Lets hear how you made an expensive market work!

[Nicholas Coulter]

I often hear that it's impossible to invest in Southern California but we managed to make it work! I would love to hear about how investors have found creative ways to make expensive markets work!

My wife and I did the rent by the room strategy. Bought a 4 BD 2 BA house in Redlands CA and got tenants in immediately into the spare rooms. Has covered the mortgage ever sense!

[Dan H.]

Quote from @Shafi Noss:

Expensive markets often work better if you're doing value add, commercial, or are looking at long term appreciation. It just happens that most people are thinking about rentals and whether it will cashflow right away. Just depends on your strategy. 

 I very much agree for value adds.  Material costs vary minimally between cheap areas and expensive areas.  Labor rates do not have strong correlation to RE prices.  For example the RE prices in my market is high, but wages are close to national average. 

Due to high RE prices, I look to get value increase from conservative refinance appraisal of at least double my value add cost.  Typically my refi appraisal have provided a value much greater than double my vale add costs. 

If I was in a cheap market say we’re a valuation on a property varies only by $25k from Poor condition to fully rehabbed, you could not obtain the same profits from the value adds. 

The only property I have not extracted my full initial investment was a non value add purchase.  All my value add purchases have all my initial investment extracted.