrus Heights, and West Sacramento (near downtown). I will never buy in lower income areas (Class C)  regardless of state and with the landlord tenant laws in CA, I'm apprehensive if I need to evict a tenant who can't pay rent or causes problems. My thought is choose a higher income, high quality tenant especially in CA and don't listen to any sob stories (not 100% foolproof but reduces the risk). 

I initially looked at doing a 1031 exchange of all my Indianapolis properties but the timing would have been difficult. The price points in Elk Grove would have been way too high and with 7% interest rates not do-able for me. I'm not planning to buy anytime in the next year or so until I get rid of all my Indy properties and maximize rent on Bay Area SFH.