Palmdale, Lancaster, CA, Investment opportunities?

[Sara Soleimani]

Hi all, what would be the reasons I buy rental properties in Palmdale or Lancaster? Any future prediction you guys might be aware of? It seems it cash flows nicely. 

Any advice is appreciated! Thank you:)

[David Faulkner]

I own some property in the AV ... it does cash flow better than other parts of LA, but does not appreciate as fast, or historically at all really over the long haul after inflation. The problem is the demand is much lower than LA proper because it is so far out, and even if demand does rise, there are miles of empty desert lots so the big home builders just come in and increase the supply which caps the appreciation. There still is no cure for the supply problem until everything gets built out, which may happen some day but not too soon. On the demand front, it is tied to Aerospace and defense jobs, which a poppin' in East Palmdale at the moment ... Northrop Grumman got a multi-billion dollar contract for the next gen stealth bombers and they will be built in East Palmdale.

All in all, AV has been good to me, but I prefer to wait until after the market crashes and pick up new inventory at fire sale prices there. As mentioned by others, prices up there are very volatile and that market gets hit very hard each and every downturn ... to give you an example of numbers, my Glendale CA rental went down 25% in the great recession from the peak ... the East Lancaster property I bought for 75% off of its peak price. So, if you buy closer to the bottom your short term appreciation can be great, but don't expect it to be great right now unless you create it with forced appreciation like a flipper would or in the long haul. If you are in it just for the cash flow, though, and you are ok with the price volatility and not great long term appreciation, it could still work.

Another "path of progress" play may be around downtown Lancaster ... they did a nice job redeveloping downtown a few years ago, but surrounding areas are still pretty rough. It is possible they may turn around due to a nice downtown and proximity to the metro station that can take people straight to downtown LA. You'd have to be willing to put up with some rough tenants and properties, though. And it is possible that it won't ever turn around ...

Finally, the AV is far away from you (OP) ... unless you are looking to move out there to house hack, the distance will dramatically effect your ability to manage and control your investments. You will need to hire and be reliant on contractors and PMs, and that will be expensive and eat into your cash flow, especially in the beginning when you go through a few duds to find the good ones (and you will, don't kid yourself). I would seriously consider sticking to Long Beach if I were you ... you will have much better control, much better appreciation, and with the cost savings from being more hands on the cash flow may not be all that much lower for you, though the buy in price may be higher.