Good idea to still invest in Stockton, CA?

Question

Hi everyone, I'm a newbie to BP and real estate investing, and want to thank everyone in advance for all of the great information and advice so far. My wife and I are looking for our first rental property (perhaps a duplex?), and was thinking of Stockton because investment properties in the SF Bay area where we live are way out of our price range.

Sorry if this question has been asked before, but I am hoping to revive this topic in case anyone has some updated perspective and wisdom for today's market conditions ~Q2 2014. I'm originally born and raised in Stockton, so I feel a little more comfortable with the town than most out of town investors that jumped on the opportunity when houses were dirt cheap. Unfortunately, we weren't in a position to execute on anything back then, and wanted to see if things were still profitable in Stockton for buy and hold (not flipping).

With prices creeping up like everywhere else and interest rates on the rise, I wonder if this is still a decent idea, or should I avoid this at all costs? If not Stockton, where? California may be a tougher than most states, and since we are just starting out we wanted something physically closer to us and still affordable so the logistics are manageable. If/when we get better at this and have a number of successful properties under our belt, maybe we'll feel comfortable investing outside of CA at that point.

Thank you!

Paul Timmins · Answer

@Raymond C. Go to IREM.org search for ARM certified property managers. Call 5 ask them what parts of the city they like/dislike and why. Ask them what they see expenses running per category per unit. What do they see them selling for per unit, what is the market occupancy rate. Ask them if they know anything coming up for sale. Great way to pick up some good info and possibly a deal. Paul

Account Closed · Answer

I have no personal experience but a good friend of mine invested I'm Stockton and also Phoenix, Sac, and Indy. She said Stockton was her worst tenant experiences. She got out with a profit but the experience was not good.

Eric Siu · Answer

Raymond C. :UOP undergrad was more campus oriented as the surrounding area was sketchy. There were a lot of apartments just across the street that the upperclassmen stayed in. However, for the pharmacy school more students, especially the transfers, lived off campus. March/West area and the area around 8 mile tend to be safer, both security and investment-wise. Hope that helps!

Mike D'Arrigo · Answer

@Raymond C. Like any city, Stockton has it's bad areas and ok areas. Stockton just has a lot more bad areas. You would have to be extremely cautious and know the area well. Personally, I think you'd be better off going to a better, more stable and safer out of state market. I just don't see a real upside to Stockton other than it's one of the less expensive cities in CA.

Kyle J. · Answer

I have rentals in both Stockton and Lodi, so if you guys who are considering buying here have any specific questions that I can be of help with feel free to ask.

Raymond C. · Answer

@Eric Siu - Great that you went to UOP! I had a few high school friends that went there, but lived at home and drove in. Do you know where students that aren't local generally live? Is it all over the place, or did they really want to live near campus? I'm not sure if UOP was more a "commuter" school or if students liked to gravitate toward each other and live near the college. If it's the latter, then anything by the Miracle Mile north of Harding Way seems like a viable option. There are some decent Victorian multi-families for good prices a block away from the Pacific Ave and the tail end of the Miracle Mile, but it also borderlines on the sketchy just north of Harding Way. It's only a mile to UOP from there, but a mile can make a big difference in the area :-). In another part of town, there are some duplexes that are in the Lincoln Unified School district (best public school district in Stockton), but because of the higher prices that they command for those areas, the cash flows might not make sense. I am still researching and doing a lot of homework on this and a few other areas in Stockton that are a tier or two down from that. I currently don't have the experience nor stomach to go hardcore south Stockton where things are dirt cheap, but where neighborhoods are extremely sketchy and properties that are very old and need major maintenance. My friend told me his uncle who runs a long time liquor store in that area successfully bought many rentals in that area because he knew the "good" pockets of it. I'll have have to learn about that among other things! Thanks for the reply!

Eric Siu · Answer

@Raymond C. I've been looking to invest in the Stockton/Lodi area myself. I attended UOP and know some of the area too. PM me and I'll let you know if I see anything interesting. I'm still working on securing funds but I'm doing the research in that area to get a feel for things. @Paul Timmins thank you for the IREM recommendation. I'll have to check it out also. @Jordan T. I'm looking for a realtor in the area. Can I ask for you for your guy?

Raymond C. · Answer

@Paul Timmins - thank you for the IREM suggestion. That sounds like another great way to find information. I will check it out. @Jordan T. - thanks for the insight. Great to hear about your success in Sac, and I feel good about Stockton as a potentially good place to invest because I am familiar with it. I also appreciate the referral to a good realtor, but I am currently working with one. If it doesn't work out, I will definitely PM you.

Jordan Thibodeau · Answer

Hi Raymond. As a fellow Bay Area resident, I understand your pain with the astronomical prices we're seeing in Silicon Valley. I started investing in Sacramento because the home prices were affordable and I was familiar with the area. I recently went down to Stockton to look at Duplexes. Being that I'm inexperienced with the area, it can be daunting to find the best areas. Also, I don't know how the city will resolve the bankruptcy issue (Fed/State Bail out? New Parcel Taxes?) As far as investing out of state, start instate, being that your advantage is your familiarity with Stockton. Investing in state allows you to hone your property management skills, because if you invest out of area you have little or no control over your properties. I came across a great realtor when I was in Stockton and he was able to show me a few duplexes, what's nice about him is that he is a buy and hold real estate investor so he has extensive knowledge of the Stock RE market, if you need a referral, please PM me.