Sell in California and buy in Kentucky or Ohio!

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Sell in California and buy in Kentucky or Ohio!

Jenny Perron
Real Estate Broker · Member since 2021 · 8 posts · 11 votes

As a broker in California and in Kentucky, it's mind-blowing that cap rates are as low as 2 or 3 in CA and yet investors hold on to these when they could sell them and by 10 times the units in KY with strong cash flow!  

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Joe HomsBusiness Member
Flipper · Mission Viejo, CA · Member since 2014 · 2k+ posts · 1k+ votes
4y

@Jenny Perron how much is the appreciation in Kentucky?  

Housing in Kentucky

The median home cost in Kentucky is $165,900. Home appreciation the last 10 years has been 51.7%. Home Appreciation in Kentucky is up 10.8%.

Housing in California

The median home cost in California is $684,800. Home appreciation the last 10 years has been 120.1%. Home Appreciation in California is up 18.8%.

I will stay here.

Good Investing...

[email protected]949-625-4533
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  • Joe HomsBusiness Member
    Flipper · Mission Viejo, CA · Member since 2014 · 2k+ posts · 1k+ votes
    4y

    @Jenny Perron how much is the appreciation in Kentucky?  

    Housing in Kentucky

    The median home cost in Kentucky is $165,900. Home appreciation the last 10 years has been 51.7%. Home Appreciation in Kentucky is up 10.8%.

    Housing in California

    The median home cost in California is $684,800. Home appreciation the last 10 years has been 120.1%. Home Appreciation in California is up 18.8%.

    I will stay here.

    Good Investing...

    [email protected]949-625-4533
    10Reply
  • Kevin Hart
    Real Estate Agent · Louisville, KY · Member since 2014 · 257 posts · 172 votes
    4y

    @Jenny Perron yea its nuts! I just recently had a CA client sell their single family rental in CA and buy a 6plex here in Louisville with the money

    3Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    4y

    @Jenny Perron
    You literally hit the nail on the head. The Columbus market is great. It has a good cash flow and quite a bit of appreciation. On top of that, there are lots of job opportunities and population growth. The latest news for Columbus is that another company has set its sights on Columbus and will be setting up shop. The company is a French EV battery company called Forsee power.  

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    3Reply
  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    4y

    @Jenny Perron

    What areas of Kentucky? I've heard good things about Kentucky as a rental market. I live in the San Francisco Bay Area and own a rental house in the Indianapolis metro area. I bought the house for a very reasonable price and am getting decent rental income. My investor friends who bought property before 2010 in the Bay Area are cash flowing nicely. I made the mistake of buying at the peak of the seller's market in 2019 (my previous primary residence) and I wouldn't cash flow but break even at best on my Bay Area property. It's also not landlord friendly in this part of the Bay Area. I'm trying to sell and take whatever proceeds I get to invest in a better property, mostly likely not in California. I'm a beginning investor and getting used to all the terminology and how to analyze if a property would cash flow. To me Indiana, Ohio and Kentucky seem like great rental markets.

    1Reply
  • Simon Ashbaugh
    Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
    4y

    Absolutely spot on! I worked with a remodeling company that solely did investor renovations and the vast majority of our clients were from California!

    2Reply
  • James WilcoxBusiness Member
    Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 603 votes
    4y

    @Becca F. I can also help you if you have any Kentucky-specific questions. 

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  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    4y

    @James Wilcox

    Thanks. I’m trying to sell a bad purchase (a condo) I made in California. If I can net some proceeds out of that sale I can look at properties out of state. 

    1Reply
  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    4y

    @Joe Homs

    I agree with you about the home appreciation in California being much larger than other states. I know people who bought properties in the Bay Area before 2010 or way back in the 1970s to 1980s. They're cash flowing really well if they have rentals. A few people sold their homes, took the cash and moved out of state. As far as buying a duplex or single family home in the Bay Area, a house that needs work will be at least $650,000. This house a realtor told me about has great potential as a rental or flip but it would be difficult to finance that much, for me at least. And the property taxes would be high as a rental. In contrast I could buy a duplex for $290,000 in Indianapolis - my property manager keeps me informed about how the market is there since I have a rental in Indiana. Indiana is much more landlord friendly than San Francisco, Berkeley and Oakland (not sure about the rest of the Bay Area or California).

    I love California but I think the Midwest and parts of the South are the hidden gems for rental property. I went to an investment seminar and there was a California couple buying property in Tennessee. I'm guessing Kentucky and Ohio are landlord friendly? Sorry for my rambling lol

    0Reply
  • Paul Merriwether
    Investor · Oakland, CA · Member since 2015 · 141 posts · 84 votes
    4y

    So ... after the recent floods in Kentucky you might want to rethink that advice. 

    Cap rates are low in CA yet appreciation is off the charts. A $650,000 value

    could mean $65,000 yr over yr just for owning the property. RE can be tough at times.  

    1Reply
  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    4y

    @Paul Merriwether

    I appreciate the feedback. I know some people buy rental properties (and primary residences) remotely. I would never buy something without going out there to look at in person. To me a plane ticket, hotel stay and car rental are well worth the money. 

    That's true about California appreciation but $650,000 is a large amount to finance and right now I couldn't come up with 25% down for that property. 

    What I've seen is in the Midwest I could buy a fixer house for $100,000 to $150,000. That's much more do-able for me but again I don't know much about these areas so I'm not jumping into any purchases for now. My rental in Indiana was my primary residence and it appreciated quite a bit, still not as much as a Bay Area house in a 5 year time frame. People pay more for Teslas (the more expensive ones not the lower priced one) out here than I paid for my Indiana house so that was a good purchase for me and a Tesla doesn't bring in passive income :) 

    0Reply
  • Lori Williams
    Developer · Youngstown, OH · Member since 2019 · 129 posts · 121 votes
    3y

    My stepson buys in LA.

    We buy in Youngstown, OH.

    We bought and rehabbed 3 properties for 301k (out of pocket was 80k), our gross rents are 5k per month, our net rents are around 3k per month.

    He bought a triplex for 1.2M, he had to put 240k down (almost as much as we paid total for our properties and rehab, and 3x the amount out of pocket), and his net rents were less than our 3k per mo.

    For what he paid in CA, he could have purchased 4x the amount in Youngstown, and had a net monthly income of 12k (and his properties after rehab would have been a class B+ rather than a class C- like his are in CA)

    CA may be better if one wants to flip, for sure. But if you want buy and hold and long term income, OH can absolutely blow CA away. So it depends on what type of investing ppl want to do.

    2Reply
  • Lori Williams
    Developer · Youngstown, OH · Member since 2019 · 129 posts · 121 votes
    3y
    Quote from @Becca F.:

    @Joe Homs

    I'm guessing Kentucky and Ohio are landlord friendly? Sorry for my rambling lol


     I can't speak for KY, but OH is landlord friendly

    0Reply
  • Lori Williams
    Developer · Youngstown, OH · Member since 2019 · 129 posts · 121 votes
    3y
    Quote from @Joe Homs:

    @Jenny Perron how much is the appreciation in Kentucky?  

    Housing in Kentucky

    The median home cost in Kentucky is $165,900. Home appreciation the last 10 years has been 51.7%. Home Appreciation in Kentucky is up 10.8%.

    Housing in California

    The median home cost in California is $684,800. Home appreciation the last 10 years has been 120.1%. Home Appreciation in California is up 18.8%.

    I will stay here.

    Good Investing...


     That makes sense if you are buying to resell.

    If you are buying to hold and collect passive income, I get better monthly returns in OH. MUCH better than LA.

    0Reply
  • Allan C.
    Rental Property Investor · Member since 2018 · 826 posts · 810 votes
    3y

    @Jenny Perron I think people misunderstand what cap rates mean. Initial cash flow is just one of many metrics, and ultimately you’ll need a combination of metrics to make a sound investment.

    If you compare IRR of Midwest vs CA markets, you'll likely find that the risk adjusted IRR is similar over a period of time. As folks become more sophisticated with investment underwriting and strategy, they won't simply compare cap rates and year 1 cash flow. They will develop 15 yr cash flow models and understand the NPV of an investment.

    At the end of the day, it’s hard to believe that all CA investors are un-savvy and simply making bad investments.

    1Reply
  • Sarita ScherpereelBusiness Member
    Real Estate Agent · Chicago, IL · Member since 2018 · 659 posts · 376 votes
    3y

    @Jenny Perron The appreciation in California would make me stay. Not to mention it's the market your in which I've always found more help. The grass always looks greener but no market is perfect. There's always something! 

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  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    @Lori Williams

    Your situation and your stepson's is a great example. I'm in California and if you acquired your property before 2010 (2008 recession prices) or way before that (1970s to 1990s), investors are getting positive cash flow with charging market rate rent. Because of Proposition 13 property taxes can only increase so much a year - this benefits primary home owners and investors who bought years ago. I have Bay Area properties that are in a positive cash flow but I wouldn't buy more in California now. The prices are much too high in San Francisco Bay Area and my mortgage payments would be more than my rent unless I have someone to partner with.  I'd be in at least negative $500 to over $800  a month (without even doing an in depth analysis). That adds up over a year or more. If someone is a multi-millionaire or billionaire investor the numbers might work for them. 

    I'm looking in the Midwest, Tennessee, possibly Florida Panhandle area. SFHs in $170,000s to low $300,000s is much more attainable in my situation. If I could find a turnkey property for a deal, even better. I've also heard that buying closer to $200,000 is better in terms of being recession proof. If your tenant loses their job, it's much easier to pay the mortgage on a $200,000 property than a $400,000 house and the $400,000 house will decrease in value more than $200,000 house. My limiting factor is also using my own money and 20% down. I could buy one more property doing this. How are people finding private lenders, hard money loans or other creative financing? 

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    3y
    Quote from @Jenny Perron:

    As a broker in California and in Kentucky, it's mind-blowing that cap rates are as low as 2 or 3 in CA and yet investors hold on to these when they could sell them and by 10 times the units in KY with strong cash flow!  


     Wurd

    0Reply
  • Greg M.
    Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes
    3y

    First off, 10X the units = 10X the work & 10X the problems. 

    And cash flow is great, if that is what you're looking for. Cash flow means the government is taking 35% of it from me. Appreciation I can offset later in life when it suits my taxes better.

    4Reply
  • Lori Williams
    Developer · Youngstown, OH · Member since 2019 · 129 posts · 121 votes
    3y
    Quote from @Becca F.:

    @Lori Williams

    Your situation and your stepson's is a great example. 

    Becca, he just bought a 4plex for 1.4M in Long Beach. I was stunned that his rents are 2k - 2500.00/mo.

    Then, to make the numbers work, he had to put down 40% or over 600k. But apparently he is banking on increased value of the property to resell, because he's getting effectively 0% return on his cash out of pocket.

    In our position, we don't care about resale value atm because we are doing this for actual long term income. So our properties are gradually increasing in value as the neighborhood revitalizes, and then we use forced appreciation to take it up a notch. Our investors get a share of the refi cash out, and then a percentage of the monthly rents. And once these current 2 rehabs are completed, we'll be putting a little something in escrow every month to cover the vacancies/repairs so the properties are covering their own expenses.

    What we've found helpful is our properties have such a high NOI, that if there were a disastrous downturn in the economy, we have enough room to lower our prices and still make above average NOI. Since we never know what can happen economy wise and we have no real control over it, we won't buy anything that gives us razor thin margins.


    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Jenny Perron:

    As a broker in California and in Kentucky, it's mind-blowing that cap rates are as low as 2 or 3 in CA and yet investors hold on to these when they could sell them and by 10 times the units in KY with strong cash flow!  


     Agree, I see many getting less than 5% net cap when I am getting 20% net caps, So many just stuck in their ways 

    All the best 

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Greg M.:

    First off, 10X the units = 10X the work & 10X the problems. 

    And cash flow is great, if that is what you're looking for. Cash flow means the government is taking 35% of it from me. Appreciation I can offset later in life when it suits my taxes better.


     10 x the work, what work ?   All you do is hire a PM co and let them handle. 15- 20% net cap with appreciation ( I have seen pricing double triple or more in my market) is a heck of a lot better than 2, 5% 

    All the best  

    0Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Becca F.:

    @James Wilcox

    Thanks. I’m trying to sell a bad purchase (a condo) I made in California. If I can net some proceeds out of that sale I can look at properties out of state. 


     MANY from CA buy in the Midwest,  

    0Reply
  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    @Bob S.

    I have a SFH rental in Indiana. That is the best purchase I made almost 10 years - it costs less than a Tesla or high end Mercedes people are driving and a car doesn't bring in passive income :) I'm in the process of pulling equity out of a California property to help with a down payment on an out-of-state property. I'm also looking at Tennessee (an hour within Nashville, maybe Memphis) and Florida Panhandle but Midwest is at the top of my list. I sent my Indiana realtor a list of 20 potential properties.

    1Reply
  • Bob S.
    Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
    3y
    Quote from @Becca F.:

    @Bob S.

    I have a SFH rental in Indiana. That is the best purchase I made almost 10 years - it costs less than a Tesla or high end Mercedes people are driving and a car doesn't bring in passive income :) I'm in the process of pulling equity out of a California property to help with a down payment on an out-of-state property. I'm also looking at Tennessee (an hour within Nashville, maybe Memphis) and Florida Panhandle but Midwest is at the top of my list. I sent my Indiana realtor a list of 20 potential properties.

     Your working much to hard. All you need to do is connect with those that provide properties, allow them to handle all for you . 

    BTW a realtor is NOT where you get the good deals from,

    0Reply
  • Becca F.
    Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    @Bob S.

    I have a SFH rental in Indiana. That is the best purchase I made almost 10 years - it costs less than a Tesla or high end Mercedes people are driving and a car doesn't bring in passive income :) I'm in the process of pulling equity out of a California property to help with a down payment on an out-of-state property. I'm also looking at Tennessee (an hour within Nashville, maybe Memphis) and Florida Panhandle but Midwest is at the top of my list. I sent my Indiana realtor a list of 20 potential properties.

    0Reply
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