All Forum Posts by: Osazee Edebiri

Quote from @Osazee Edebiri:

Quote from @Bruce Woodruff:

Quote from @Osazee Edebiri:

I will agree with you Matthew, there are some cities that have Endless regulations, but many cities in other states have those problems too.

You're incorrect here. I understand you are biased towards Cali, and that's ok as long as you realize that. But there are no other states with the over regulation that Cali has. Zero. I lived and owned many businesses and properties there for over 40 years, longer than you've been alive.

And if someone decides to squat in your Bay Area Mansion the State Law will protect them, it's a State issue and then County, not neighborhood. (Although I get that you're saying that rich areas will treat it differently, the elites never follow their own rules)

 The whole premise of this question is to hear why another state is better and while likely out perform a Cali investment in 15 years, most of the responses are just negatives to California. I definitely love California, but if someone can give me good reasons to invest somewhere else of course I would do it. Reasons are two sided. Cali's bad laws, eviction practices, etc and the benefits to another state.

Eviction is very much county to City here. Evictions happen, but realistically if you are renting a Bay Area Mansion, the tenant you put in matters. I value your longer than my lifetime experience, that's why I here for these conversations. I did property management for 5 years, time again the the tenant screening is one of the most crucial parts to success. Then for small landlords the relationship with the tenants or how the property management maintains the relationship. 

And yes to the areas where there are "elites" as you say, I believe those are the areas that will out perform most other cities in other states.

Hey, I was the first one to say that coastal Cali will probably out-perform anywhere else. At least until a major paradigm shift happens, which I suspect it will. But not in the next 15 years.....

But...... now that I've had time to let this thought percolate, I will change and say that there are other areas that could outperform that area.

California is just too large and too diverse to be talked about as a single market. Where I'm at - in far northern CA - looks nothing at all like the metro areas south of me, be that Sacramento, San Jose or LA. Housing is actually very affordable, particularly in comparison to income levels. We live here, we invest here, and we also invest out of state so we know exactly how our area compares to other areas we've either invested in previously or are interested in now: Central and coastal OR, Northern CO, all of Idaho, Cleveland, Toledo, Dayton and Akron OH, Indianapolis, and the Texas hill country. In our area we can get solid cash flow using the BRRRR method on SFH's with an ADU. They will appreciate, but not at the rates you see in the bay area and other metros. While it's true CA has a lot of regulations that aren't business friendly, property taxes are actually very favorable - FAR better than those cities I listed in Ohio and even Idaho. Our property manager has done an excellent job of vetting tenants and we have no problem staying at market rates. Thankfully we haven't had to deal with an eviction but that has as much to do with tenant vetting as anything. A lot of people who don't live in CA or invest here have created a lot of stories that people love to repeat. I don't love the income tax bracket we're in. I don't love having to pay $850/yr per LLC. I don't love the extreme heat at this end of the state, but it's still a place that people want to work and live despite what the headlines or your neighbor Bob will tell you. Bottom line: real estate is local. So there's no one size fits all in this state.

Quote from @David Song:

Quote from @Osazee Edebiri:

I think the constant discussion of California vs anywhere else is intriguing. So I pose a question. Hypothetical, if a person had a  2 million dollars to invest, they purchased property with 1 million in California and 1 million in any other state, which would perform better after 15 years and why? 

This assumes anything and everything will happen, which is the real life case anyway.  I am not automatically assuming California will perform better just because I live here in the Bay Area. I think someone may have interesting incite to why another state could out perform California property in the next 15 years.

This question has been debated on BP for over a 

This question has been debated on BP over a decade. About 10 years ago, I made the decision to stay in CA Bay Area, rather than OOS. Looking back, that decision certainly paid off big time. I am curious about those folks decided to go OOS 10 years ago, how are they doing. I am sure they are doing fine, with the nationwide appreciation in the recent years. But I would love to know if they regretted their decision.

Quote from @Carlos Ptriawan:

Actually there's no such this as CA vs out of state.
This is all just mathematical equation dude. So lets have this exceltable how the house appreciation performs since 2009 :

Bay Area    6.9%
San Diego  6.5%
Kansas City 3.2%
Nationwide Average 3.1%
Typical Inflation every year 2.9%
..
Indianapolis,IN 1.8% (just for illustration ,not accurate)
Birmingham,AL  1.5%  (just for illustration,not accurate)

 There's a metro that's accelerating double in the inflation rate, that's where you see the highest acceleration. The highest acceleration is equal to a lower cap rate equal to lower cash flow.

In the other spectrum, there're cities where it's lacking appreciation, so you can still always have higher cash flow/higher cap rate in that city.

In another question: what makes the city appreciates a lot? economic booking and highest supply/demand ratio.

In the year 2300, if Silicon valley moves to Boise Idaho, Boise Idaho will appreciate double as well. 

So it's not about "where", but it's about "economy". Higher economic output triggers higher appreciation, it happened everywhere regardless it's San Jose, NYC, Singapore, Berlin, or London. 

It's a function of math.

this is an astute breakdown.

At the end of the day, no one has a crystal ball. If the numbers makes sense, a deal can work in any market but who knows what that market will become in 15 years. 

Quote from @Aaron Gordy:

@Osazee Edebiri I think that one of the richest folks currently: Elon Musk has kind of led by example by putting down billion dollar roots in Texas. He left California. 

 We need more people like  Elon Musk.

When these techies move to different places, the new place suddenly has price appreciation, good for realtor :-) 10 years later, people start complaining 'why everything is so expensive here, lets's move to Florida or Alabama'.

@Osazee Edebiri I think that one of the richest folks currently: Elon Musk has kind of led by example by putting down billion dollar roots in Texas. He left California. 

Actually there's no such this as CA vs out of state.
This is all just mathematical equation dude. So lets have this exceltable how the house appreciation performs since 2009 :

Bay Area    6.9%
San Diego  6.5%
Kansas City 3.2%
Nationwide Average 3.1%
Typical Inflation every year 2.9%
..
Indianapolis,IN 1.8% (just for illustration ,not accurate)
Birmingham,AL  1.5%  (just for illustration,not accurate)

 There's a metro that's accelerating double in the inflation rate, that's where you see the highest acceleration. The highest acceleration is equal to a lower cap rate equal to lower cash flow.

In the other spectrum, there're cities where it's lacking appreciation, so you can still always have higher cash flow/higher cap rate in that city.

In another question: what makes the city appreciates a lot? economic booking and highest supply/demand ratio.

In the year 2300, if Silicon valley moves to Boise Idaho, Boise Idaho will appreciate double as well. 

So it's not about "where", but it's about "economy". Higher economic output triggers higher appreciation, it happened everywhere regardless it's San Jose, NYC, Singapore, Berlin, or London. 

It's a function of math.

Quote from @Osazee Edebiri:

Quote from @Todd Rasmussen:

@Osazee Edebiri

Where is dictated by how you want to invest and how much you have to place.

For me, 1 million dollars does better in TN than CA over 15 years. If there was substantially more to invest or I wanted to be more passive, then CA would be more appealing.

Yes, I definitely agree, I mean just being more familiar with an area is an advantage. But this question is based on what would perform better. So let’s say we took a person who had no ties to California or Tennessee, how would there million dollars perform better and why?

I'm in TN. For cash flow and general wealth building I love investing here but historically there's no comparison between here and most of California in terms of housing appreciation. Even our markets that are getting "expensive", like Nashville, are no comparison to most of California's prices. 

That of course comes with a caveat. As a landlord there's no way I would want to be a California investor because I don't want to work that hard for the extra return. It's the same reason I don't own C/D class housing - there's much better returns there but I don't want to work that hard.

Return and risk are strongly correlated. One of the reasons you have historically had better returns on investment property in California is because you face a lot of hurdles and aggravation that I don't face here in TN.

Colorado has the third lowest property taxes in the US.  Boulder has a housing cap (limited supply) and steady demand.  So not unlike geographical limits to supply on the CA coast.  And as many have said, the state of CA has some issues regarding landlord tenant laws. I was recently speaking with two different people who live outside of CO. One an accountant in PA and the other a water law attorney in Utah and we  are astonished that there isn't more talk of the American Southwest running out of water. Is anyone else concerned about lack of water in CA and the rest of the Southwest?  Would this be a contributing factor to not invest in these areas? 

@Osazee Edebiri

California is called the Golden State for many reasons. Plenty of sun, the gold rush, and extraordinary past opportunities to invest in real estate. While California is still an ideal setting for certain people, it is quickly becoming more difficult to justify buying property there. This is especially true because there are, arguably, 49 other states with more attractive real estate investment incentives.

For people who have only known California as home, it can be a little difficult to think about shopping for property anywhere else. Try to counter this bit of nostalgic grief by framing real estate investment properly. It helps to keep an open mind about a smart relocation. Here are five benefits that accompany property ownership outside of California.

1. Living More Comfortably, While Chasing Other Economic Opportunities

It is no secret that the cost of California acreage is only surpassed by certain select metropolitan properties in places like Manhattan. For the price of a simple home and plot in California, a small ranch can be purchased in many other states. Plus, the tax burdens in these places are much more manageable. Also consider states like North Dakota. Property prices there are also rising, but there is much more raw land available. Industry growth is also producing income opportunities that are setting records.

2. Investing Beyond Ballooning Markets, or Scarcity Fears

Investing in real estate simply because the market is volatile is not a secure plan. Try to remember 2007. Places like Utah and Colorado have balanced housing market statistics. Though there are upward trends, they are not only occurring because cities are running out of room.

3. Exploring States with More Resident-Friendly Governments

Sometimes, when reading California news, it seems as if the state government doesn’t actually like the job of managing its population. This is especially true when it comes to the act of finding affordable property in a safe neighborhood. Consider economically unique shifts like those in Wyoming. This state has just provided home buyer and business incentives for people using money vehicles like Bitcoin. This is a no-nonsense move to attract people who want to make the state home.

4. Escaping the “Nanny State”

Freedom is a huge issue with property buyers, regardless of age and class status. New California legislation, like the recent home solar power mandate, is the last straw for many people. There is a renewed desire for personal liberty in modern America. This is precisely why a state like Idaho is one of the fastest growing. In a city like Boise, new residents can enjoy metropolitan attractions, untouched wilderness areas, and private acreages with simple municipal laws to “homestead.”

5. Being Part of a Place with Growing Attractiveness for the Future

While a state like California has nearly endless attractions for visitors, most property owners would say that it is headed in the wrong direction. Why invest in an area that has an uncertain social and economic future? Bottom line real estate profits are only one factor in finding the right property. Take the time to learn about markets in areas that will likely remain popular for decades to come.

Good Luck!