Investing in California - pros and cons

[Becca F.]

I'm a new investor (2019) with 2 properties (1 SFH solely owned and 1 apartment building, co-owned with family) in the Bay Area. I've also been investing in the Indianapolis area, more for cash flow and tax benefits (may be able to get REPS status by logging my hours but that's another topic). The appreciation on the CA properties far surpasses the Indiana ones. I've talked to several people and am aware that I could 1031 my Bay Area SFH with lots of equity to buy a multi-unit or many SFHs in the Midwest and possibly generate more cash flow. I don't plan to do that. I would rather own fewer solid properties than 50 or 100 cheaper properties.

I hear a lot about California being a terrible place to invest with landlord tenant laws. I haven't heard lots of horror stories, just mostly in Alameda County specifically with the COVID moratorium. One San Leandro landlord is owed $132,000 in back rent and in Oakland you can't discriminate against rental applicants with a criminal back ground (except sex offenders) and several stories of non-paying tenants which took thousands in legal fees to evict in Oakland. 

I'm interested in hearing from other CA investors, especially in the Bay Area. I've talked to a couple people successfully flipping here and doing BRRRRs. For long time investors who bought they're able to charge market rate rent and have relatively low monthly payments, either paid off property or low property taxes from Prop 31. For newer investors, they seem to be very high income earners (tech workers, physicians) or have lots of capital but it's tougher to buy here without a lot of money. 

If your a CA investor and 1031'd your properties to buy out of state, would be interested in hearing your experiences. What are your horror stories or success stories? 

[Nate Meeker]

I am considering doing it the other way around.. I bought a bunch of rentals in FL during the pandemic and am going to 1031 them into CA for the risk of weather and appreciation benefits.

Some of my clients are doing pretty good with small-multi family in the Bay Area, but they are getting 20% discounts upfront by sourcing the deals themselves. 

Others are hitting the 1% rule in CA with ADUs and JDUs.