Where do you invest? (San Francisco is insane)

[Alice K.]

Hello All,

I've been involved in 2 out-of-state offers so far and feel like I've hit a wall in the areas I was planning to purchase a home/multi-family in. 

My primary question: Where would you / do you invest? 

Past experience

Eastern Washington: Little/no appreciation and meager cap-rates for anything decent (I know there are other factors but for simplicity, cash-flow is only so-so). Last offer took some wind out of me (thankfully, nothing bad *knock on wood) and I realized I have the entire world to look for property. 

Seattle: Rising far too fast, not sure if it's sustainable. I don't want to put all my eggs in one basket (heavy reliance on tech alone). Who knows if that will burst with San Francisco (where I live). On top of that, rents don't justify the high costs. (I haven't aggressively looked for "deals" but from what I've seen for the average joe that doesn't plan to spend 10k on postcards, such as myself.)

I was looking at job growth/diversity, running numbers, looking at charts, patterns, etc. and thought, heck I should ask people on here.

Would be so appreciative for any thoughts!

Cheers,

Alice

[Arlen Chou]

@Nicholas Varner I often hear people talk about "what will happen if Google or Apple" leaves....  However, the fact of the matter is that it is extremely difficult to move corporate headquarters of those sizes. It is not as easy as just moving equipment and changing letterhead.  The huge loss of employees or cost in relocation of those employees will undoubtedly slow down or kill that move.  Moving within the Bay Area or choosing to expand in nearby cities makes more sense, which is what we are currently seeing in the market. 

Even in an acquisition situation where the acquired entity will be absorbed by a company with a corporate headquarters in a different geography will take time.  That measure of time is most often in the range of years and not months.  This massive amount of time gives real estate investors substantial time to analyze and plan for change.  

A good example of this is the old IBM disc drive facility in San Jose.  They were purchased by Hitachi in 2002 and the consolidation of the business is still going on.  A smaller version of that massive facility is still there but now surround by many new homes and retail outlets that grew out of that merger.

In reference of capital flight from countries like Russia, China and Brazil I believe that money is flowing into the US because the referenced economies are doing poorly.  Those people want to protect their wealth and therefore will move assets from their bad economies into real estate in the US. So I would take the opposite position and bet that more foreign money will flow into the US RE market until those economies become healthier.  Of course this is dependent on the willingness of the governments of those nations to allow capital fight.  I would expect the respective governments to put limitations on offshore balance transfers which might halt less sophisticated investors from moving money out of native accounts and into the US.  If this happens smaller investors might start to disappear and might make competition for smaller properties easier for local small investors.

Just my simple counter point.

Arlen