Determining markets outside San Diego

[Danielle Friberg]

Hi. We are fairly new investors (house hacking in San Diego and single family in Palm Desert) and are interested in investing outside San Diego and California. Does anyone else invest in multifamily real estate outside California? If so, how did you choose your market? Any tips on where to start? -Danielle

[David Faulkner]

Originally posted by @Danielle Friberg:

Originally posted by @David Faulkner:

Have your San Diego and Palm Desert investments not worked out well for you? 

Hi, we bought our Palm Desert place in 2010. It was our second house purchase, so it was another good learning experience. It was our first rental as well. We have had some great renters, and the the market appreciation has really benefited us. We did learn some hard lessons on doing due diligence on doing background and credit checks, but we did get to experience the eviction process and learn from that as well. 

Our first home in San Diego was an older Condo downtown. We bought at the bottom of the market, fixed it, and then sold it a few years later. This allowed us to get into a larger home where we tapped into the profitable vacation rental market in San Diego. It has been surprisingly good for us both financially and in learning more about creating passive income through real estate. 

David, do you invest in San Diego? If so, what types and where? We are looking to go out of state since the market is just so hot right now in SD. 

-Danielle

I have my primary residence in Huntington Beach and my rental properties in LA county, and have done quite well with them ... I do not have any investments in San Diego, but I really like the market there as well. I've also invested out of State (Phoenix) for 5 years, after I had some success in CA, and it was an unmitigated disaster because of the lack of honest, reliable management. So much so that I fired 7 property managers in 5 years trying to find a good one, and my out of state properties being "managed" by PMs were far more work that my self managed properties in CA ... the only thing my PMs managed to do was to rip me off and create tenant issues that I would then have to drive to Phoenix to sort out myself.

That is why I ask if your CA investments are working ... because if it ain't broke, then my advice is don't try to fix it ...I hear you about the market being hot ... I would flip in this market if I found a great deal, or do hard money lending, or just build up reserves for the next downturn, but I have not been as active on the buy and hold side, and I wouldn't advise going out of state because you give up your control and have to be 100% reliant on others (who may or may not be competent and/or have your best financial interests at heart) in a market you are less familiar with and have limited access to. A lot of people on here selling a lot of properties and services out of state, so of course the advice skews in that direction ... I have nothing to sell you either way, just a guy with 15 years of experience investing both in and out of state sharing what I've seen and experienced in both.