I am a big fan of So Cal investors investing in So Cal. The post about 1 property in So Cal versus 10 properties at the average return location with same investment money is correct for past 5 or 10 years. All you need to do is look at 10 fastest appreciating markets for last decade and compare them to the national average. So Cal not only would have been the superior investment but it would not even be close compared to the average locale. Of course past performance is not necessarily an indicator of future performance. However, One thing to note about So Cal properties is the supply is finite especially in coastal urban areas. The demand seems to be infinite.
It is my belief that most experienced RE investors leverage their money and therefore will typically choose to finance over paying cash with the exception being if the cash has additional payoff such as being required because purchasing at auction, required to close the deal, required because the property as purchased cannot get traditional financing due to various issues, etc. So if you can get traditional financing using it will allow you to leverage your capital more than putting all the capital on the one property.
You received all sorts of good advice on avoiding $30K properties. I suggest a blog on this site titled something like Why $30K properties do not work. It basically points out that cap expenses are independent of the cost of the property (ignoring size and bathroom counts). Cap expense therefore are a bigger hit on lower rent properties. There are of course other issues with lower rent properties.
So here is my case for So Cal:
- Appreciation
- Advantages of local including expertise, cost to get to property, able to self-manage if desired (typically ~10%). The family had an out of state property hit by 2 hurricanes. Even though we hired contractors because we were not present we were the property getting the least attention with the slowest work.
- Appreciation: Do the research. Use your own knowledge of the supply/demand. It really is simple Econ 101. I am not stating that it is certain to appreciate like it has but econ 101 tells me that excluding something catastrophic it is likely to continue to appreciate.
- Prop 13: My family suffered from this big time on a property on Gulf Shores Alabama. The taxes went up faster than the rents (until the hurricanes). We sold this property even though it was awesome (on the sand).
- I have no problem finding cash flow properties in my chosen area in So Cal. These properties cash flow using a $300/unit per month cap expense and 5% vacancy (our vacancy rate is less than this) and 5% maintenance expense. This cash flow does not include equity gain from making the payment which is in effect additional cash flow that can be obtained with a little effort. They may not cash flow with other parts of the country but the effort is less than out of state and so far the appreciation has more than made up for any reduced cash flow (Each property I have owned at least 3 years has gone up at least $100K - I have one property that has been owned only 1.5 years and is probably up $30 to $40K).
- The equity gain for rehabs is larger than many other parts of the country. Nice properties are greatly valued over neglected properties. This implies that I can purchase neglected properties, rehab, and have additional appreciation (more per unit than many other parts of the country).
Good luck with whatever you decide.