San Diego vs Oklahoma City?

Question

Here's the deal. I am a younger entrepreneur (32) I own a construction business, car wash and a mini storage facility. I am moving to the San Diego area this summer when my GF finishes her RN. We have family out there and want to experience something new.

Anyways, my issue is this. Through my connections here in OKC, I can buy brand new SFH's that are very nice. I can get them under $150k and they will cash flow around $700 a month. That includes vacany/repairs, property taxes, management company and insurance. I will be back in OKC at least 4 or 5 times a year for my other businesses.

However, I can buy homes in certain parts of So Cal that should generate similar returns. I like the idea of diversifying my portfolio in another state and being close to these investments. I also know the California real estate market can be a little volatile, which could work in my favor if a large spike goes up. However, a crash concerns me. It would be all about getting the right buy. Not sure what to do? Thanks.

Aaron Mazzrillo · Answer

First off, why would you buy in San Diego when there are cities all around San Diego that are priced much more advantageously, and those cities are much closer than a plane ride away. Also, your return is higher in OKC? I highly doubt that. I regularly buy houses here in SoCal that cash flow quite well. One just can't shop retail. I recently closed a 1,100 sq/ft 3/2 SFR that I paid $99K for, I got 100% financing at 7% from a local, but very well known hard money lender, and it will rent for $1,195. The game changer is that it appraised for $180K and we all know that there are actually 3 certainties in life; death, taxes and that eventually, ALL real estate must change hands. So, you buy your OKC house and make the same return I get and ten years if you have to sell, hopefully you get little more than what you paid, or you invest in California, get about the same return you'd get in OKC, but when you sell, you'll have the opportunity to take one huge a$$ check home from the closing table. I like cash flow, but I'm in real estate for the long game.

Matt R. · Answer

@Ryan Ford I have only heard good things about both cities. If we take a step back and look at appreciation historically, IE over the last 20 years here is what you see. OKC Rank: 124 of 378 (67th Percentile) well above average.SD Rank: 11 of 378 (97th Percentile) the top of the mountain. When the first Spanish explorers first saw San Diego after sailing many thousands of nautical miles....they said, whoa wait a second...we are setting up a mission here guys. San Diego is very geographically unique vs the entire planet. Like mentioned above keep your eyes peeled for something you can improve or see creating the extra value possible in SD. Otherwise OKC is your bread and butter for the immediate cash flow. I don't see this as an either or with your background. Good luck!

Justin R. · Answer

Wouldn't want to let Rhett Tullis sit on the edge of his seat for too long, so I'll chime in behalf of the CA folks. ;) Ryan Ford Sounds like a pretty ideal situation to me since you'll have physical presence and can build connections in both places. There's plenty of reasons some folks (myself included) invest here locally in San Diego. The variables in the math are a little different and the geography and demographics makes the rental market and landlord experience different. No better, no worse. Yes, the rental market here is incredibly tight - I've also been experiencing the 50 responses to an ad / I'll offer $X over asking for just about every turn the past 2 years. The reality is that there's a large number of tenants making very good money ($60k+) who are just priced out of the home buying market. Solid jobs, good income, stable, lots of toys, and raising families... It's a different tenant dynamic than many other places. Of course, it hasn't always been this ideal from a supply/demand perspective for landlords, and won't stay this way indefinitely. Why not use your OK houses as your bread and butter and invest opportunistically here in SD if you find something interesting? At this point in the cycle, it's rare to see anything that I get excited about locally.

Jeff B. · Answer

OK, City & Tulsa = = Tornado Capital of the worldCalif, Riverside up thru SanFran = = Earthquakes second only to Japan.How much risk can you tolerate?

Rhett Tullis · Answer

just wait for some of the west coast folks to chime in, they will say something soon I am sure. lol

Callum K. · Answer

I've lived in Tulsa for 33 years and have never been in a tornado. Insurance is expensive here, but I have yet to meet someone who lost a rental property due to tornado's. I guess I should be happy that there is a reluctance to invest in OK. It keeps all the out of town investors away :)

Jo-Ann Lapin · Answer

You received good advice from all. It is always personal. for most investors. The golden rule to have a good cushion to absorb some sort of expense and loss.

Ryan Ford · Answer

Thanks Mark.. I have already learned so much on here!!

Mark Nolan · Answer

@Ryan FordWelcome to Bigger Pockets.

Ryan Ford · Answer

When I say San Diego I include other close areas like Oceanside. That's where you can get stuff around or under $400k. I get that in that market isn't just cash flow and there could be a big pay day if you cash out and property values have gone up.My overall goal is to get long residual income. I wouldn't balk and selling a place with a bunch of equity, but my goal right now is a long term stream of cash while my property value rises.Honestly, I am thinking of doing both to diversify. I will buy a few in OKC and a few in So Cal. I will be out there this summer and have more time to study the market.