Over priced market

[Erik Lindquist]

I am living in a market (Marin county cali) where everything is going for well over asking, some of them 200k over! I am a newbie and it does not make sense to even start here when everything is over priced. There are markets nearby that are much more affordable(within in a hr of driving)   Any help or advice? 

[Account Closed]

Erik,

Welcome to BiggerPockets.  The Bay Area market is tough to invest for sure.  However, everything in life has a price.  When something is expensive, like real estate in the Bay, you have to ask yourself why.  When something is so cheap, you should also ask yourself why.  If it were easy, we all would be millionaires.  

What is your personal goal?  Are you investing for cash flow or wealth?  Cash flow will get you off the rat race while appreciation will make you wealthy.  The thing about cash flow markets is that the rent tends to stay stagnant while the rent increases with appreciation markets.  As you have seen the rental in our market in the last few years.  50% rent increase is typical across the Bay.  If you study history and learn its cycles, you would do well IMO.  

Let me give you some examples. I bought a couple of handful condos and townhomes during this downturn. At that time, 2-bedroom condos were renting for $1,300-$1,400/month. Fast forward to 2012-2013, they were renting for $1,750-$1,850. Now, they are renting for $2,100-$2,200/month. We're talking about $800 rent growth in 5 years. What used to be $200-$300/month above PITI is now $1k+.

As the market appreciates and your rent goes up, you can tap $100k of equity tax-free for every $500/month of cash flow.  Would you trade $500/month of cash-flow for $100k tax-free money to spend or reinvest?  Our appreciation is very lucrative once you have it figured out.  Not only it will provide you cash flow, it will also build wealth for you to pass down to future generations.  

I'd like to leave you with this quote from Master Oogway "One often meets his destiny on the road he takes to avoid it."  Please give it some thoughts before parting with your hard earned money.  No one takes care of your money better than you do.

Best of luck.