Buy-and-hold strategies in high priced areas

[Phil Sharp]

I have lived in the San Francisco bay area for the last 15 or so years, and am anxious to start doing some buy-and-hold investing.  However, it seems that price-to-rent ratios are solidly over 30 in my area, and generally high anywhere in coastal California it seems.  For example, the house I own in Sunnyvale currently has a price-to-rent ratio of 34.  My understanding is that, as a rule of thumb, buy-and-hold investing doesn't make sense unless you can get a price-to-rent around 8 or below (which roughly correlates to the 1% rule).  Assuming that's roughly true, is there any way for me to do buy-and-hold investing in my area, or do I simply need to find other places in the country to invest?  If so, what is the best/simplest way to find places where price-to-rent ratios are in line with buy-and-hold investing?

[Account Closed]

Hi Phil,

Be very careful if you want to go out-of-state (OOS). There's a high chance you're going to be buying yourself a lot of headache and grief in the hope for faux cash flow. As Master Oogway wisely said "One often meets his destiny on the road he takes to avoid it." I have two friends, one went through this painful experience and another one is swearing up and down right now. One bought 2 duplexes through someone on this thread. He paid $155k and $185k for the duplexes with $2,200 and $2,400/month in rent, respectively. What could go wrong right? Well, he sold both of them this year and took a $200k loss after several years of owning them. If you're interested in reading the full story, check out fifighter dot com. I hope you can connect the dots...

Real estate is about control and leverage. By going OOS, you're giving up control. Saj is killing it in East Oakland while my partner and I are doing it in San Jose. 1% rule is not possible at purchase for our market, but we get there in 2-3 years with our strategy. No one is going to hand you their cash cow money minting machine. You have to work and earn it. Once you get there, do cash-out refi, get your capital back, buy more, rinse and repeat. We're up to 76 doors on multifamily, and that doesn't include the single units we own separately. 

Unlike others, we don't have anything to sell so there's no hidden agenda. We just want our fellow Bay Areans not having to suffer the pain and grief others who got suckered into. Everything in life has a price. Something is expensive for a reason so is something cheap. It's a rewarding journey if you can break the code. The barrier of entry is high so are the rewards. 

Have fun figuring it all out.