Where are Bay Area residents buying today!? Which market?

[Natalie Johnstone]

Hi All - I'm brand new and have a goal to buy a property by EOY.  I'm overwhelmed by which market(s) to choose.  Because I'm in the Bay area, I can't really invest in my backyard so to speak.  Looking out of state (because of prices and more landlord friendly areas) but open to hear others successes in Cali investing (for first time purchases).  

If you are investing out of area or out of state, how are you inspecting property, and all your due diligence out of area? has it been difficult?

My strategy would be to have a property manager do pretty much everything, I'm okay with minimal cashflow because we both have great W2 jobs.  I'm more interested in just growing assets.   Thank you so much!!!

[Becca F.]

Hi Natalie! I invest in the Bay Area and Indianapolis metro area. 

If you can invest within a 2 hour drive, you have more control with checking up on the property. I'm thinking Sacramento, maybe Central Valley (Turlock was suggested by my local agent). I wouldn't do Stockton if it were me - the higher crime areas are concerning. Maybe Manteca. A little longer drive, Reno. Vegas is also a short flight away. 

The short version is if you go with the Midwest or the Southeast, stick with Class A or B for appreciation. My Class A home (nice suburb with great schools) is doing well but I bought it in 2013 and it has doubled in value from 2013 to 2021. Class C is volatile - it can go well or badly. I fall into the badly camp (so far until the property stabilizes after 2 to 3 years),  lots of repair issues. I bought them in 2023. Don't buy a 100 year old renovated home (renovation done by the sellers, not me) - some people like old homes but it's been a huge headache for me. On paper it was supposed to cash flow, minimally at 7% rates. You can skim through some of my previous posts. 

I also DON'T recommend doing a BRRRR from a long distance unless you have experience with renovations. I've done a local renovation where I was on site multiple times a week. I made offers to BRRRR and an attempted flip in Indianapolis - decided it was too difficult so bought move-in ready (which really wasn't after the inspections). You need a trusted team and it takes time to build relationships, at least several months.

I would add property manager should be one of the first people to talk to - they know the rental rates of different areas and tenant base. Also network with local investors to get unbiased feedback (not anyone trying to sell you anything). Good luck!