Cashflow positive in CA with 10-15% yearly appreciations

[Account Closed]

Im tired of reading about all my local CA investors wanting to run out of state for so called "great cash flowing properties". I have purchased (along with some of my investors) over 2 dozen SFR and MFR positive cash flowing properties, within the last 3 years, with instant appreciations over 25% and yearly appreciations of 10%+. I will begin to document these stories from past and future investments moving forward. I have never really posted my success stories on BP mainly because I don't really have the best creative writing skills or bp vocabulary to keep up with you guys, so please bear with me.

IMO, equity is king and cashflow is a little bonus on top. Yes cash flowing properties are always good but the $100-400 a month positive cashflow is nothing to a 10%+ yearly equity game. These out of state markets with little to no appreciation offset your income so greatly that your missing out on the appreciation of Northern California. Even worse, a capex can set you back 2-3 years of all your positive cash flow. So for all you looking to buy out of state because it is cheaper than CA here you go.

Deal 1 

SFR 3/2

Purchase price 60k (cash)

Rehab 10k

Appraised ARV 3 months later 103k

Currently rented at 1,000

15% Yearly appreciation since 2013 and still hasn't reached its peak of 2007.

Yearly profits 45,000  including equity gain

Yearly profits moving forward 27,450 including equity (not including yearly rent increase)

You can do the math anyway you want this is a great deal. Wether you were going to do creative financing, conventional loan or pay cash as I did. I will admit that tenants must be screened good as there is many rift raft around the county but there are also many great tenants as we have found. Just need to do your due diligence as on any investment.

Deal 2

Duplex each unit 2/1

Purchase price 150k

Rehab 1k 

ARV 200k

Currently rented at 1,700

12% Yearly appreciation since 2013.  This years predictions are the same 

As you can see on this property doesn't have the greatest cashflow but still meets the 1% rule Didn't need much rehab at all besides landscaping. One unit is fully remodeled and the other needs a rehab of 6-8k but rent would also go up $100 a month after rehab. This was an instant equity play which helped in my decision process.

I have many many more but don't want to run this post to long. The investments are out there in CA my friends just look for them. Im getting 1% rule easy and expecting a minimum of 10% yearly appreciation. I see these out of state investments 60-100k. Imagine if you had the extra $850.00 a month equity on those properties. I would always be willing to sacrifice a little cashflow for equity any day. The equity gains are much greater.

I know I will hear a lot about equity is not guaranteed but nothing in life is guaranteed. We make these investments on sound research and numbers. Thanks to the BP community we are all here to help you make the best educated and strategic decisions. 

More to come with pictures.

.

[Leonard L.]

There is only one question I need to ask, which always allows me to determine if the buyer has made money or not on any real estate deal  -- WHEN did you buy it?  In real estate, Realtors all tell you is it location, location, location.  Not true.  It is timing, timing, timing.   I agree with OP that there are still deals to be found in CA that make sense as buy and hold.  But as  @Matt Leonardpoints out above, if it also a riskier game.   The OP is saying he has 10% appreciation since 2013. Yeah, so has everyone else.  The question is what happens when you buy in CA and the elevator is going down instead of up.  

Don't get me wrong.  Like the OP, I am buying all my deals in CA (Riverside County).  Shifted from mostly buy and hold to mostly fix and flip.  But that means that if I marked portfolio to current market, I would also have to admit I am only getting a 5% return (although a 15-20% return on capital, thanks to appreciation).  At some point (not yet), I will take most or all of my chips off the CA table and place them in a more stable market in another state while awaiting the next CA correction. [Winter is coming...]  

So yes, appreciation makes you wealthy.  Yes, you can still find deals in CA that make sense if you do this full time and stay highly motivated.  Yes, the signs look good for next year or two at least to keep investing in CA.  Yes, I could tell stories about properties I bought in 2011-2013 period that would make me look very smart.  But whether buying in CA makes sense for YOU or not depends on your goals. If it is capital preservation, buying in CA at this point in the cycle may not be the smart bet.