Your thoughts on Hemet ca?

[Todd Fithian]

Hey BP,

Just curious if anyone has done any investing in hemet or San Jacinto lately, and has it been worth your while?  I know both cities are a bit less desirable to some, but Im leaning towards looking in either soon.  They both seem like they could possibly have semi potential for cash flow and appreciation in this market?  Please feel to correct me if Im wrong... Thanks for your input!

[Jo-Ann Lapin]

not sure about the appreciation part . Make sure it is a rentable desired property. 

[Aaron Mazzrillo]

Lots of crappy tenants and not much appreciation any more. Better than a kick in the face and way better than a piece of overpriced junk in another state.

[Todd Fithian]

thanks guys! Yea I agree about the appreciation, seems like it's gotten a little stale.  I have one decent property in Hemet that has decent tenants, but they seem few and far between.  @Aaron Mazzrillo have you had to go through the new landlord "sign up" in Hemet yet? If so, does it seem worth it to have all the regulations? Thanks again for your input

[Aaron Mazzrillo]

Originally posted by @Todd Fithian:

thanks guys! Yea I agree about the appreciation, seems like it's gotten a little stale.  I have one decent property in Hemet that has decent tenants, but they seem few and far between.  @Aaron Mazzrillo have you had to go through the new landlord "sign up" in Hemet yet? If so, does it seem worth it to have all the regulations? Thanks again for your input

 I don't believe the code enforcement rules are optional. I started getting some pretty hefty fines after tell that (insert extremely bad word here) lady where to go and what to do to herself when she got there. I ended up just paying for their stupid business license and registering one house. (I have many more that they haven't caught onto yet - thank you land trusts!!) I never did attend their landlord training and have no intention of doing so.

As for appreciation, I track a few houses around the IE. I like to comp them out every so often to see where prices are and what we are looking at as far as past appreciation. Here is a quick look at one of them;

Year - Sales Price = Year over Year appreciation

2008 - 2011 - $50K. Best time to buy in California. Prices were at the bottom.

2012 – $60K = 16%

2013 – $100K = 60%

2014 – $115K = 15%

2015 – $136K = 15%

2016 – $140K = 3.5%

Things are still doing well, but the market definitely has cooled a lot. 2016 still has a few more months so that 3.5% might hit 5%, but I doubt much higher. I am however still taking down rentals. I have one in escrow now. But my strategy is much different in a market like this; I am not just buying a rental to own a rental. If I get a property under contract that is in an excellent neighborhood (A to A+) and far superior to the majority of my pile of crap (pretty much everything I own in San Bernardino and Hemet), that is something I will consider keeping. Would I keep a house in Hemet now? Maybe, but that would be a capture the equity game. In other words, it would have to have a very healthy equity cushion, like 40% for me to consider keeping it and it would have to be in a better neighborhood/area. I absolutely would not consider units out there... Unless... I will also keep almost any property I get seller financing on or I can buy subject to, so I will still buy junk (units) - I looked at some last night. If it isn't in an A to A+ neighborhood and I have to put my cash down and sign a note with a company for a loan, the house is getting wholesaled. I see no reason to keep a rental house in a flat market where I have to sign for a commercial loan. The risk to reward ratio doesn't look that appealing to me. 

In a market like this, it is so much easier to retail and flip for a nice payday. A pile of cash that will take you years... a decade or more to make collecting rent from the same house.

[Todd Fithian]

@Aaron Mazzrillo Man thank you for such a detailed answer!  Thats some great insight about the appreciation.  I figured that was the case with the Hemet and San Jacinto area, especially because its a bit hard to find appreciation in neighborhoods that dont really attract the best tenants.  But what you said about the risk to reward ration makes sense with the nicer neighborhoods and not having to sign a loan with a company with your cash.  I guess Im in a scenario right now where I am looking to use my own cash, and sign onto a mortgage, and this best explains why doing so right now 'might' be a bad idea.  Once again I really do appreciate your input, ive read a ton of your posts and they are always real helpful. 

As for the the code enforcement rules, I have a feeling that I would be finding myself in the same shoes as you with telling someone to stuff it where the sun dont shine, so im glad to hear that it wouldnt be in my best interest! I need to learn more about these land trusts! (Lol).  Im going to be looking into signing up real soon, those fines dont sound fun.  All in all, reading everything you wrote, im thinking i might just have to dig a little deeper for cheaper properties in nicer neighborhoods (as well as the rest of the RE world).  Thanks again for your input!

[Shannon Wright]

HI @Todd Fithian, I am in Murrieta! Those are very hard markets and profitable investor deals seem to be rarer that those in Corona / SB / Riverside, etc.

[Leonard L.]

Sounds like you are already talked out to Hemet, but I just want to chime in that I had the worst landlord experience of my career there.  Bought a distressed 4plex there for a steal of a price, and didn't even consider not doing it.  After complete rehab, I had 6 months of 100% vacancy, multiple break-ins, used needles and actual feces left on carpets, and entire windows and doors taken off frames and stolen.  Gang members asking prospective tenants what side they are from, etc.  Almost comically bad experience.  I gave up and sold.  Luckily, great price plus great timing meant I made profit, but since then I have steered clear of Hemet  except for flix/flip.  And that is coming from a guy who buys a lot of deeply distressed houses in questionable neighborhoods.  That Hemet 'hood took the cake.

[Alex Aguirre]

Hi @Todd Fithian,

My wife has helped investors make money in less desirable cities of Hemet, Perris, Lake Elsinore. Their strategy is to find the cheapest house in the best neighborhood that has some cashflow. They have a longer buy and hold game.

Hemet is a mixed bag.You have old single story homes, duplexes and lots of farm land - and it smells. The people that usually move to this area cannot afford to live somewhere else, or some for the convenience to get to work at Soboba Casino.

The equity gains opportunity is most of these places has come and gone. @Aaron Mazzrillo is correct in that the equity gains have flattened out. This is due to affordability again. If people are going to pay that kind of money, they are moving back down to Menifee, S Winchester, N Murrieta.  

Now that being said. Affordability is escaping most people who live in Temecula and Murrieta. Prices are approaching the levels of pre market crash. So we see the disparity between rents and mortgage payments grow. As a result have seen rents increase by about 20% in the last couple of years. There may still be opportunity for cashflow if you can purchase a property at the right price.

Hope this helps. 

[Christine Kankowski]

The prices are cheaper, but you have to look at more than that when you are investing in real estate.

Why are the prices cheaper?  10% unemployment, compared to 5% ; crime is way higher than the average,  Almost 50% of households make under $30K.; school ratings are between a 3-5 out of 10. 

From experience as a property manager, many of the homes require a full rehab upon move-out. Just a tough place.

If you want long term cash flow, consider investing a little more to get to the menifee area, which is close, but has better stats in all areas, or the midwest . 

[Aaron Mazzrillo]

Originally posted by @Alex Aguirre:

Hi @Todd Fithian,

Hemet is a mixed bag.You have old single story homes, duplexes and lots of farm land - and it smells. The people that usually move to this area cannot afford to live somewhere else, or some for the convenience to get to work at Soboba Casino.

I've never noticed any smells other than musky old people and white trash.

[Alex Aguirre]

@Aaron Mazzrillo Lol... I meant the other smells from the adjacent farms. Grade A cow mud paddies!!

[Todd Fithian]

Thanks everyone for your advice! I love this website more everyday. Truthfully I think possibly I just got lucky on the duplex I currently have in Hemet, mixed with a little bit of insight on parts of Hemet I was looking at at the time that turned me off dramatically. Luckily, this one is a keeper for a while, but blinded me a bit on wanting to look more in Hemet, forgetting about how bad most of the city is.  

@Christine Kankowski The numbers definitely make sense.  I agree about menifee, have you had much luck investing there yourself?  I guess the scare of menifee is that the prices (Like everywhere else) are getting pretty ridiculous.  Thanks for your input!

@Alex Aguirre It definitely helps! As of right now I am in a bit of a "Cashflow" grab, but like everyone has said, and the market shows, that cashflow is just about nill now a days unless you find the right place at the right price.  I guess thats why Hemet or San J seemed like a semi decent idea.  But youre definitely right about moving outwards into the nicer areas.  quiet honestly, If I never had to visit Hemet again, it wouldnt hurt my feelings! (lol), just curious about the investor opportunity.  Thanks man!

@Leonard L. I dont get it, that sounded like a perfect property?? ha jk, sorry to hear it.  Sound like a nightmare.  Thank you for the insight.  Im curious, it seems like Hemet would be tough for fix and flips, like such low returns.  Are you still flipping in the city?  

Thanks all

[Christy Greene]

In regards to the cow smells and the poultry farm, I used to live close to that in a brand new community.  When the winds would shift, the smells got pretty bad.  However, the cow farm is no longer there.  I don't live in that community anymore.  The builder Lennar is building homes right near there.  We went go look at the homes last year and I did  not notice any odors then.  

[Jairo Garcia]

Aaron Mazzrillo Leonard L. Hank you for your detailed responses! I was looking to get into MFU's in Hemet because of the cashflow potential but after reading some of your posts I'm going to look elsewhere. What are your thoughts on Corona? Although prices are high I feel that during a market correction people from Orange County migrate to Corona because of the proximity which should help in propping up rental rates. This is just a theory from a newbie though.

[Aaron Mazzrillo]

Corona is one of the highest priced areas in Riverside. The idiots that live there (horrible traffic and 50% of the day has no sun because of the mountain) think they live in East Orange County. I've actually had someone tell me that before. As much marketing as I do, I rarely find good deals in Corona. They are there, but I haven't had much success in getting anything there that made more sense than something else where in the county.

As for buying MFU there, if you can find a deal, you'll get high rents and should expect low vacancy for the exact reason you stated; it is easy to get to higher paying jobs in the OC from Corona. Especially now with the new super highway they just opened.