San Diego Realtor

[Gloria R.]

Interested in purchasing buy and hold properties in other states. Mainly because Southern California has low CAP (3-5) and is not a landlord friendly state. I'm not into flipping, though a lot of investors I work with are...

[Account Closed]

Hi Gloria,

Welcome to Biggerpockets. Bob is a straight shooter. Too straight in fact. Once you get to know him, I'm sure you'll love him.  :>)

I've been through an eviction once, and that was my first tennant. She contested it, and it took 7 weeks to get her out. My investment partner inherited 2 bad tenants. It took 5 weeks to evict them as they didn't contest. My biz partner and her client evicted two tenants. Both took 7 weeks to get the tenants out as they contested it. The court system in Santa Clara County (SCC) works. So it takes about the same time to evict here in SCC as some city in AZ as Marty stated above. Don't give up on CA too early. 

Why the heck do I want to go to AZ to invest in some stretched 6-7 cap rate when I can accomplish the same thing in my San Jose market, which is just as tough as your market I believe.  

3-5 caps are great compared to 10 cap IMO. As they say in investing, higher risk, higher return. Why do you think those Midwest markets offer 10+ cap while San Diego and San Jose can only command a 4 cap? Lower risk, lower return? 

Not necessarily. It's kind of ironically that it's reversed in real estate. It seems like higher cap rate (higher risk) comes with a lower return while lower cap rate (lower risk) comes with a higher return. How is that even possible? It all comes down to perception. Once you understand how your SD market operates as I do in my SJ market, you will likely not going to invest elsewhere. 

You're going through a learning curve now. I just hope it's not going to be an expensive lesson. Here's the trivial question. Why does a lower cap rate tend to give a higher IRR?

Best of luck.