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!!!

[Kerlous Tadres]

Quote from @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!!!

Hey Natalie,
Congrats on wanting to get your real estate investing journey going! The biggest thing for you is to do you research on where you should invest and know the city/state by heart. Then from there I would build your CORE 4 with a reliable Realtor, Contractor, Attorney, and Property Manager

[Joseph Bui]

I'm not from the Bay Area, but I'm based in the Seattle area so its also crazy expensive where I live. I've been investing in a couple Midwest markets since late 2020 (Memphis and Detroit). I've scaled to 9 doors across those 2 markets. To be honest, if you have a solid team in place in the market of your choice, thats half the battle. This way you have "boots on the ground" that can help evaluate, walk and manage properties. Happy to connect and knowledge share if you are interested.

[Natalie Johnstone]

@Kerlous Tadres thanks so much for the feedback. At what point in the journey of finalizing your market, and offering a deal would you begin to engage an attorney? Thanks 😊 

[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!

[Travis Biziorek]

Hey Natalie, I was in SF proper and then Walnut Creek for years. I'm now down on the Central Coast (SLO County).

I'm doing two things... investing in the midwest and building an ADU here at my primary (almost complete!).

I'm pretty open about my out of state investing and share a lot of resources, performance metrics, etc. Happy to send those resources your way and/or chat about pros and cons of going out of state vs staying in your back yard.

[Natalie Johnstone]

I’d love to connect and also would love if you’d share your resources and performance metrics.  I will message you!

[Jake Andronico]

Quote from @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!!!

There are people making money across the country in different markets. I grew up north of San Francisco but moved out to Reno to live and invest. 

Still have a lot of family in Northern California and am only a short drive away. I'm an agent here, so I'm obviously bias. But, I lived and invested here long before I was an agent. 

There will be no perfect market at a perfect time, EVER. Rents aren't always amazing, prices, interest rates, etc. 

Just learn how to hit base hits consistently. Nothing wrong with great W2 jobs! That's an amazing place to be and start. 

I'd recommend much more boring assets that are solid long term plays than getting fancy and risky. 

In Reno, we analyze the entire market simultaneously to sort the best potential cash flowing deals. Instead of going one property at a time, this can save investors a ton of time. 

Whatever you decide, I wish you the best of luck!!

[Travis Timmons]

@Becca F. would be a good resource. You'd be smart to send her a direct message. She lives in reality and has nothing to sell. 

There is no easy money out there. If you don't need the income, I'd suggest a market that has some appreciation upside. Try to purchase the asset that will provide the greatest rate of return 10 years from now. I can, anecdotally, provide this example. I lived in Saint Louis from 2006-2009. The monthly rent on the apartments in which I lived in while there have moved about $250-300/month in 15 years. I moved to Houston from Saint Louis - those apartments rent for about $1000 more per month than I paid in 2009. The appreciation/current value has a similar spread as well. 

Think beyond year 1 and resist the urge to go for cash flow in a cheap market with little to no population growth. I like the filter of "Would you live in that property or city?" and "Would a young person with options want to move to ______?" We tend to complicate real estate...it's as easy as "Would it be cool to live here?" most of the time.

[Natalie Johnstone]

@Becca F. this is the greatest response - thanks so much for this valuable response! Can I message you / connect with you?  I just need to organize my thoughts first 😊

[Natalie Johnstone]

@Travis Timmons thanks so much Travis - this is great.  What you stated is exactly what I’m going for. If I could break even cash flow to mortgage/expenses - I’d be happy in a market with appreciation.  As mentioned not necessarily looking for cash flow but looking to hold properties for as long as makes sense.  Take equity out (when it makes sense) and find more properties to buy.  I really want to be as hands odd as possible with operations so I’m willing to spend on a good property management company (mentioning again I’m not as concerned about cash flow today)

any insight into markets you are aware of with good alleviation outlook over next 10 years?

[Travis Timmons]

@Natalie Johnstone There's no perfect answer, but the general indicators are the simple ones - population growth, median household income growth, businesses moving to the area. 

I'm a fan of overflow cities/towns if you are looking for a lower purchase price. It is its own place but close enough to the big city amenities. The type of towns that are 40-70 miles from a major city that is growing but are still affordable. I'll use Central Texas as an example - places on the I-35 corridor like Temple/Belton, San Marcos, and New Braunfels that are around Austin but not suburban Austin. A young couple or family can still buy a house for $250k.

Another top of mind examples is my wife's hometown of Bowling Green, KY - hour north of Nashville, growing, and still affordable.

Or do what a buddy of mine just did - paid up for a 3 unit in a premier neighborhood in Boston. It's a no brainer long term play. You struggle to scrape by for a few years but feel like an absolute genius 10-20 years from now. It's an awesome place to live in a city that will always attract young ambitious talent.

I'm not suggesting that these specific markets are good for you. The general theme or idea is what I am getting at. Do your own research and find what fits. It's going to be harder than you expect, more time consuming, and will feel like you are spinning your wheels for a while. It's also okay to punt on real estate and let the magic of compound interest do its thing in an index fund or two.

[Alex Olson]

Hey - KC market is great. Sent you a DM about it. 

[James Wachob]

Welcome @Natalie Johnstone to the world of real estate investing! It’s exciting that you’re setting goals to buy a property by the end of the year.

I hear investors say all the time that they’d love to invest but find it too expensive in their local markets. The Bay Area, in particular, can be daunting due to its high property prices and competitive landscape. For those looking to invest out of state, Memphis often stands out as a top choice.

Since you’re comfortable with minimal cash flow and have strong W2 jobs, focusing on asset growth is a great strategy. Memphis can provide an excellent platform for that, with its combination of affordability, rental demand, and landlord-friendly environment.

If you have any more questions or need further guidance, feel free to reach out!

[Scott Scoville]

Quote from @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!!!

Hey Natalie, I'm currently working with many bay area bigger pockets clients who are buying in the greater Sacramento area. I typically walk the properties for them, facetime and help analyze the deals prior to them coming up to view themselves. I'm a local agent and investor myself, so I have a lot of first hand experience investing in this market, along with an extensive list of contractors, etc. Would be happy to chat if you're ever interested in learning about the Sacramento market. 

[Natalie Johnstone]

Hey Scott! Sac has always been a place I’ve at least thought about, but I think what worries me a little bit is the more tenant friendly laws in CA. Thoughts?

[Samuel Diouf]

Hey Natalie, there are some great opportunities in the Ohio markets. Many investors from California are choosing to invest in the Midwest because of the low barrier to entry and yearly cash returns making more sense in these lower priced markets. Ohio markets show up 3 times in Zillow’s 2024 hottest markets, with Columbus and Cincinnati taking the top 2 and 3 spots. I moved from Florida to start investing in Columbus because of the same reason.

https://www.zillow.com/learn/hottest-housing-markets-2024/

[Sam McCormack]

Quote from @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!!!

 I am biased, but Cincinnati as well as the hidden gem of Northern Ky. I am in both. You can expect good cash flow in some areas, and then more appreciative friendly areas elsewhere! Some have a mix of both if you can get in early enough. 

Shoot me a message about Greater Cincinnati if you are interested!

[Jordan Moorhead]

@Natalie Johnstone I would look in areas you have some knowledge of, that you possibly have connections in or at the very least are landlord friendly and experiencing strong economic growth!

[Mike Paolucci]

Quote from @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.  

Hi @Natalie Johnstone. I'm born and raised in San Francisco and ran into the same issue when I was starting off in 2021. I ultimately settled on Ohio for a more landlord friendly and better price point/not have to run a negative every month after the property was stabilized. Been pretty happy with my decision. 

Here's an example of why I'm not a big fan of investing in Cali anymore--> "Justice for Renters Act" Not exactly ideal for landlords, imo. 

When picking a market, I would recommend first looking at whether or not the state is landlord friendly and then the macroeconomics (population & job growth / any additional drivers that are helping the local economies) of the various cities you're potentially targeting.

To answer your question about inspecting the property, an investor friendly realtor should be able to help connect you with a local inspector with a good track record and multiple property managers who should also be able to help answer most of your questions. 

 Happy to share some of my experiences as an OOS investor or answer any questions you might have! Good luck on your journey! 

[Neil Ginty]

@Natalie Johnstone
We just got into contract on a deal in Martinez and we have invested in Sac.
The landlord laws aren't as bad as made out (we feel, at least!) - except for the rent controlled cities ie. avoid Oakland and SF!

Key for us is finding something we can add value to. This one is a duplex with 2x 1-beds that pretty easily convert to 2x 2-beds. And we just saw one in Sac that we could make hit 1% without doing toooo much!!

Bay Area and Sac can work - just need to be creative!

[Karen Wanamarta]

@Natalie Johnstone I work Nashville and Knoxville. About half my clients are from CA. Depending on your budget I would check out a multifamily near Clarksville (army base) or an Airbnb in Gatlinburg (year round season and 10% cap rates)