Best place to invest for a California resident?

Best place to invest for a California resident?

Member since 2024 · 4 posts · 11 votes

I'm in a bit of a unique situation in that I'm a California resident and can only invest in properties all-cash for religious reasons.

I'm not able to use leverage/loans, and I know and accept that investing all cash is not common, but thats the way I do it. 

My goals are purchasing single-family homes in lower cost areas ($250,000 maximum purchase price) and my priority is buy and hold. Equity/appreciation is less of a concern for me, although it'd be a nice to have. 

I'm also not interested in condos/townhouses as I owned one previously locally, and it really restricted what I could do. 

I've been debating where I should invest for a number of years, and think I need to just get into it, as a lot of time has gone by without me doing anything. 

The reason for the delay is because I initially thought I'd invest in low cost areas of California like Fresno, Bakersfield, Stockton, Sacramento, etc (due to being somewhat within driving distance of the SF Bay Area) but I held back because California's landlord laws made me very concerned.

I didn't want to end up in drawn out court battles with a renter just squatting at a place I purchased with my cash. 

For that reason, I decided to start flying to/visiting states like North Carolina, Ohio, Texas, Missouri, etc. 

The issue I found when visiting these places is that the nicer suburbs are not much cheaper than some of the cheaper areas of California (many single families are in the high $200,000's/low $300,000's so the draw is not as enticing if I can purchase something in my state for a similar price). 

I know the quality of the home and neighborhood won't be the same in California, but because I'm targeting buy and hold, I just need a property with okay or decent rental yields. Not a fancy ranch home or newer build.

After visiting these States, I just didn't see the benefit of investing in $200,000 in a B- class neighborhood in Ohio, which is a 5 hour flight away, when I could maybe invest a similar amount  in the California Central Valley in a C class neighborhood that I could drive to when needed.

Yes, the landlord laws may not be as friendly, but maybe I could just be really stringent when fielding tenants? I've also heard anecdotally on BiggerPockets that the concept of other States being super landlord friendly is sometimes overblown (in other words, sometimes even in the most landlord friendly states, things can get sticky)

In other words, I'm not sure how much the potentially friendlier landlord laws would convince me to purchase far away in other state, when that also comes with its own challenges (the inability to self manage, property management fees, etc) 

This debate on whether I should locally invest vs out of state has left me wasting time so now I feel I just have to make a decision and go for it. 

1. Would it better as a California resident to invest my money in a low price area of California due to driving distance and proximity? Or are the landlord laws simply too draconian in California to warrant the risk? 

Are decent buy and hold returns still found in some parts of California? If so, which regions should I be looking at?

2. Or would it simply be better to stick to my original plan and just go out of state? Any states close to California with good rental returns where a single family (3/2 or 2/1) can be purchased for $250,000 or less, all cash? 

Unfortunately, this is my max budget, and I wouldn't be able to go above this amount at all. 

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Real Estate Agent · Columbus, OH · Member since 2020 · 149 posts · 193 votes
2y
Quote from @James Khail:

I'm in a bit of a unique situation in that I'm a California resident and can only invest in properties all-cash for religious reasons.

I'm not able to use leverage/loans, and I know and accept that investing all cash is not common, but thats the way I do it. 

My goals are purchasing single-family homes in lower cost areas ($250,000 maximum purchase price) and my priority is buy and hold. Equity/appreciation is less of a concern for me, although it'd be a nice to have. 

I'm also not interested in condos/townhouses as I owned one previously locally, and it really restricted what I could do. 

I've been debating where I should invest for a number of years, and think I need to just get into it, as a lot of time has gone by without me doing anything. 

The reason for the delay is because I initially thought I'd invest in low cost areas of California like Fresno, Bakersfield, Stockton, Sacramento, etc (due to being somewhat within driving distance of the SF Bay Area) but I held back because California's landlord laws made me very concerned.

I didn't want to end up in drawn out court battles with a renter just squatting at a place I purchased with my cash. 

For that reason, I decided to start flying to/visiting states like North Carolina, Ohio, Texas, Missouri, etc. 

The issue I found when visiting these places is that the nicer suburbs are not much cheaper than some of the cheaper areas of California (many single families are in the high $200,000's/low $300,000's so the draw is not as enticing if I can purchase something in my state for a similar price). 

I know the quality of the home and neighborhood won't be the same in California, but because I'm targeting buy and hold, I just need a property with okay or decent rental yields. Not a fancy ranch home or newer build.

After visiting these States, I just didn't see the benefit of investing in $200,000 in a B- class neighborhood in Ohio, which is a 5 hour flight away, when I could maybe invest a similar amount  in the California Central Valley in a C class neighborhood that I could drive to when needed.

Yes, the landlord laws may not be as friendly, but maybe I could just be really stringent when fielding tenants? I've also heard anecdotally on BiggerPockets that the concept of other States being super landlord friendly is sometimes overblown (in other words, sometimes even in the most landlord friendly states, things can get sticky)

In other words, I'm not sure how much the potentially friendlier landlord laws would convince me to purchase far away in other state, when that also comes with its own challenges (the inability to self manage, property management fees, etc) 

This debate on whether I should locally invest vs out of state has left me wasting time so now I feel I just have to make a decision and go for it. 

1. Would it better as a California resident to invest my money in a low price area of California due to driving distance and proximity? Or are the landlord laws simply too draconian in California to warrant the risk? 

Are decent buy and hold returns still found in some parts of California? If so, which regions should I be looking at?

2. Or would it simply be better to stick to my original plan and just go out of state? Any states close to California with good rental returns where a single family (3/2 or 2/1) can be purchased for $250,000 or less, all cash? 

Unfortunately, this is my max budget, and I wouldn't be able to go above this amount at all. 


Hey James, appreciate you laying out your detailed thought process. But like you implied, sounds like you're stuck in analysis paralysis. If equity/appreciation is not much of a concern for you, is cash-flow your primary goal? Typically with buy and hold, equity/appreciation is the primary concern for the investors that I have worked with, that's why I ask. Investing locally is a good way to get your feet wet and it's a lot more practical than having to take a flight out to see your property. The advantage to investing in a market like Columbus is that it's landlord friendly (like you said), and taxes and price points are typically lower. Columbus specifically is also seeing tremendous growth from large tech companies expanding their business in the market, so from an appreciation standpoint it has garnered more attention from investors. All that to say, I think clearly defining what your short-term/long-term goals with real estate investing are will help you make a decision. 

See this reply in the discussion

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  • Jake AndronicoBusiness Member
    Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
    2y

    @James Khail

    Welcome to BP! You're in the right place. 

    I grew up north of San Francisco and now live and invest in Reno, NV. Similar to you, I wanted to find somewhere less expensive, still close to the Bay Area (drivable), but without the high property taxes, more favorable tenant/landlord laws, no state income tax, and consistent job/population growth. 

    It's now not a secret, and actually fairly expensive due to all of these benefits. 

    At the end of the day, you can make a lot of different places work, but nowhere is going to be perfect. 

    If you want to be within driving distance, CA still may make sense. 

    I'd say it's worth talking to an experienced landlord/tenant attorney and understanding the risks and weighing the pros and cons. 

    RE is a long game, and congrats on having $250K in cash to spend!  

  • Gene HackerPro Member
    Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 974 posts · 488 votes
    2y

    I share your concerns about investing in California because of their policies that benefit deadbeat tenants.  I have minimized that risk by being very strict in my underwriting.  Waiting for a solid applicant with decent credit and rental history has helped me find good tenants that do the right thing.  

    Short term or midterm rentals (under 30 days) can also limit your exposure to the negatives of California's tenant laws. 

  • Scott ScovilleBusiness Member
    Real Estate Agent · Sacramento, CA · Member since 2019 · 502 posts · 276 votes
    2y

    Hey James,

    There really isn't a right or wrong market. I like investing in my own backyard, which is Sacramento and surrounding areas. I'm able to get hands on with my investments, and also vet all of my tenants. I believe in CA real estate which has low inventory, prices and rents are solid, and theres a ton of demand. You do have to deal with more regulation, which is the cost of doing business in CA. I'm an investor and agent in Sacramento and happy to chat about the good and the bad of working in this market anytime.

    Scoville Realty & Investments LLC
  • Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    2y

    Hey James, I feel your dilemma. 

    For starters, I'm familiar with folks that need to make sure their investments are halal. And I appreciate how that limits your options. 

    I also live in California and I'm a big advocate for staying in your backyard as long as it works for your situation and your goals. 

    I've looked heavily at Bakersfield myself, and have some friends there. So I go there once or twice a year. 

    My issue with Bako is that the cheap houses are in pretty rough areas, and are likely to remain cheap. Bakersfield is also massive with nothing naturally stopping outward sprawl. Appreciation here is likely driven by demand for established areas and school districts, which likely isn't the <$250k stuff.

    If finding cheaper stuff was my priority I'd probably look out of state. I'm big on Detroit, personally (heavily) invested there, and work with a lot of clients that wish to invest there.

    Homes in Detroit proper can be had for $80k - $90k today and rent for $1,200 - $1,300/mo. You're generally seeing a 10% CoC return here and Detroit is rapidly appreciating.

    Just in the last 5 years the median price has doubled in Detroit (see below chart). Appreciation is important, for obvious reasons, but also because appreciation helps pull rents higher. That means increasingly better cash flow.

    I expect Detroit prices to 2x in the next 5+ years given what's happening there and the current trajectory.

    That said, again, if you believe investing in CA will match your goals it's a great, time tested market. I'm building an ADU here at my primary and would consider another SFH nearby if I could find the right deal. But inventory is extremely tight!

    Hope that helps, and I'm happy to chat if you'd like to connect.

  • Adam BartomeoBusiness Member
    Real Estate Broker · Cape Coral, FL · Member since 2015 · 2k+ posts · 1k+ votes
    2y

    The best place is outside of CA! And, NY! Run from those states...

  • Member since 2024 · 4 posts · 11 votes
    2y
    Quote from @Gene Hacker:

    I share your concerns about investing in California because of their policies that benefit deadbeat tenants.  I have minimized that risk by being very strict in my underwriting.  Waiting for a solid applicant with decent credit and rental history has helped me find good tenants that do the right thing.  

    Short term or midterm rentals (under 30 days) can also limit your exposure to the negatives of California's tenant laws. 


     Thanks Gene.

    Can you share more about how you vet tenants for long-term rentals in California?

    I know you mentioned credit + rental history but can you share exactly all the steps you go through and which tools you use?

    Thank you 

  • Gene HackerPro Member
    Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 974 posts · 488 votes
    2y
    Quote from @James Khail:
    Quote from @Gene Hacker:

    I share your concerns about investing in California because of their policies that benefit deadbeat tenants.  I have minimized that risk by being very strict in my underwriting.  Waiting for a solid applicant with decent credit and rental history has helped me find good tenants that do the right thing.  

    Short term or midterm rentals (under 30 days) can also limit your exposure to the negatives of California's tenant laws. 


     Thanks Gene.

    Can you share more about how you vet tenants for long-term rentals in California?

    I know you mentioned credit + rental history but can you share exactly all the steps you go through and which tools you use?

    Thank you 


     I personally refer to this article:

    https://www.biggerpockets.com/blog/how-to-screen-tenants

  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    2y
    Quote from @James Khail:

    I'm in a bit of a unique situation in that I'm a California resident and can only invest in properties all-cash for religious reasons.

    I'm not able to use leverage/loans, and I know and accept that investing all cash is not common, but thats the way I do it. 

    My goals are purchasing single-family homes in lower cost areas ($250,000 maximum purchase price) and my priority is buy and hold. Equity/appreciation is less of a concern for me, although it'd be a nice to have. 

    I'm also not interested in condos/townhouses as I owned one previously locally, and it really restricted what I could do. 

    I've been debating where I should invest for a number of years, and think I need to just get into it, as a lot of time has gone by without me doing anything. 

    The reason for the delay is because I initially thought I'd invest in low cost areas of California like Fresno, Bakersfield, Stockton, Sacramento, etc (due to being somewhat within driving distance of the SF Bay Area) but I held back because California's landlord laws made me very concerned.

    I didn't want to end up in drawn out court battles with a renter just squatting at a place I purchased with my cash. 

    For that reason, I decided to start flying to/visiting states like North Carolina, Ohio, Texas, Missouri, etc. 

    The issue I found when visiting these places is that the nicer suburbs are not much cheaper than some of the cheaper areas of California (many single families are in the high $200,000's/low $300,000's so the draw is not as enticing if I can purchase something in my state for a similar price). 

    I know the quality of the home and neighborhood won't be the same in California, but because I'm targeting buy and hold, I just need a property with okay or decent rental yields. Not a fancy ranch home or newer build.

    After visiting these States, I just didn't see the benefit of investing in $200,000 in a B- class neighborhood in Ohio, which is a 5 hour flight away, when I could maybe invest a similar amount  in the California Central Valley in a C class neighborhood that I could drive to when needed.

    Yes, the landlord laws may not be as friendly, but maybe I could just be really stringent when fielding tenants? I've also heard anecdotally on BiggerPockets that the concept of other States being super landlord friendly is sometimes overblown (in other words, sometimes even in the most landlord friendly states, things can get sticky)

    In other words, I'm not sure how much the potentially friendlier landlord laws would convince me to purchase far away in other state, when that also comes with its own challenges (the inability to self manage, property management fees, etc) 

    This debate on whether I should locally invest vs out of state has left me wasting time so now I feel I just have to make a decision and go for it. 

    1. Would it better as a California resident to invest my money in a low price area of California due to driving distance and proximity? Or are the landlord laws simply too draconian in California to warrant the risk? 

    Are decent buy and hold returns still found in some parts of California? If so, which regions should I be looking at?

    2. Or would it simply be better to stick to my original plan and just go out of state? Any states close to California with good rental returns where a single family (3/2 or 2/1) can be purchased for $250,000 or less, all cash? 

    Unfortunately, this is my max budget, and I wouldn't be able to go above this amount at all. 


     >are the landlord laws simply too draconian in California to warrant the risk? 

    Ca is very tenant friendly and some jurisdictions are even more tenant friendly.  However, my market (San Diego) has one of the lowest deliquency rates and eviction rates in the country.   Some of the low eviction rate is the cumbersome and costly process.  However, the vacancy rate is crazy low.  Tenants need good landlord references.   We do not accept any tenant that has ever been evicted.  

    >Are decent buy and hold returns still found in some parts of California? If so, which regions should I be looking at?

    I think this is very challenging for a MLS purchase without a value add. Off market, value adds can produce good returns. I have doubled my investment on my last purchase (Dec 2021). It was off market purchase with a value add.

    I wanted to point out another big advantage of CA RE that is not present in most out of state markets.  Prop 13 virtually fixes the property tax.   Property doubles in value but property tax barely increases.  

    Good luck

  • Samuel DioufBusiness Member
    Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes
    2y

    There are successful investors in every market. It all comes down to the quality of deal you're able to find and the team you're able to build.

    In Columbus, OH, you'd be able to pick up a turnkey property in a good location for under $250k and would likely see some nice appreciation as well with all that'sd going on here.

  • Real Estate Agent · Columbus, OH · Member since 2020 · 149 posts · 193 votes
    2y
    Quote from @James Khail:

    I'm in a bit of a unique situation in that I'm a California resident and can only invest in properties all-cash for religious reasons.

    I'm not able to use leverage/loans, and I know and accept that investing all cash is not common, but thats the way I do it. 

    My goals are purchasing single-family homes in lower cost areas ($250,000 maximum purchase price) and my priority is buy and hold. Equity/appreciation is less of a concern for me, although it'd be a nice to have. 

    I'm also not interested in condos/townhouses as I owned one previously locally, and it really restricted what I could do. 

    I've been debating where I should invest for a number of years, and think I need to just get into it, as a lot of time has gone by without me doing anything. 

    The reason for the delay is because I initially thought I'd invest in low cost areas of California like Fresno, Bakersfield, Stockton, Sacramento, etc (due to being somewhat within driving distance of the SF Bay Area) but I held back because California's landlord laws made me very concerned.

    I didn't want to end up in drawn out court battles with a renter just squatting at a place I purchased with my cash. 

    For that reason, I decided to start flying to/visiting states like North Carolina, Ohio, Texas, Missouri, etc. 

    The issue I found when visiting these places is that the nicer suburbs are not much cheaper than some of the cheaper areas of California (many single families are in the high $200,000's/low $300,000's so the draw is not as enticing if I can purchase something in my state for a similar price). 

    I know the quality of the home and neighborhood won't be the same in California, but because I'm targeting buy and hold, I just need a property with okay or decent rental yields. Not a fancy ranch home or newer build.

    After visiting these States, I just didn't see the benefit of investing in $200,000 in a B- class neighborhood in Ohio, which is a 5 hour flight away, when I could maybe invest a similar amount  in the California Central Valley in a C class neighborhood that I could drive to when needed.

    Yes, the landlord laws may not be as friendly, but maybe I could just be really stringent when fielding tenants? I've also heard anecdotally on BiggerPockets that the concept of other States being super landlord friendly is sometimes overblown (in other words, sometimes even in the most landlord friendly states, things can get sticky)

    In other words, I'm not sure how much the potentially friendlier landlord laws would convince me to purchase far away in other state, when that also comes with its own challenges (the inability to self manage, property management fees, etc) 

    This debate on whether I should locally invest vs out of state has left me wasting time so now I feel I just have to make a decision and go for it. 

    1. Would it better as a California resident to invest my money in a low price area of California due to driving distance and proximity? Or are the landlord laws simply too draconian in California to warrant the risk? 

    Are decent buy and hold returns still found in some parts of California? If so, which regions should I be looking at?

    2. Or would it simply be better to stick to my original plan and just go out of state? Any states close to California with good rental returns where a single family (3/2 or 2/1) can be purchased for $250,000 or less, all cash? 

    Unfortunately, this is my max budget, and I wouldn't be able to go above this amount at all. 


    Hey James, appreciate you laying out your detailed thought process. But like you implied, sounds like you're stuck in analysis paralysis. If equity/appreciation is not much of a concern for you, is cash-flow your primary goal? Typically with buy and hold, equity/appreciation is the primary concern for the investors that I have worked with, that's why I ask. Investing locally is a good way to get your feet wet and it's a lot more practical than having to take a flight out to see your property. The advantage to investing in a market like Columbus is that it's landlord friendly (like you said), and taxes and price points are typically lower. Columbus specifically is also seeing tremendous growth from large tech companies expanding their business in the market, so from an appreciation standpoint it has garnered more attention from investors. All that to say, I think clearly defining what your short-term/long-term goals with real estate investing are will help you make a decision. 

  • Evan HoppleBusiness Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 285 posts · 420 votes
    2y

    @James Khail

    Sounds like you've boiled down your options to:
    a) in state property with tenant-friendly regulation, self-managing in a low-income neighborhood with possibly higher turnover
    b) out of state property with less landlord regulation, professionally managed, in a nicer area

    It comes down to personal preference and your time value 

    Reafco Real Estate
    View Page
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    2y
    Quote from @James Khail:

    I'm in a bit of a unique situation in that I'm a California resident and can only invest in properties all-cash for religious reasons.

    I'm not able to use leverage/loans, and I know and accept that investing all cash is not common, but thats the way I do it. 

    My goals are purchasing single-family homes in lower cost areas ($250,000 maximum purchase price) and my priority is buy and hold. Equity/appreciation is less of a concern for me, although it'd be a nice to have. 

    I'm also not interested in condos/townhouses as I owned one previously locally, and it really restricted what I could do. 

    I've been debating where I should invest for a number of years, and think I need to just get into it, as a lot of time has gone by without me doing anything. 

    The reason for the delay is because I initially thought I'd invest in low cost areas of California like Fresno, Bakersfield, Stockton, Sacramento, etc (due to being somewhat within driving distance of the SF Bay Area) but I held back because California's landlord laws made me very concerned.

    I didn't want to end up in drawn out court battles with a renter just squatting at a place I purchased with my cash. 

    For that reason, I decided to start flying to/visiting states like North Carolina, Ohio, Texas, Missouri, etc. 

    The issue I found when visiting these places is that the nicer suburbs are not much cheaper than some of the cheaper areas of California (many single families are in the high $200,000's/low $300,000's so the draw is not as enticing if I can purchase something in my state for a similar price). 

    I know the quality of the home and neighborhood won't be the same in California, but because I'm targeting buy and hold, I just need a property with okay or decent rental yields. Not a fancy ranch home or newer build.

    After visiting these States, I just didn't see the benefit of investing in $200,000 in a B- class neighborhood in Ohio, which is a 5 hour flight away, when I could maybe invest a similar amount  in the California Central Valley in a C class neighborhood that I could drive to when needed.

    Yes, the landlord laws may not be as friendly, but maybe I could just be really stringent when fielding tenants? I've also heard anecdotally on BiggerPockets that the concept of other States being super landlord friendly is sometimes overblown (in other words, sometimes even in the most landlord friendly states, things can get sticky)

    In other words, I'm not sure how much the potentially friendlier landlord laws would convince me to purchase far away in other state, when that also comes with its own challenges (the inability to self manage, property management fees, etc) 

    This debate on whether I should locally invest vs out of state has left me wasting time so now I feel I just have to make a decision and go for it. 

    1. Would it better as a California resident to invest my money in a low price area of California due to driving distance and proximity? Or are the landlord laws simply too draconian in California to warrant the risk? 

    Are decent buy and hold returns still found in some parts of California? If so, which regions should I be looking at?

    2. Or would it simply be better to stick to my original plan and just go out of state? Any states close to California with good rental returns where a single family (3/2 or 2/1) can be purchased for $250,000 or less, all cash? 

    Unfortunately, this is my max budget, and I wouldn't be able to go above this amount at all. 


    Hi James! If you're still considering investing out of state, I would personally recommend checking Columbus OH. You can definitely find a turnkey single family home within your budget. Columbus has a strong rental market due to the growing economy, population and job growth. My out-of-state clients (most of them from California) are successfully purchasing rentals here that meet the 1% rule and have steady cash flow. Happy to connect and answer any questions you may have.

  • Lender · Orange County, CA · Member since 2023 · 26 posts · 13 votes
    2y

    What about partnering up with other people / entities? Would that allow you be able to leverages loans?

  • Member since 2024 · 37 posts · 3 votes
    2y

    I’m a new investor myself, based in Bakersfield, and I’ve focused my investments here. In my opinion, Bakersfield remains one of the most affordable cities with a population over 400k, especially compared to other cities in California. No matter where you invest in Bakersfield, property values are likely to appreciate. If you’re unsure, just take a look at Zillow or Redfin to see how much homes here have appreciated over the last five years. Like any other city, it’s all about finding the right deal. Feel free to connect if you’re interested in Bakersfield—I’m always looking to connect with like-minded people.

  • Specialist · Long Beach, CA · Member since 2011 · 888 posts · 401 votes
    2y

    You already covered this, but I would avoid investing here in CA because of the terrible landlord laws. Not to mention how expensive it is to get into. I have an investor who didn't take my recommendation of investing out of state like I do. Ended up buying a home in Ontario and had to evict the tenant after 6 months. It took him 7 months to get the tenant out. It cost him over $30,000 in lost rents and fees.

    If you want that similar appreciation high that all California investors love, you should consider the sunbelt areas. They have a much lower cost of entry and far better landlord laws. That's my two cents.

  • Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    2y

    I have worked with many California investors who bought in the A/B neighborhoods of Chicago. You can cashflow here on 4 units and if on the north side the tenants are so good you can even manage it remotely with a handyman. Our properties are a strong mix of appreciation, rent growth and cashflow positive in year 1.

    Going on 6 years I have never had to even give any late notices, etc. for my northside chicago rentals, it's multiple applicants 700+ scores when list the units online. Compare that to my C class outside Chicago building where I deal with it almost monthly and got so stressed I ended up signing on a manager which has been a huge drag on the returns. 

  • Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    2y

    @James Khail welcome to the forums! It all comes down to what your comfort level is. I serve a couple hundred clients who live in CA and they prefer to invest passively in real estate in areas like Texas, Oklahoma, Little Rock, AR and Memphis, TN. You can get into a great area for under 250k and the laws are landlord friendly. It all comes down to the team you're working with and more importantly the management company who is going to be married with you through the longevity of the investment. If you have a good base it can lead to a long and fruitful partnership. Feel free to reach out if you have any question. Best of luck on the journey! 

  • Real Estate Agent · Memphis, TN · Member since 2008 · 146 posts · 24 votes
    2y

    @James Khail, Welcome to forums. As you can see, there's so many different strategies and different areas and they can all be right for the right situation. You have to find the right strategy that fits your options...listen to everyone and verify what you hear because everyone will have their own opinion...Most of the west is more expensive than the Midwest and Mideast of the country...You might want to visit the areas and interview your potential team in person or trust what you are shown through videos of the areas or 
    ... sometimes you can make a killing on an area that everyone thinks is unsafe and you find a that is very safe and cheaper than it should be, because it is near unsafe area or people think it is unsafe. If you decide on investing out of your area to take advantage of the higher rates of returns and you find the right team to protect your interests. Whatever you do, find the right people...that fit your needs. 

  • Real Estate Agent · Memphis, TN · Member since 2008 · 146 posts · 24 votes
    2y

    I see so many people that lose money by trying to do things themself. You can learn to do some things yourself...but make sure you have someone who has experience, who you can trust, in either your geographic area or the skill set, that you need to develop, to give their opinion. 

    STAY IN YOUR LANE AND STICK TO WHAT YOU KNOW, OTHERWISE TRUST IN OTHERS WHO HAVE YOUR BEST INTERESTS AT HEART...AND IF YOU ARE RELIGIOUS, I DON'T THINK I HAVE TO TELL YOU MAKE YOUR OWN DECISION AND THEN TAKE THAT TO PRAYER.

  • Rental Property Investor · Member since 2018 · 828 posts · 811 votes
    2y

    @James Khail if you’re considering investing in CA, I suggest staying away from Bakersfield. Economic fundamentals is not very promising for that area.

    I invest in multiple cities across the nation, and I agree with the notion that you can be successful in any area. There are trade-offs for each city, so you need to better define your goals. Most importantly, figure out if long distance investing suits your personality and competencies.

    Tbh, if you can't use leverage, I think you're at a disadvantage investing in real estate. Do some math and consider if you'll get better returns unlevered in REI or through equities that pay dividends. You still get the tax-shielding benefit of depreciation, but you lose the significant advantage of gearing appreciation.

  • Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    2y

    I don't know how bad the landlord laws are in california (they're not exactly great here in illinois) but evictions in any are are going to be costly regardless.  One way to avoid that though is to invest in areas that allow str's - even if they're modest small town usa towns.

    You never have to worry about evictions as long as your management doesn't allow them to book stays 30 days or more (which you can put in your management agreement).  And most of the damages a guest will do can be covered by these str booking sites insurance.

    Your budget will prevent you from buying homes in some of these big cities or vacatation areas with tons of str's.  But you'd be surprised at some of these average smaller towns can do STRs very successfully.  Going to those places will help you stay in your budget and cash flow better too - with property management built in.

    The hard part with the smaller towns is that they don't always have the big property management setups so thats where you'd have to do some leg work to find ones that do.

    And you might be able to do bigger str towns or even cities in that price range. I'm thinking of something like Branson, MO. They have houses in that price range. They have STR management.

    To me, if you're going to buy cash and don't want the risk of evictions or tenant damage, then STRs are absolutely the way to go.  No matter how you cut it, you will get a higher return by doing STR than you would by doing regular rent.  And property management is built in. And the risk of an eviction or a tenant trashing the place is virtually zero. (note: a guest might trash the place but that would be covered by the hosting sites' insurance as part of your listing services).

    Maybe california has cheaper towns that are close to you that also allow STRs. Don't be afraid to consider turning a home into an STR even if its not a vacation town.  You'd be surprised how much demand there is in smaller nondescript towns like that.  And again, if you were to airbnb a home in california, I don't think the guests would have the same eviction rights they have if they were to be a regular renter.  I believe you just need to keep the stays under 30 days.

    Just a suggestion that might be worth looking at.  Maybe california could still be an option in some way and you can reduce the risk of evictions/damage by investing in homes in small towns there that allow strs. 


  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    2y

    @James Khail

    Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

    If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

    So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

    Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

    Class A Properties:
    Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
    Vacancy Est: Historically 10%, 5% the more recent norm.
    Tenant Pool: Majority will have FICO scores of 680+ (roughly 5% probability of default), zero evictions in last 7 years.

    Class B Properties:
    Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, decent amount of relative rent & value appreciation.
    Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
    Tenant Pool: Majority will have FICO scores of 620-680 (around 10% probability of default), some blemishes, but should have no evictions in last 5 years

    Class C Properties:
    Cashflow vs Appreciation: Typically, immediate cashflow and at the lower end of relative rent & value appreciation. Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
    Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

    Class D Properties:
    Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation
    Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
    Tenant Pool: majority will have FICO scores under 560 (almost 30% probability of default), little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

    Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

    PM us if you’d like to discuss this logical approach in greater detail!

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    2y
    Quote from @Jake Andronico:

    @James Khail

    Welcome to BP! You're in the right place. 

    I grew up north of San Francisco and now live and invest in Reno, NV. Similar to you, I wanted to find somewhere less expensive, still close to the Bay Area (drivable), but without the high property taxes, more favorable tenant/landlord laws, no state income tax, and consistent job/population growth. 

    It's now not a secret, and actually fairly expensive due to all of these benefits. 

    At the end of the day, you can make a lot of different places work, but nowhere is going to be perfect. 

    If you want to be within driving distance, CA still may make sense. 

    I'd say it's worth talking to an experienced landlord/tenant attorney and understanding the risks and weighing the pros and cons. 

    RE is a long game, and congrats on having $250K in cash to spend!  

    Look at Lake county   not the east side of the lake but the west side.. Lakeport Kelsyville area or Hidden Valley lake Middletown area.. 2 to 2.5 hour drive and in your price range..
    Ukiah might work..  Or NV is a good choice low prop tax's and no income tax..

    also personally I have been looking for a summer cabin in the Sierra valley.. this is north west of Reno and one of the best kept secrets in CA. Portola , Blairsdon, Greagle , Sierra City . STR bring really big nightly rates . And its got great recreation and fishing and spectacular summer weather which is why I want to get a place there so I can be out of the Vegas heat 4 months out of the year.

    I created an investment platform for folks of your same religious beliefs many years ago and am still taking care of those clients today. 

  • Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    Keep in mind the more tenant friendly the state, the higher the rents. There have been studies on this. They also happen to have decent appreciation. I understand the cash situation, so maybe this becomes a stacking/1031 Exchange play. So buy here for $250K, wait until it is worth $400K, then stack up to a different asset class.

    It also seems like you are focused on SFR, have you considered multifamily? For example in some markets, you buy a fixer under $100K, then use the difference to fix up to add value. Then a few years later, sell and scale to bigger scale properties.

  • Karen WanamartaBusiness Member
    Investor · Knoxville TN · Member since 2024 · 55 posts · 17 votes
    2y

    @James Khail check out East Knoxville. You can find a 3/2 single family for 250K and Airbnb laws are less stringent there. No state tax and landlord friendly. 

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