All Forum Posts by: AJ Wong

You could explore a private note sale but without hard collateral it could be difficult and would come with a discounted buy out. I would suggest approaching the borrower on an accelerated pay out with an incentive. Maybe half upfront and reduce the rate of interest on the balance..

Oregon is a prime region for seller and creative financing on real estate transactions. I've personally utilized private notes on three transactions and participated in another handful of negotiations with sellers on behalf of buyers in the past five years. 

Perhaps the most consequential transaction involving creative financing solutions was a recent closing for a 20+ unit apartment complex in downtown Eugene. In short: $4.25M Purchase Price. 15% down. 3.25% with seven years remaining. 

How? We approached the existing lender for a loan assumption. The mechanics of the transaction were actually very involved and some of the most intricate and detailed of any transaction I've been a part of, however the results were worth the effort. Due to current interest rates, many CAP rates are much lower than they should be and usually there is only so much price discount a non-delinquent seller will be able or willing to offer. The solution could be a creative financing solution such as a total or partial private note, an assumption of the note or LLC, a speciality or local lender, or any combination thereof.

Without this workout, the down payment requirements, current levels of interest rates and cost of the transaction would not be incentivizing enough to for investment. 

There are few places as iconic to visit or invest as the Pacific Coast in the US and the coastal stretch of Oregon is no exception. Astonishingly, I'd argue that the luxury Oregon Coast Real Estate market is still a bit under the radar. Having toured some of the most prestigious, expensive and historic estates and properties from Brookings to Astoria, there is still considerable investment opportunity at the very high end of the luxury market. At least comparatively to properties in California, Washington, Montana and Idaho, investors seemingly still get a lot of value for their capital. 

Part of the reason coastal values haven't quite scaled to heights of neighboring states is the remoteness and lack of winter sports and high end amenities and entertainment, but that doesn't mean trophy estates, ranches and homes don't exist. Recently, a lot of the market factors that kept people away, are the same that are drawing attention. Charming, smaller coastal towns with a slower pace of life, natural amenities, seclusion and semi-self sustainability are high on the wish list of many high level clients and investors. 

Climate refuge is a genuine priority for many and a reasonably distanced retreat or refuge has perhaps never been more valuable? Clean water, air, peace and sunshine are nature's remedies and in over-abundance on the Oregon Coast. 

My top locations for luxury Oregon Coast Real Estate Investment, estates and ranches are: 

- Brookings, Gold Beach and Bandon - One of the few stretches beyond Big Sur that you can actually drive along the Pacific Coast Highway at altitude. The views are breathtaking and offer some of the most dramatic combinations of beaches, dunes, rivers, lakes and mountains. Bandon in particular has a very strong trajectory due to the ever expanding reputation of Bandon Dunes Golf Course as a worldwide attraction. 

- Florence, Lakeside, Yachats - This is fairly accessible region through Eugene and also offers spectacular landscapes and amenities. Many of the estate properties are located on lakes or rivers providing unique recreational activities. The location is central to northern or southern coast attractions. 

- Manzanita, Arch Cape, Cannon Beach, Pacific City - Already well established as the more prestigious zip code on the Oregon Coast and just a quick drive from Portland this northern coast region offers premium restaurants, experiences and accessibility. Quintessential coastal PNW with beaches that are among the top rated anywhere. 

Runner Up:

- Lincoln City, Seaside, Gearhart - All of these towns are charming and growing and have all of the above to offer. I think what they lack are the unforgettable beaches and views. Obviously there are properties and investments that are exceptions but since we're discussing nearly unlimited budgets, my first look for a legacy estate would be begin in other areas. *There are several cities and towns not noted that are deserving and feature one of a kind coastal ranches and estates. 

So what does $1-10M get investors on the Oregon Coast? Here are a few active examples and sales we think demonstrate investment value: 

North Coast: 3 Bedrooms / 4 Bathrooms / 4032SF on 1.6 Acres with custom architecture. Asking $3.95M https://www.zillow.com/homedetails/79274-Ray-Brown-Rd-Arch-C...

Central Coast: 4 Bedrooms / 4 Bathrooms/ 4254SF on 4+ Acres with panoramic views. Asking $1.7M https://www.zillow.com/homedetails/94515-Highway-101-S-Yacha...

South Coast: 5 Bedrooms / 9 Bathrooms / 9301SF on 34+ Acres with guesthouse and caretakers house. Asking $6.749M  https://www.zillow.com/homedetails/36044-Highway-101-Gold-Be...

Lincoln City - Breathtaking Estate. Asking $5M https://www.zillow.com/homedetails/179-Siletz-Hwy-Lincoln-Ci...

Coastal Ranch - 4 structures. 775 Acres. Asking $8.9M https://www.zillow.com/homedetails/32940-Miller-Ranch-Rd-Gol...

Lakefront - Large updated home on acreage. Asking $1.99M https://www.zillow.com/homedetails/83837-Highway-101-Florenc...

In the six years I've owned, operated and sold vacation rentals on the Oregon Coast the investment landscape has evolved considerably. 

When I first arrived and invested on the Pacific Coast in 2018 it was still relatively unknown to investors and vacation rental investors. Post pandemic, the secret is out and investors can no longer 'simply' operate a nightly vacation rental in most cities and regions. As with most municipalities and jurisdictions, the evolution of the AirBnB market has spawned regulation and restrictions on where, when and how a STR can operate. The increasing barrier to entry results in fewer new STR's coming available for sale, but also fewer options for guests to rent.

As tourism grows, seemingly so does demand and nightly rates. There are often weekends or holidays that finding even a basic motel for the night in some areas is nearly impossible (especially if you have pets!) 

So.. can investors still acquire a lucrative vacation rental on the Oregon Coast? Absolutely. Last year we helped eight buyers acquire exceptional coastal STR's in; Brookings, Gold Beach, Bandon, Manzanita, Arch Cape and Yachats, with two in 2025 under contract in Seaside and Rockaway Beach. We cover a large geographical area (nearly 400 miles) because there are usually only a few STR eligible properties for sale in any given city. To provide our buyers the greatest probability for success, we cast a wide net to evaluate ALL vacation rental prospects and narrow it down to the handful that meet the search criteria.

The process can take client's anywhere from one month to two years of active and consistent searching, analysis and dealmaking to acquire the right home. Our most recent client has been persistent with us since July 2023!

If you're in the market for an STR on the Oregon Coast (or really anywhere for that matter) here are some tips to be successful this year:

- Know your market. Know you needs. Specifically; rules, regulations and permitting procedure. There is no point in looking at a home that can not reasonably obtain a permit. With that said, investors have different reasons for purchases. For example, several of our clients last year did not have a primary intention of profitability. They were seeking secondary homes for their family that could be rented to help offset costs and didn't require an immediate or transferrable permit. For those that need a property eligible for immediate launch, the target can be smaller. 

- Expect buyer competition. Lucrative STR's are some of the most desirable property types on the market (especially near the beach!) and the demand is amplified when it has a proven rental history, furnishings and a transferable or easily obtainable STR permit. On a recent STR prospect, there were ten calls and six showings in less than one week. Timing is critical. Follow new listings closely and be definitive in scheduling tours and making offers. I have found sellers often place priority on seriousness.

- Post closing Plan. A major part of the success or failure of an STR investment is the design, furnishing and management plan. See managing on the coast is plausible and there are great cleaners and crews on the ground willing to work hard. Historically, full service management on the coast has been costly but in recent months management rates have come down and quality has improved. For properties that need upgrades, rehab or furniture, investors will need the time or team to execute.

- Performance expectations. I think we do a very good job of helping investors to focus on the most lucrative prospects. In fact, I would put the quality of homes we've sold up against anyone's on the Oregon Coast! We truly have sold some stunning properties. A good gauge of performance for a full time rental is roughly 10% of valuation (A $1M home should generate $100K+ in gross revenue.) I'm not sure why that metric has held true but it still applies, the properties that perform well above that ratio are the owners that treat their STR like a business. They've gone all in. Direct booking website, highly attentive to guests needs and experiences and consistently enhance the property during ownership. To reiterate, that's not what everyone is looking for out of their investment, but clients that embrace their hospitality business have been highly successful.

Fearless Forecast: I've written extensively about the wonders of the Oregon Coast, including why I migrated north and why I believe many others will continue to follow. Climate migration is real. Cost of living increases are real. Living on the Oregon Coast is real. There is an abnormally low amount of new construction occurring on the coast in comparison to the demand and the existing inventory can be quite dated, especially for those coming from areas like California. As much as prices have increased, comparatively you still get A LOT for the money. The entry level point for STR's has risen to the $4-500k range with many now pushing $750-850-$1M+ and I would expect that to continue to increase. Over the next decade the 'larger' coastal cities like Coos Bay, Lincoln City, Newport and Astoria will continue to mature. Just in the past few years we've seen rapid growth in cafe's, yoga schools, restaurants and amenities operated by younger entrepreneurs.

- The smaller more 'luxury' coastal areas such as Bandon, Arch Cape, Manzanita, Florence and Cannon Beach could see dramatic valuation increases as could luxury coastal estates. When you compare 'what you get' for the price in Oregon to other locations on the Pacific Coast including; California, Washington and Hawaii, investors generally get more 'bang for the buck' the greater the valuation. These areas are becoming 'micro Big Sur-esque,' a more affordable piece of the Pacific Wonderland. 

Other notes: 

- Higher density multi family properties can be very hard to secure on the coast, but very profitable. I do not anticipate significant new multi family property inventory in the coming year. I do expect greater development of condos and townhomes and higher density single family communities. 

- Acreage will continue to be a very hot commodity. Western Oregon is surprisingly composed of smaller single family lots, usually around .10-.15 of an acre. It's somewhat unusual for a large in town coastal lots or homes on plots of 1-10 acres. 

- Boutique hotels are on fire. The graduation for many successful AirBnB operators are 5-25 units hotels where licensing and permitting are inconsequential. For those with hospitality experience, the coast offers a lot of upside. 

- Storage and Mobile park prices could soften. There has been a substantial increase in inventory of storage facilities constructed and although generally near full occupancy there are greater options for storage space in most coastal regions. Mobile Parks have seen an influx of listings for sale that could keep valuations flatter. 

- Established and actively managed AirBnB's will continue to be consistent income producers with a gradual growth in returns. 

What's going on in your STR market?

This is awesome!! Great job. Very similar to properties in Oregon we've sold and for sale. Cheers. 

President Trump’s nominee for Treasury Secretary, Scott Bessent, testified that extending the ‘Tax Cuts and Jobs Act’ of 2017 is essential to avoiding economic catastrophe.

Part of those cuts included the short-term rental tax loophole, a strategy real estate investors can use to help mitigate their rental income tax by offsetting earned income with real estate losses, and could be renewed or extended.  

There are several articles that do an exceptional job of explaining who, what, where, why and how tax payers qualify for the ‘STR Loophole' listed here:

The Short Term Rental Tax Loop Hole: A Game Changer for W-2 Wage Earners

The Short Term Tax Rental Loop Hole: What Investors need to know 

The implications on the Oregon and California Coastal STR market is a strengthening buyer pool for luxury rentals in the $750-1.5M+ range. The deduction is optimized as values increase and can potentially offset the entire net investment (including down payment) for high wage earners.

We've helped a handful of investors maximize their investments over the past several years and anticipate a robust demand if/when the tax cuts are re-instituted. 

As always, consult with your licensed tax professional for qualifying, tax implications and strategy.

What do you think will the accelerated depreciation be extended? 

2024 was a banner year for our investor clients with eight prime Oregon Coast vacation rentals sold. Four properties were existing STR's that had a permit 'transfer' and the other half were eligible properties that successfully launched with astounding success. As with all regions, the Oregon Coasts' counties and cities are tightening their rules (and quantities of allowable vacation rentals) and there are a few adjustments to last year's regulatory landscape. As the market evolves we've intensified our commitment to helping investors focus only on listings that are eligible for vacation rental usages and either; have exceptional existing production or high potential for rental performance. Below are a few areas and things to look for if you're exploring investing in an AirBnB on the Oregon Coast.

Most notably, the heart of the Oregon Coast in Lincoln City STR permits will be more difficult to come by. LC already had a tight inventory due to an instituted CAP. Although many properties with a specific zoning code are technically eligible, they would be subject to an extensive waitlist that could last years. The biggest change was in the Road's End neighborhood. Up until November, actively licensed VRD (Vacation Rental Dwellings) could transfer one time to the new owner. With expiration, there is a maximum CAP for the area so new license applications would be subject to a wait list. All hope is not lost for a Lincoln City STR that can be licensed immediately though. There are neighborhoods such as Olivia Beach that allow STR usages outright as well as pockets with specific Commercial Tourist Zoning that are not subject to a waitlist.

The other major change to a top STR destination was in Rockaway Beach Oregon. Prior to last year, effectively any SFR was eligible for a short term rental license. In 2024, the city instituted a CAP and for a period, now only active STR permits can transfer to a new owner. These properties are generally in high demand, but on a positive there will be drastically less new inventory of competing rental properties.

In the immediate region there are pockets of permittable properties. We sold a wonderful two unit STR in Depoe Bay in 2024, which generally is a no-go zone but has neighborhoods with specific commercial zoning that allows for vacation rental usages as well as a brand new development of luxury homes that allows STR usages similar to Olivia Beach in nearby Lincoln City. 

One asterisk to all of the above areas are townhomes and condos. There are many communities within each of these areas that run or allow nightly rental programs. 

Continuing on the north coast, another idyllic vacation rental location is Pacific City Oregon. In general, active STR permits can transfer to a new owner (one time) and new applications would be subject to a currently short waitlist.

Nearby, Seaside Oregon is another majestic, highly requested and feasible vacation destination for STR investment. Permit eligibility is based on region (usually the west side of town) and density (quantity of surrounding STR's in the area) as well as percentage of landscaping and minimum parking requirements. It is highly specific, my recommendation is to contact the city directly with qualifying questions or have us do it for you :)

In general Astoria is also a No-Go with the exception of commercially zoned properties. As a result, mid term rentals can do exceptional here and there are quality multi family units in the $250k/door range. 

Moving south...here are some quick areas of note: 

Florence - Centrally located and easily accessible from Eugene. New rules for permitting are in motion, but at present most properties are eligible for a near immediate launch as an STR.

Coos Bay - The main delay with application in this area is whether the property is on public utilities or has a septic system and private or public water source. In-town properties are significantly easier to permit but also have some density restrictions. County or non-public utility properties are possible to license but can take 90-180 days. 

Bandon - The home of Bandon Dunes Golf Course, when you can find a property eligible for a VRD license it can come with a price tag. In-town, most properties don't meet the density/saturation requirement. Curry County has it's own process, similar to Coos County that is mainly focused around waste systems and water sources. Each require county inspections that extend the permit process. On a positive, the rental demand and production in this are is some of the highest in the country. 

Brookings - The first city north of the border has specific zoning that is eligible for STR usages. The permit process is efficient and can be completed in 4-6 weeks.

Between Brookings and Astoria there are many county properties that cam retain their vacation rental usages or qualify for a new license. My absolute best advice with ANY STR prospecting is to contact the municipality in charge of regulating that area of region. In smaller towns, this is usually a specific individual within the Planning Department.

A few things to consider when shopping for an STR on the Oregon Coast:

- Geographic Restrictions: These are small, remote towns. The Oregon Coast is rugged and roughly 400 miles long. If you're prospecting the entire coast, just keep in mind travel times for tours and be mindful of the weather. We service the entire coast and consistently plan efficient physical and remote tours encompassing several cities or regions. 

- Property Management: No STR can be successful without quality cleaners and management. It is entirely possible to self-manage with a strong cleaning team. We usually are responsible for connecting investors with teams on the ground or established local PM companies. For full time management rates can range from 20-30% of gross revenue depending on the level of services provided. Self managers can reduce their PM costs significantly.

- Furnishings and Design: Active vacation rentals are usually sold furnished, vacant homes are not. Budgeting for furniture and coordinating the time to execute or hire a designer is something we try and factor into our Pro Forma or analysis. Even successful and furnished properties often need a refresh and at least some additional reinvestment due to wear and tear. 

- Production: Typically STR production on the Oregon Coast is +/- 10% of valuation. A $500k property should produce gross annual income of +/- $50K but can generate as much as $65-70k with the right location and amenities like a hot tub. In general, the higher valuation properties with views or close proximity to water have higher rates of returns. For example we helped a client acquire a $1.5M oceanfront home that is pushing $180-200K per year and a $875k home (with no water feature) generating $125k gross revenue annually.

- Expectations: At any given time along the entire Oregon Coast there are roughly 125+/- worthwhile STR eligible properties listed for sale. That's a very small inventory when especially considering buyer needs like, budget, location, bedrooms and aesthetics. Usually, when a new client approaches me with a wish list, there are often only a handful of properties actively on the market that are genuine prospects, and these are usually the hottest listings in any market. Our job is to rapidly identify, qualify and analyze all listings, tour the propsect as soon as possible and write workable and winnable offers. Our strategy is successful but requires investors to commit to a fairly intense prospecting and decision making pattern. Due to these challenges, a successful client acquisition has taken as long as 1.5yrs(!!) but on average takes 60-90 days to get to closing from the point of introduction.

Oregon is a diverse real estate market with a lot to offer but not a lot of established property inventory for sale. The biggest challenge is a lack of quality homes and a rapidly increasing demand for vacation, second and primary homes. The good news is that there are still investable vacation rentals but historically the barrier to entry is growing each year. 

One week into 2025 and the US housing market is facing considerable new challenges. It goes without saying that the recent and ongoing disasters in California are some of the most devastating and destructive in recent memory. I lived in LA for a decade and we have many friends, family, clients and community members suffering and send our sincerest condolences to all of those experiencing and affected this tragedy. As we’re beginning to get a grasp on the scale of the challenges ahead we wanted to highlight a few areas of note and concern that is already influencing the local and national real estate market.

Insurance : This area of consideration deserves its own deep dive so we’ll briefly highlight key concerns. 

- The underinsured. Those policies that weren’t forced on the plan of last resort, the state run California ‘Fair’ Plan are significantly underinsured. Many likely have coverage for their mortgage balance or from many years ago. There will be a huge gap between coverages and replacement costs.

- Renters are majority uninsured.

- In September 2024 the FAIR Plan had $6B in exposure to the Palisades alone. The plan is notorious for minimum insurance and they were previously capped at $20M for larger commercial and HOA properties. That limit was recently bumped up to a $100M maximum. I heard a story today of a condo owner whose entire complex was lost. They had the $20M in coverage, equating to $400k+\- per unit or less than half the $1M Zestimate. Estimates range from $3-500B of property insured with the FAIR Plan and between $3-700M in liquidity with up to $3B in re-insurance. Post insolvency, the framework allows an assessment to all private insurers operating in the state to cover the difference which will subsequently pass the costs along to policy holders. In other words, individual policyholders are subsidizing the losses.

- Inefficiency with payouts and administration will be compounded as the FAIR Plan has zero experience with a major pay out and lack infrastructure of assessors and technology to distribute the funds they don’t have. Think of the California DMV..

Defaults and Foreclosures : Not yet on the radar for most, is that the existing liabilities and mortgages need to be satisfied…either by insurance pay outs or other means. I’m certain there will be some type of moratorium or intervention, but the fact of the matter is the balance sheets of impacted lenders will suffer when obligations are not paid on time. Not only will lenders be effected, but borrower credit, business loans, inventory, and auto credit will suffer when those effected have to relocate, find long term replacement housing and their livelihoods and income are destroyed. Even large and small businesses with intangible residual services like TV, internet, security, pest control or the local contractor with remodels in process could fall behind on payments revenue contract. 

Legal Implications & Ramifications : As an example; the iconic PCH homes in Malibu and many in the upper foothills might not permitted to build back, certainly not to the same extent or materials. Some of the most expensive and difficult properties in the country (and world) to develop were vaporized into potentially un-developable lots. Regardless of socio-economic status, a significant proportion of wealth is concentrated in prime real estate, especially in these areas. Even if the actual property survived, it often won’t be inhabitable for sometime due to infrastructure, contamination or remediation. Class action lawsuits are already being discussed and there is potential at least portions of the blazes were caused by arson, often excluded from coverages. Many insurance policies also require re-development within two years, a near impossible timeline in a region with the coastal commission, perhaps only second to Manhattan in terms of permitting and red tape.

Local RE Economy : Although proportionately more affluent areas were impacted, Altedena is one of the most diverse constituencies in the State. Those effected go well beyond the property owners, the economic contribution of RE and subsequent economic loss in the form of: management, maintenance, landscaping, caretaking, hospitality, tourism, contracting, designing, pools and gardening is economically catastrophic and will reverberate well beyond specific zip codes.

Wealth Destruction : Luxury properties contain luxury assets. These are some of the most successful people; CEO’s, tycoons, celebs, old and new money and investors on the planet. The loss of priceless art, jewelry, autos, memorabilia and watches could often match or exceed the property values. With a historic proportion of assets invested in equities, markets beyond Real Estate could be influenced.

Job and Talent Loss : The duration of recovery has and will continue to force migration. After the Paradise fire Butte county lose nearly two-thirds of its population. Beyond property owner losses are retailers, grocery workers, dog walkers and all walks of life whom’s livelihood was interrupted. We own a home in Mexico, and our neighbor said their daughter unfortunately lost their home in Altedena. They are nearing retirement and have children in school. They own another property in Michigan and are leaving SoCal this week…permanently. He is a PHD physicist at the Jet Propulsion Laboratory.

Taxes : Taxes have been a brewing crisis nationwide for sometime, Chicago is another prime example of a major municipality struggling under high debt load. Legislators often leverage future obligations in the form of bonds. When the tax base disappears so do essential services. Borrowing costs are nearing their highest point in decades and the municipal and state debt crises do not get nearly the attention of the federal government or deserve.

Environmental Impacts : My assumption is that the entire toxic debris removal process will have to be managed by the Army Corp of Engineers X FEMA and other governmental agencies. In Hawaii the debris was systemically removed, wrapped in plastic and disposed at a 70+ acre site the city acquired. The soil composition had to be tested and cleared before development could begin. Eventually it will rain, the toxic soot will seep into the soil and makes it's way into the rivers and oceans. The contamination will flow well beyond the localized areas and require significant remediation.

Limited labor and resources : Unlike the catastrophic fires in Lahaina Hawaii there are significant resources in Los Angeles to contribute to recover, but quality contractors, tradesman, plumbers, electricians and laborers have long been in short supply. Meaningful home building hasn't occurred in SoCal since the post war era. Replacing the same infrastructure and structures with the same design is unlikely. Lahaina is a year and a half into recovery with roughly 1500 homes destroyed, The US Army Corps of Engineers and FEMA just competed debris removal. There are at least 5-10X that many structures destroyed throughout LA and LA county. The timeline is years for clean up and decades for reconstruction and recovery. This is a hurricane Katrina scale event that I believe will well exceed those costs and downhill economic impacts.

Appraisals, Lenders and Rates : Beyond the transactions that were literally in process (sales, listings, leases, seller carries) are properties that remain amongst vacant lots. What happens to the 'comparable value' if the area is uninhabitable or a community that won't return for years? Local lenders and credit unions could face insurmountable losses to their balance sheets and customer bases as well as the downstream financial and real estate service sector. Inherently, rebuilding in inflationary. Bonds have been signaling risk to markets that interest rates could remain elevated as western countries grapple with exploding debt loads and costs. 

Bonus : Could the 30 year mortgage be at risk? Without predictability on insurability and risk of the primary collateral being destroyed (which at this point theoretically could happen anywhere) as it’s January, and would you believe in 2023 that 71K thousand square miles of northern Canada burned 5% of the entire Canadian forest with billions in damages? Most US mortgages are based on 30 years and without assurance on insurance, why would banks continue to make mortgages in higher risk areas if the potential is complete loss? The borrower will need to be exceptionally qualified and have significant reserves (particularly for a jumbo or super jumbo loans of $1-2-5M++) Historically borrowers could qualify with 10-20% reserves of the amount financed, that could jump to 100%+ without significant state and federal intervention. There is a chance a national wildfire or disaster policy will need to be created, some form of Government Service Entity such as Fannie and Freddie to stabilize the insurance market. 

There are considerable economic headwinds for 2025 including if equity markets pull back, there could be a reallocation of profits into real estate. High level local impacts are rising rents from Santa Barbara to San Diego and high demand for luxury purchases. Migration will accelerate as will second home purchases from those that live primarily in areas prone to disasters. Areas that saw population bumps during the pandemic could see milder but significant demographic shifts, as will almost any area where effected residents have family, relatives or property available for immediate longterm occupancy. On the ground, I've already had a few random feelers for ultra luxury coastal estates here in Oregon and family homes in Eugene from California buyers. There's growing housing desperation to both purchase and sell in markets with pre-existing supply and price constraints. 

I've consistently written about the forces of nature and her current and future effects on the real estate market (even while often being ridiculed and politicized on this very site for it) regardless: I personally moved and invested in coastal Oregon in 2018 from Venice Beach Los Angeles partly as a result of the trajectory of climate and have assisted several clients that specifically purchased on the Oregon Coast for their own 'climate havens,' investment and future retirement homes. 

The truly tragic natural disasters in California, North Carolina, Florida and others of the past six months are evidence that no location is truly 'climate safe,' however there are geographical areas that can expect less weather extremes and lower costs of living, developing, insuring and seemingly...surviving. 

Full disclosure, I'm not a disaster expert, politician or climate alarmist, but according to those fighting fires on the California coast since the 1960's, Devil Winds are natural occurrences each and every decade but require highly conducive conditions to be as destructive. 

One month before the LA Fires, at my casita in north Baja Mexico, we experienced a mini 'Firestorm' of 50+mph Santa Ana winds. Having grown up in Florida, I was paranoid about the wind and a potential fire and sure enough at 10AM one broke out in the vacant lot adjacent to our property. I hopped on the roof with the garden hose to defend the property (even though initially it was contained) when suddenly an ember spread to a palm tree (that had been neglected to be trimmed for years) that instantaneously atomized/vaporized into hundreds of embers and spotted fires on several homes. Fortunately for our 100+ house community, the fire department was already on site battling the brush fire and about a dozen fire fighters frantically extinguished the 4 or 5 roofs burning.

This is insignificant compared to what has happened in LA, Palisades, Malibu and Altadena however having lived through Hurricane Andrew and many other major storms even this experience was drastically more terrifying and chaotic. I'm confident if the Bomberos were not already on site the entire campo including our property would have burned down. Effectively a 'Firestorm' is a dry hurricane that rains fire, with nearly indefensible circumstances, just like the catastrophic flooding, hurricanes, tornadoes and other disasters they have and will intensify in severity and rapidity.

Beyond directly impacted property owners, investors, insurers and businesses, the downhill effects of the SoCal fires on the immediate and surrounding areas are astronomical and still somewhat incomprehensible. The timeline for reconstruction is decades, many will choose not to rebuild or re-take the risk. Already there are many reports of increased listing activity in the surrounding areas and plans for many to relocate and migrate. If nothing else it will change how and where many live. 

The potential impact on property insurance could be catastrophic. In California and Florida there are two State run plans of last resort (Cal Fair and Citizens respectively) for the otherwise uninsurable; properties that private companies have already deemed too risky and are effectively subsidized by taxpayers. At last check, the California Fair Plan has nearly $500B in insured property and $700M in reserves. No lending institution or bank would be permitted to operate with those ratios. They are effectively insolvent and lenders and insures have already deemed those properties uninsurable and therefore non-financeable. There was a report that State Farm cancelled 70K+ California policies eary in 2024 and 70% of their policies in Pacific Palisades. My assumption is that the majority of those were subsequently insured with Cal 'Safe' but I have no data to confirm that. If they were insured with Cal Safe they are both dramatically underinsured and a single neighborhood would deplete the programs' reserves. 

The financial and social extent of this disaster (initially estimated at $50B) is underestimated by at least 5-10X. This is some of the most desirable and difficult to develop real estate in the country, owned and operated by many of the most powerful and affluent individuals and corporations on earth. If you came to me with an unlimited budget and asked me the most desirable place to live on Earth, my response would be Malibu or the Pacific Palisades. The average homeowner is estimated to be underinsured by 40% based on replacement costs and that doesn't include the interior contents and assets, many of which are in the multi and even mega millions. Consider this: there are an estimated 10K homes in Pacific Palisades, at least half of which were destroyed. 25% were constructed during the 60-70's and +/- 75 TOTAL were built in the past FIVE years. 

Those that choose and can rebuild, will most likely not build back to the extent or scale due to feasibility or costs or unanticipated new zoning, infrastructure, insurance and legal variables. For example, the iconic Malibu waterfront homes were built directly over the water, many by variance, and assumedly will not be permitted to reconstruct, certainly not with the same materials or attached architecture. Many of those homes were valued at $25-30-50M+, and could become un-developable. Anecdotally, if a house that literally 'floats' over water can burn by wildfire, is any property truly insurable? If so, at what actual cost? Premiums are based on statistics. Statistically, I would bet that many of these properties could be at risk from a similar event before the reconstruction could even be completed.

What is the new premium on a $5-10-20M insurance policy and how could it ever be recuperated during the life of the policy or length of the average 30 year loan? The insurance industry will never be the same. I would anticipate a semi-guaranteed government run insurance program, similar to the national flood insurance program of some sort and perhaps connected to an existing department of housing program to manifest. It will begin as an emergency order and inevitably become permanent. 

Without one, there is a small and remote chance that the existing system of insurance, mortgages and the US housing market as we've known it, is at systemic risk due to; over-financialization, risk aversion and regional fragmentation. Lending and insurance are based on predictability and without question the frequency and size of losses will continue to eclipse prior records. In many areas insurance rates have already doubled or tripled, magnitudes of previous increases. This clearly impacts affordability and valuations. All of this is also inherently, inflationary. 

In the near and immediate term, expect dramatic changes to the local Southern California RE market. Luxury rentals, purchases and short term accommodations will be in high demand from Santa Barbara to San Diego and a drastic uptick in inventory for sale can be anticipated in the areas most effected by the fires. Also, there will be permanent migration to northern coastal California, Oregon, Washington, Vegas, Texas, Tennessee, Florida, NY and anywhere else families can find a permanent refuge from the trauma as the recover, rebuild or restart. 

Symbolically, fire is eventually an opportunity for re-growth. Anticipate an emphasis on quality over quantity in terms of reconstruction materials and housing footprint. Replacement homes will be climate hardened, smaller, functional and include consideration for the type of infrastructure, architecture and sustainable/durable materials utilized. 

Our sincerest condolences to all of those impacted, we have dozens of friends and colleagues that have directly or indirectly lost everything and several have evacuated for reprieve to our communities both north and south of the border. 

 Thanks Zack!