How do buy and hold investors survive in high priced markets?

[Nick Clurman]

Hello BP Community,

I am an aspiring investor currently living in the high priced SF bay area of California.  Currently I am still in an investigative  stage of investing.  Ive been focusing my search primarily in Sacramento county and also look regularly in Solano, San leandro, and Santa clara counties.  Going off what I see on websites such as Zillow and redfin, then plugging the financials into the BP rental calculators it has been a bit discouraging.   From what I can tell California is a pretty hard place to get cash flow, even with a sizable cash investment.  As a control, I pulled a few multi families  from Phoenix Az and Portland OR and ran the numbers.   What I found is that the Phoenix  market will cash flow fairly easy in comparison (there are  1% deals).   Portland was a bit tighter but still much more forgiving than California.    

In Sacramento where I've been focusing most of my search home prices are about half of what the are in my current area but still I struggle to find anything that looks it will generate cash.   Of course I could throw all my eggs into one basket and get a modest return.  Not a good option.  

What am I missing?  How do investors in markets such as this turn a profit?  What is the upside to these markets?  Are these markets spoiled for investors?  Is  California not a good place for buy and hold investors?

Thanks in advance for any input.