California City, CA - is this town going downhill?

[Logan Allec]

So I recently sent out some marketing pieces to all of the Antelope Valley.  But strangely enough, of the 10 people who called me in response, 9 want to dump their properties in California City.  Hardly a peep from Palmdale or Lancaster, which are much larger cities to which I marketed much more heavily.  What's the story here?  Is California City on the way down?

[Matt Mason]

Originally posted by @Logan Allec:

So I recently sent out some marketing pieces to all of the Antelope Valley.  But strangely enough, of the 10 people who called me in response, 9 want to dump their properties in California City.  Hardly a peep from Palmdale or Lancaster, which are much larger cities to which I marketed much more heavily.  What's the story here?  Is California City on the way down?

More like it never really took.  California City was planned out around 1960 by a sociologist who hoped it would grow to be something close to Los Angeles in population.  By area it is one of the larger cities in the U.S.  By population not so much....

[Logan Allec]

Thanks, @Matt Mason.  So is that to say that California City is a place to avoid?  Or should it just be viewed like any other small town notwithstanding its failed ambitions?  I'm just so doggone curious why my response rate on my postcards was a whopping 10% in California City but pretty much 0% in Lancaster and Palmdale.

[Jo-Ann Lapin]

Hi Logan. Pull have the unemployment stats and vacancies in the area. That always tells you a story.

[Jim Keller]

Originally posted by @Logan Allec:

So I recently sent out some marketing pieces to all of the Antelope Valley.  But strangely enough, of the 10 people who called me in response, 9 want to dump their properties in California City.  Hardly a peep from Palmdale or Lancaster, which are much larger cities to which I marketed much more heavily.  What's the story here?  Is California City on the way down?

Our Company sold a small none performing 18 unit apartment building in Cal City last year for under $23,000 per door. This deal turned out to be a little more than everyone involved was prepared for but in the end the buyer got a great price on the 18 units. Obtaining competent management was an issue, I have no confidence in the service personal in the local area. Its not like me to just make a sweeping statement like this but it was the hardest part of the transaction by far. If this was my first chance at making it big on small SFR's or mid size multi family I would take what I say to heart. I had the feeling as an outsider the locals have seen this many times before and they orchestrated most of the drama they pushed on our buyer. These deals are hard enough to control and having to deal with the "Hatfield's and McCoy's" was a huge distraction.

Good Luck

Jim

[Logan Allec]

Thanks for the advice, @Jim Keller.

[Kristofer Schroeder]

@Logan Allec, Don't be afraid of Cal-City! There is a higher turnover rate and vacancy rate there, But just analyze your deals like you would anywhere else. If you can make it cash-flow with the included low rents and high turnover then go for it! There are some investors who are doing very well in Cal-City. You can get newer units there which gives you a lower repair cost, and yes, the rents are lower but so are the prices so it evens out. One of the benefits of investing in California City is that there is less of a downside than many other areas if the market turns. There is also a military contingency out there which some investors like...

[Logan Allec]

@Kristofer Schroeder, I definitely have some questions for you, just sent you a private message.

[Kaylyn T.]

Hey @Logan Allec I know a woman who bought tons of SFRs in California City and lives off of them. Rents to mostly military and her properties are rarely vacant long. I looked there a bit myself, but don't know the area well enough to feel comfortable. I can tell you that she has done very well there. Good luck! Let us know if you make a move.

[Julio Arana]

Did you end up buying in cal city? Looking to buy there right now and curious about your experience. I own units in Desert hot springs and have some experience with dumpy downs.

[Josh Domingo]

@Logan Allec, I'm curious if you ended up buying in California City as well. If so, how was your experience? If not, why not?

I'm currently looking at a four-plex in the area and the numbers look decent. Just worried about job growth and finding quality property managers that cover that area.

[Logan Allec]

@Julio Arana and @Josh Domingo, I did end up buying in California City.  I bought a 3/2 cash from a distressed seller.  You can read about my most recent experience here.  I am seriously considering selling the property as soon as the tenants are out.  In hindsight, I wish I would've taken that money and used it toward a down payment on a property in a better area--say, a fourplex in the Valley or even some of the parts of South L.A. that are on the up and up.  Live and learn, right?  But like everything, your mileage may vary.  Julio might do better out there since he's already used to the I-live-in-the-middle-of-the-desert crowd.

It's a weird town, guys.  14,000 people out in the middle of nowhere.  Not a whole lot of jobs out there, so you end up with a demographic that isn't exactly stable.  And those who do end up learning marketable skills generally leave, eventually, for Bakersfield, Lancaster, Palmdale, L.A., etc.  The exceptions are the military folks from Edwards, but they're far and few between.  Apart from family ties, California City is not exactly a place where people settle down.  Take away the dirt cheap real estate, this town isn't really desirable to anybody, and I think this is a huge distinction between Cal City and Desert Hot Springs, Julio.  Not saying it'll be a ghost town, but I don't exactly see anything changing in Cal City anytime soon--or ever.

Buy good property.  That's what I'm taking away from this experience.  Not property that cash flows well on paper.  Not property that's super cheap affordable.  Good property.  Property in desirable areas with a stable, well-employed demographic.  Property that will have qualified applicants lining up whenever I have a vacancy.  Property next to good jobs and schools and entertainment.

We're young.  I'm 28.  You guys look around my age if not younger.  We have decades to bet on appreciation in more desirable parts of Southern California.  I don't know about you, but in 30 years I'd rather be sitting on a million-dollar asset that I own free and clear (because someone else paid it off for me) that is generating multiple, multiple times the rent I was collecting when I first acquired it and in which I can fill a vacancy with a qualified tenant within two weeks because the area is so desirable that it can't keep up with housing demand than on some boondocks asset that I only purchased because it was the cheapest thing around and "cash flowed" $200 per month on paper but barely appreciated over the years and whose rent appreciation has marginally kept up with inflation and takes me three months to fill a vacancy with a "qualified" tenant who even then might get behind on rent because his hours were cut at the gas station 30 miles away (true story; my tenant worked at a gas station in Boron--only job he could find).

Personally, I'm keeping my 4-unit in Santa Clarita and investing in development deals and notes until an incredible off-market deal lands in my lap (keep dreaming, Logan) or the SoCal market cools.  But that's just me.  Let me know what moves you guys make.  I like to hear about what other young investors are doing in the LA area.  And good luck--especially if you invest in CalCity.  I kid.  Kind of.

P.S.--and this is especially for Josh since Julio's already been in the game--I am still very much a rookie, so please take what I say with a grain of salt.  Two years ago I was desperate for real estate wisdom.  So I posted on BP, got some answers from all across the cash flow vs. appreciation spectrum, and developed my investing strategy.

[Josh Domingo]

@Logan Allec Thanks for sharing your experience with us, Logan. I appreciate your insight and advice. It's easy for me to undermine the qualitative aspects of a deal (jobs, schools, entertainment) when the cash flow looks amazing on paper. I find myself trying to justify why the market may not be as bad and that the cash flow is worth the investment. But of course, I have to step back and consider the entire gamut.

I found a pretty nice four-plex in California City listing for $230k, however, just down the street is an 8-unit listing at the same price! This to me was a red flag. It just didn't make sense. I'll continue to do my due diligence but it looks like I may just ditch this city and move on to another area outside of Los Angeles. Will keep you posted

Thanks again!

- Josh

[Logan Allec]

Hi @Josh Domingo, are you talking about the ones on Walpole?  I am not familiar with that part of town, but I do know an investor who has more experience with and knows more about California City than I do.  I'll see if I can put you in touch with them.

[Josh Domingo]

@Logan Allec Yep exactly. Walpole ave. That would be great to get connected. Thanks in advance

[Tee Allen]

I Been in California City since 2009 and a quite few things has changed they now have a quit a few stores that they didn't have  my mother and sister are still located out there. So for sure i know the market is growing as i see new faces every-time i am visiting and the go up on the rent every year. Now i am going to make it clear that Cal City is not in the position for fix and flipping as the market is very slow you can have a property on the market for 6 months before it sells. But it is great for holding if your looking for longevity California City is a Retirement city but it has its attractions as well like silver saddle ranch that thousands of tourist go to every year from all parts of CA they just built the Best western hotel and its still standing.  the central park has a lake that me and my family loves to go and feed the birds. lol @Josh Domingo Now the reason why the prices of the properties on Walpole doesn't make since is because Walpole is a  bad area the Mayor is in the process of making allot of tenants move because of the crime and as you know if you cant control your tenants nor property the city has rights to seize it. So instead of them getting their property seized its easier for them to throw their hands up and sell

Hopes this helps 

[Tee Allen]

And allot of people are out here cause of rent prices if you know how to screen your tenants properly You wouldn't have any problems I know every Top realtor out here and they know just about every renter out here as well this city is great for developments just expand your vision i always told my mom if the right investor comes out here and knows what to do they will be the next Bill Gates lol

Good Luck

[Josh Domingo]

@Tee Allen Thank you for your insight, Tee. This helps out a lot and it's great that you actually live in Cal City as well. What areas would you recommend?

[Fred Whitney]

I have been investing in Cal City since 1993. The best single source of stats for the area can be found here  http://socalleadingedge.org/

[Logan Allec]

@Julio Arana and @Josh Domingo just to close the loop here, escrow closed on my sale of my California City property a couple weeks ago.  All in all, it wasn't a bad investment.  Purchased in November 2015 for $75,000; collected $700 monthly rent; rehabbed for $8,500; and sold in August 2017 for $125,000 (net after closing costs $111,000).  I think the saving grace here was that I didn't buy retail but rather bought below market from a distressed seller.

Best of luck with your investments.

[Fred Whitney]

NET = $110,000????

[Kyle Bergren]

@Logan Allec  

@Fred Whitney

@Josh Domingo

This is disappointing to hear about California City going downhill. I've got orders Edwards in 6 months and currently on the hunt for there or Rosamond. Have any properties or prospective sellers there? I am a cash buyer for the right price. 

[Ezichi Oha]

Thank You for Sharing Your experience Logan. I hear is a depressed Town.

[Kelli Bryant]

Hi I just purchased some plots in California City to build homes on. I don’t know if I made a bad decision. I’m a single mom with adult children and wanted us to be close and build homes in the future. Or pass on to grand children. Any information or advise appreciated. 

[Darius Ogloza]

On my first visit to California in 1986, my brother, who had just moved to Ridgecrest to work on the base, drove me through there.  Nothing but empty lots all platted out to look like a city but no people.  What is that? I asked.  California City, he told me.  Surprised to hear 14,000 people actually made their way there.

[Kira Rasmussen]

Quote from @Tee Allen:

I Been in California City since 2009 and a quite few things has changed they now have a quit a few stores that they didn't have  my mother and sister are still located out there. So for sure i know the market is growing as i see new faces every-time i am visiting and the go up on the rent every year. Now i am going to make it clear that Cal City is not in the position for fix and flipping as the market is very slow you can have a property on the market for 6 months before it sells. But it is great for holding if your looking for longevity California City is a Retirement city but it has its attractions as well like silver saddle ranch that thousands of tourist go to every year from all parts of CA they just built the Best western hotel and its still standing.  the central park has a lake that me and my family loves to go and feed the birds. lol @Josh Domingo Now the reason why the prices of the properties on Walpole doesn't make since is because Walpole is a  bad area the Mayor is in the process of making allot of tenants move because of the crime and as you know if you cant control your tenants nor property the city has rights to seize it. So instead of them getting their property seized its easier for them to throw their hands up and sell

Hopes this helps 

HI TEE!
I want to start a little glamping business out in the desert in CAL City. Should I worry about vandalism when I am not around you think? The property crime is quite high... 
Thanks :))