California vs Virginia Market?

Question

Currently live and operate in Norfolk, Virginia, and while on vacation visiting my wife's parents in San Diego, California I can't stop thinking I'd much rather pack up all my stuff and move out here. It's nice all year around, the market "seems" stable, but really how stable is it out here? I feel like all the shows over exaggerate the profits and potential for success. Id rather have an opinion from someone who's actually living it rather than a tv show tuned to get reviews. So, does anyone have any insight on the California investing side? Thank you all in advance!

Jay Hinrichs · Answer

Account Closed

Hey thanks for the nice words.... Minh my house is in Lake Oswego as is the spec I showed you  :)  Steve we just finished it this week turned out really nice.

In my mind CA is a wonderful place to invest over time... But I was born and raised there so it was just natural to invest were you live.. and of course any of us who bought Bay Area RE in the late 70S and 80's there is no denying it was one of the top 5 places in the US to invest vis a vi appreciation.  And there is no question had I just cobbled together 4 or 5 rentals in Cupertino or Palo alto when I could buy homes there for 100k each they would now be worth or are worth 1 mil plus each... I still do own my 4 acres in Rohnert park that is right across the street from the new Indian casino and was brought into the city as mixed use residential.. If I had followed the cash flow advice that everyone talks about I would never have bought this property in 1992 for 27k cash and sat on it and bleed out the tax's at 270.00 a year.. I would never be able to put it on the market for 3.5 million like I just did.. Of course that's pie in the sky I would settle for 2 mil... But you get the point there is all sorts of ways to skin the RE cat.

If one is going to go out of state Like Ali Boone is always talking about.. that's fine most anyone who has read my post knows were I stand on this.. One just needs to be careful to the extreme and remember someone like Ali makes a living selling you out of state TK. So take those comments with a grain of salt, as well of course she is going to deliver the exact same message she delivers on virtually everyone of her posts. That is just being a good sales person and trying to make a living.

Account Closed · Answer

Bob, I went to @Jay Hinrichs 's gorgeous home in Beaverton, OR today. Jay told me the same thing. He has 40 years of experience. What a coincident. LOL!!!

After seeing Jay's home, I want to sell my home in San Jose, move to Portland, and pay cash for a house there. No more mortgage.

Cody, as Pete mentioned above, everything comes down to supply and demand. In general, the more desirable the place, the more expensive it is.

Jon, as Bob mentioned above, let the data be your guidance. Figures don't lie, but liars figure.  Why don't you compare 40 years of data of the San Diego housing market to any other cashflow market out there and see which one has been given a better ROI for the investors?  If history is any indication, the trend will likely remain the same for the foreseeable future.

A lot of us are struggling between cashflow and appreciation. Some investors were fortunate enough to achieve both during this Great Recession. What Bob mentioned above has been true to our housing market. I have seen properties that have doubled in value since 2011 and 2012. I have witnessed rents went from $1,300-1,700/month to $1,800-$2,400/month in 2 short years. It's one of those things that you have to see it to believe it.

Best of luck to all of us.

Jay Hinrichs · Answer

Account Closed

I missed Bob on my last trip to Honolulu if his invitation he extended to visit with him and have a beer is still open I plan on doing that when I am in Honolulu in Oct.  And from where Bob described his Pad  its in the top  0.001% of price points in America no doubt.

OK I got to go fund some deals and make some money have a great day all

Account Closed · Answer

@Ali Boone

It is you that do not understand CA investing.  I most definitely look for cash flow over my holding period.  That is why I repeatedly post about rent growth AND appreciation and why you should KNOW the rate for both in ANY area where you want to invest just like you'd want to know the vacancy rate.  Over a 5-10 year holding period I generate much more cash flow even if I am negative the first few years than I would with a property out of CA that has no or limited rent growth.

I don't understand why you keep ignoring those numbers.  Now if you HAVE to have money coming in monthly from day one then IMMEDIATE cash flow is important.  But are you really getting "cash flow profit"  or is the turnkey merely dribbling YOUR investment money back to you?  Kinda like a Ponzi scheme?

People need to run all numbers because cash flow does NOT equal profitability.  Some of the most profitable real estate investments ever will start out with no cash flow or even be negative.  To dismiss a property because it does not cash flow on day one is foolish.  Of course just because a property is cash flow negative does not mean it is a good investment.  You need to run all the numbers.  Speculating on todays cash flow is risky.

Account Closed · Answer

I see it differently though. Everyone is different therefore different styles of response.  If you will, Bob's style is like Dr. Laura (tough love) while Jay's style is like Dr. Phil (compassionate).

Unlike others, I don't use cap rate to determine my purchase because cap rate can easily be manipulated.  I use GRM and CoC returns. I'm willing to accept a lower CoC returns for better locations. Of course, you have to look at your local GRMs and cap rate to know if you've gotten a good deal or not. That's a sound advice IMO.

Btw, I was on that bridge yesterday, Multnomah Falls, correct?

Have a great day. I'm heading to the Rose Test Garden now, then Cannon Beach.

Account Closed · Answer

This doesn't help?

9-11% appreciation rate and 6-7% rent growth for 40 years!  Compare that over a ten year holding period to an area that is never going to produce more than $200 a month cash flow or appreciate more than inflation.  Actually check how long that cash flow has been around because it may disappear after the first years lease.

KNOWING THE RENT GROWTH AND THE APPRECIATION RATE OF ANY MARKET YOU ARE THINKING ABOUT INVESTING IN WILL MAKE YOU A BETTER INVESTOR.

Better investor?  Learn why a rent ratio is meaningless.  Understand that a cap rate is not used for residential properties and that it is not used for commercial properties the way people try to use it here.

Those four things will make you a better investor than 95% of the people on this forum.

You want to be in the top 99%?  NEVER listen to anyone that can't or won't explain why they think a number means something in an analysis of profitability.

Happy to answer any questions.

Account Closed · Answer

Yes, forty years of experience.

Jon Huber · Answer

@Ali Boone  I feel your pain with the LA market. I haven't found anything to sink my teeth into other than my primary... on the west side as well.

@Bob Bowling  You say speculating on today's cash flow is risky... but isn't it more risky to speculate on an area's appreciation (or lack of)? Or is there something I missed?

Pete T. · Answer

I think a lot of people would love to live in San Diego and that is part of the reason why it is so costly to live there.  However, I would think appreciation would be strong just based on desirability.  Who knows how long things can go up before people choose elsewhere.

Ali Boone · Answer

Cody, most real estate investors I know who live in CA are buying outside of CA because you can't get cash flow here. I live in LA and it's next to impossible. If you want to buy like Bob does and shoot for appreciation, that's another thing. But just make sure you understand the difference. VA is actually kind of hard for cash flow as well but much more likely than CA. But it depends on if you even want cash flow or if you want to bank on appreciation or you are talking more about flipping or those kinds of methods. Then that's another story. But for the most part, CA, especially San Diego, is very high entry points and a difficult market. But stable and all that, as you mention, absolutely.

California vs Virginia Market?

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