Any undervalued coastal California areas poised for the next wave of monster appreciation?

[Joe Derobertis]

I live in SoCal and am a new investor.  New as in I haven't invested in anything yet, but I am actively looking.  As we all know living in SoCal presents some limited options for investing locally so, much like others, I've begun looking out of state and obviously there are some very viable options.  That said, I can't help but wonder what coastal-ish areas in SoCal or California in general are poised to blow up.  I was perusing padmapper and following the coast north from LA and came across Orcutt and Santa Maria.  I'm not very familiar with these areas, but it seems the rents looks pretty decent and there appear to be some homes for sale where the numbers could add up.  I haven't really done much research into any of these towns yet and thought I'd shoot out a message to see if anyone has any experience or thoughts here.

Clearly there must be underdeveloped/undervalued areas in coastal CA, that should experience tremendous appreciation in the next 20-30 years right?  I mean the established areas aren't going to see appreciation like they did if you bought in the 60/70s.  

I'm thinking of those towns as blue chips, sure they'll continue to appreciate but the rate will be much lower because they're discovered, established, etc..., but there are people who want to buy homes in coastal areas and cannot afford those so they'll seek more affordable areas and my hope is that if you can locate those now and find the pattern/trend and hold for 20-30 years those are the areas that will have tremendous appreciation.

Wow, this ended up way longer than I meant it to be, so if you've read this far I appreciate it!

Anyway, I'd be curious on the collective groups thoughts here.

[Bradley Bogdan]

@George Fitz I can certainly see some potential up here (I live in Eureka, Humboldt County), but for slightly different reasons and in different patterns than most areas exhibit. 

First of all, there is ample water here, one of the few areas in the state that has little to no worry about having a water shortage in the main residential areas. There is talk of some of the local water being diverted to the Central Valley, which should tell you just how much there is here to make such an effort worth the $$$. 

Second, real estate here is VERY influenced by the marijuana growing. Ranches and rural properties are VASTLY overpriced, especially ones without any water rights, due to the ability to grow large amounts of marijuana to pay the mortgage. When full legalization hits the state, and marijuana prices drop, there is the potential for these properties in southern and eastern Humboldt to drop through the floor. Scenery-wise and outdoor opportunities-wise, these are amazing areas for a vacation, and probably vacation rentals, once the majority of the pot trade fades. 

Third, there are a noticeable number of properties in the urban areas that would cashflow nicely. There is a fairly restricted number of units in the area, and rents aren't quite high enough to spur more development, so the right properties definitely have the potential to cashflow well at Section 8 levels of rents (even if you're not renting to Section 8). Nicer units don't command as much of a premium as they may in other places, but you can certainly get an extra $100-$200/mo if you allow pets locally, as almost no one does. If I was planning on staying in the area longer than I currently am, I would definitely pursue a couple. 

Finally, while the county will never physically get closer to the Bay Area or Redding, and transit time from Redding isn't really improvable due to the terrain, there is ongoing efforts to make Humboldt more connected to the south. Current projects around Willits (in Mendocino) and southern Humboldt could cut travel time by 20-40 minutes when complete, making the drive up/down a bit less daunting. Opening up a secluded area like Humboldt a bit certainly has the potential to up property values as Bay Area folk look for places other than the Sierras for vacation homes or retirement homes.