Which would you buy as your first investment property..

[Rachel Blackwell]

Both are same price. Would you buy an out of state 4plex (AZ), or an in-state single family fixer (CA)? My husband wants an out-of-state buy and hold and I want to do a fix and flip in San Diego. 

[Dan H.]

I recommend all new RE investors start local.  There are various reasons for this including local knowledge, easier to build and maintain team, ability to perform heroics if necessary.

Historically:

• AZ will have better initial cash flow.
• AZ will be more landlord friendly in their regulations.
• San Diego has rent control.  The max increase is high enough that the capping the rent increase is not the most problematic aspect of rent control.  The bigger issue is making it difficult to get rid or tenants that may not meet your standards but still pay the rent.  I used to get rid of these via a large rent increase.  That is no longer an option.  In addition, terminating their lease without them breaking the lease and be given opportunity to address the problem also is not an option.  So mostly rent control increases the need to thoroughly screen tenants.
• San Diego will appreciate more.  This is both property and rent appreciation.  This implies that historically San Diego will out cash flow AZ over a long hold period.
• San Diego is very constrained on its supply side.  This relates to a reason for its historical appreciation.
• San Diego has a nicer climate.  This has helped with the appreciation but it also helps with the longevity of certain cap expense items.
• AZ has cheaper labor costs.  This results in lower maintenance and individual cap expense costs.  Counter this with shorter lifespan of roofs, windows, paint, HVAC.  
• Case Shiller has San Diego as one of the best buy n hold returns for this century in the entire US.
• San Diego will be easier to build and maintain the team.

If you lived in AZ, my recommendation would be for you to start in AZ.  Seeing you live in San Diego, my recommendation is you start in San Diego.

I have been investing for a while.  My entire team except for the home inspector has turned over at least once.  In late 2019, the plumber we had used for the majority of work over the last 8 years and us went our separate ways.  We have tried a handful of plumbers since then and have not found one.  We got two quotes to solder one elbow in a crawl space.  One wanted $680 (and was already onsite), the other wanted $400.   I expected the cost to be ~$150 and consider that already high but plumbers' prices I virtually always consider high.  This job, if nothing goes wrong, should be less than an hour.  If something goes wrong it should still be less than 2 hours.  The one that quoted $680, we will never call again.  They were already on the near never to use again list but they crossed it.  So we have been searching for a new plumber for 5 months and have yet to identify one.  I had a contractor that I used a handful of times just poor a curb that looked like it was poured by drunk.  He says he will fix it, but I do not know how.  We will see but if we cannot come to an agreement I may be looking for a new contractor.  Wife was thinking $400 off.  I told her I would rather have it straight then get only $400 off (it is that bad).  Hopefully the contractor can fix it.