Goo States/Areas to Invest

[Kevin Godinho]

I currently live in San Diego and although it may not be impossible to start out investing here, it is more difficult than a lot of places for various reasons. I have considered moving out of state for quite some time, I just haven't had any particular place in mind. Does anyone have any suggestions as far as where might be a really good place for a beginner to get into the business, with not as expensive housing but a good market? I have family potentially moving out to Virginia over the next year or two and I'm considering heading out that way with them. I am mostly interested in buy and hold multi family properties. Thank you.

[Dan H.]

best state to invest for buy n hold REI is California. Mathematical fact. I find it strange when people who live in So Cal choose to invest out of state for the lower entry point or better cash flow.

If I was young with minimal assets in San Diego I would look to house hack a duplex in working class area of San Diego ideally with an FHA low down loan. I see some duplexes in my area of interest in the mid $400s that will likely sell in the low $400s. I realize this is a lot compared to Indiana but let's assume financed with fha loan at 5% down. So ~$25k entry cost including closing costs. Each of the last 5 years in San Diego you would have at least doubled your money invested in the first year. Add in principle pay down and any cash flow from tenant paying ideally a substantial portion of the mortgage. I have one duplex I purchased in Escondido that if I house hacked it I could have lived free of rent in a detached 4/2 with a yard.

Let's argue appreciation is not guaranteed and is like placing a wager.  I could make the point that cash flowing places are not guaranteed as the properties can depreciate or rent can depreciate.  My wife's family is from n Dakota and there are fairly nice homes abandoned there.  The rents likely do not cover the cap expenses.  But I will make a different case.  Prices do cycle and you must be able to withstand a period of depreciation but historically So Cal coastal prices have performed better than appreciation for any longer term duration.  It is not too many wagers that can be made were up to at least the time of the wager you would have never lost the wager. Odds are pretty good, if you do not see something drastically different about the conditions, that you would win the wager. 

So consider what you know about the local RE and research appreciation history (property and rent appreciation- last few years rents have gone up almost 10% a year which equates to ~$100/month per year on small cheap rental units (more for larger units)).  Think about advantages provided by prop 13.  Then make a fully educated decision.

Good luck