What Are The Best Areas In California To Invest? & Out of State Questions

[Jordan Budke]

Hi guys, 

I'm a condo owner and resident of San Diego County. I'm currently working on paying off my debts and improving my credit scores, but have the long-term goal of using the equity in my condo to begin my investing journey. 

Are there any areas in CA that are good for investing? If so, where would you recommend to a rookie investor?

Prices in CA, specifically in my SD area, are prohibitive. We live in a 1bd 1bth with little ability to upgrade without spending $500k+. 

Investing in-state would be convenient if possible. I've considered the possibility of buying a small mountain cabin (1.5-2 hours away) to rent as an AirBnB but question if that is wise to start out with.

Otherwise, I'd love direction on places to invest other than CA. I've looked mostly in the midwest and southern states, such as IN, OH, IL, KS, MO, TN, AR, TX, MS, AL, GA, SC. So many areas. It's tough to know where to focus on and how to build a team. 

[Twana Rasoul]

@Jordan Budke You are better off in San Diego and your capital invested would be less in san diego than some other random market and your overall returns will likely be higher in the long term here...Very cheap markets are cheap for a reason.  

If you step up to another condo since you already have one, assuming in the 400k-500k range condo your down payment would be 3-5% which is in the 12k-20k range.  You can purchase another condo and rent out your current condo and continue to move up and rinse and repeat when you can.  

I started off in San Diego with low money down and the first property my wife and I purchased was under 400k as that was what we could afford in 2014 and by 2017 we were purchasing our 3rd property and it was still under 400k, not in particularly great areas...so first 3 properties were are single family homes or Condos (in East County)...then we house hacked a duplex in 2019 and fully renovated those units, and we are currently submitting plans to put 2 ADUs in the back. In 2020 we did a cash out refinance on the first 2 properties we purchased and pulled out over $250k between those units ....we used the $250k to purchase a triplex in La Mesa Village in the first half of 2021 (we are currently adding an ADU to make it 4 units). At the end of 2021 we sold the condo we purchased in 2017 (put less than $40k down initially) to do a tax deferred 1031 exchange and purchased a ugly/tiny 4plex in Golden Hill but I was selling 1 unit to buy 4 in a better area so I was happy.....in 2022 we purchased a 4plex with low money down, also in east county using a small bank that did this type of loan at the time....

So between 2021 to 2022 we purchased most of our units (11 units) with little money out of pocket since 2 of them were from cash out refi funds and 1 was from a 1031 exchange.  If we didn't purchase those initial properties we would have never been able to do the above and the properties that we purchased were retail and not in great areas but it was better that we purchased than not doing anything and letting time pass by.  They were all "base hit" deals at best but it worked for us, and of course if we purchased value add and in slightly better areas we could have done even better but we did not have the funds initially to take on properties that needed work.

I had a few mid west properties for a bit and sold those off...from that experience I can say for me, I would rather have 16 units in San Diego than 200 units in the mid west.