Investor · Belvedere Tiburon, CA · Member since 2017 · 41 posts · 16 votes
I'm a new member. I have been investing in the San Francisco Bay area for a few years, I would love to continue building my portfolio there, but good deals are hard to come by now. The numbers are too high and the returns not so great. I'm interested in diversifying into multi-family residential in more affordable markets that offer good returns. Also, as foreign investor, financing is more restricted, but depending on cash flow alone to buy cash is too slow a strategy. Suggestions?
Double dagger straight to the point @Arlen Chou!! We have divested a lot of our holdings in Texas bc of the property tax rate and vacancy kills. We used to live in Texas and got them via foreclosure and got some favorable assessed value. We're switching now to partnering instead of owning and managing directly ourselves. In short, we work with our CPA and lawyer to hold everything in LLC's to lower personal tax liability, do the best we can within the boundary of the rules to have income qualify as passive, try to offset with book losses if we can, and 1031 when possible.
I'm more than happy to share offline... I dunno how much I can share here without people taking it as actual legal advice and get me or my guys in trouble.
@Ricardo Fainsilber - Welcome to Bigger Pockets! You are going to love this community. I have been working with quite a few individuals from California who have said the same thing. We are all on this journey together and I look forward to seeing you on these forums as we all continue to help each other grow. Welcome again, Ricardo!
Welcome! I've been investing in SF for over a decade and good deals are definitely harder to come by but they do exist. What's helped me out is using tools that make it easier to find of good deals. Think of it like a gold rush where the person with the best mining tools will find the most gold.
@Ricardo Fainsilber I do primarily buy-and-hold and look to invest for cashflow. I use this tool to do initial calculations and then use Bigger Pockets to get a more detailed report if the initial results look good.
BP is loaded with all the information you will need to succeed in whatever niche of real estate investing you wish to pursue and the community is filled with knowledgeable investors and professionals to learn from and connect with.
Listen to the podcast for extra inspiration and investing advice and post in the forum for any questions you have.
Like you, I am living in California (Los Angeles), but I focus on investing in Florida for the 3x cash flow and reasonable cost of real estate with very solid appreciation.
If you have any questions about Fl investing, please connect with me and good luck on your journey!
@Ricardo Fainsilber I like Tampa and Orlando personally but I know Jacksonville has some great returns and growth as well. South Florida just gets too pricey for my taste.
Welcome @Ricardo Fainsilber! Good deals are definitely harder to come by but like @Jay Baker said they're still out there. Time to get more creative. I'm personally getting ready to try out a few new tactics or even direct mailing.
What kind of deals are you looking for in the bay area? For more cash flow I've been investing with some partners out of state instead.
HI @Jason Hsiao I would like to focus on multi-family buildings. As you mentioned, the Bay Area still has good deals, but they also come at very high numbers. When you say out of state, where are you investing?
I invest in Texas and Georgia right now. My partner in Georgia has been expanding out to North Carolina and Tennessee but I haven't participated in some of his new deals yet.
@Jason Hsiao I have wondered about the tax issues of living in CA and owning in Texas. Don't you get hammered with both CA State tax and Texas property tax? How much of a cash flow hit is that and do you do anything to try and offset those taxes?
Double dagger straight to the point @Arlen Chou!! We have divested a lot of our holdings in Texas bc of the property tax rate and vacancy kills. We used to live in Texas and got them via foreclosure and got some favorable assessed value. We're switching now to partnering instead of owning and managing directly ourselves. In short, we work with our CPA and lawyer to hold everything in LLC's to lower personal tax liability, do the best we can within the boundary of the rules to have income qualify as passive, try to offset with book losses if we can, and 1031 when possible.
I'm more than happy to share offline... I dunno how much I can share here without people taking it as actual legal advice and get me or my guys in trouble.
@Jason Hsiao, double dagger is what it looks like to me too. I have been trying to figure this piece out for a long time now. It just looks like Texas does not make sense for CA investors. I was just hoping you had found a solution that I did not see.
We do factor in the high property tax in Texas. If it doesn't make sense before in the analysis we don't buy it. No kind of entity structure, paper pushing, estate planning whatever you want to call it will help make it make sense later.
Deals are getting harder and harder to find, not just in California honestly.
The San Francisco Bay Area reached its peak acceleration in the velocity of sales price increases last year. Prices are still going up, but at a lower rate. There's still time to get out, but as a local real estate broker, I would take the money to a different market. There is still good money to be made in AZ, FL, GA, TX and other states, however, picking the right submarkets is key.
A very good source of local analysis, rereport.com.
@Jason Hsiao, double dagger is what it looks like to me too. I have been trying to figure this piece out for a long time now. It just looks like Texas does not make sense for CA investors. I was just hoping you had found a solution that I did not see.
I think what attracts investors to TX who live in CA is the lower cost of entry. If you can leverage many more units in TX, see price appreciation (cap rate decrease), then the reduction in income from taxes is more than offset. We don't have as many $100k/unit buys here now, but certainly have more product at lower price points!