For the past two or three months I continue to hear that “California is a whole seperate animal” when it comes to real estate both in general and in terms of REI. Can anyone tell me what people mean by this? Is it really that hard to invest out there or is the market just very competitive and people are over reacting?
Average home costs are extremely high and the rental rates are not commensurate with those prices…$600K properties rent for $2500 a month…you can’t cashflow. Most folks are making any money are buying, fixing, and flipping. The appreciation has been phenomenal such that the ARV goes up during the 2-3 month rehab period…
I’m not in California so these are general observations on my part;
California is a whole different animal - in many ways - none of them good. It makes me thankful to live in Ohio.
California is a beast right now. Everything is extremely overpriced. It’s like a bidding war gone really bad. Some how people keep coming up with the money to buy at those prices so houses continue to sell at those prices. I would hate to see so many people get hurt but when this thing really corrects itself, it won’t be pretty. I live in Southern Cal(Riverside/San Bernardino) and the prices I see on some of the houses are unbelievable. I would like to invest out here but “now” is not the right time. The appreciation run-up hasn’t taken away my hope besides I would never accomplish anything if I gave up.
rehabbers are having a hard time finding homes to rehab even though their friend, relative is a broker…so i heard.
u cant make $ in a low to avg neighboor these days. Rental income for a 600K home is barely 2000k and buyer expects new fridge, nice carpet, etc, you name it.
There’s money in the higher end neighboorhood where u can purchase a property starting at 1mil. and rehab it and double up.
Well from what i’m reading in the posts it seems to be a horrible place to invest in right now until the market values seems to stabilize. But from an investors point of view I can’t help but continously hear what REOCONSULTANTS keeps saying on the other posts, “ITS NOT YOUR MARKET ITS YOUR MARKETING”.
With that being said (NO DISRESPECT MEANT TO ANYONE IN CA) could it be that we’re seeing a market that investors have yet to “tame” in terms of marketing or is it just incredibly economically unfeasabile in its current economic state?
In the bay area, it was the case where houses would sell in 1-2 weeks for over the asking price. The ratios for renting them is also way out of wack. I don’t think there’s really a way to make money there.
Now the market has slowed down. People are starting to reduce prices. I think there will be opportunities in the not to distant future.
Dude…I just, like, got home from the beach, drug my naked bu** out of the hot tub, and polished off that bottle of cabernet when I read this thread.
Anyone guess where I live? NOT in Ohio - sorry Mike you had ask for that one!
California is a big place, full of lots of very different people - most of them from someplace else. To make gross generalizations about either the place or the people would be a mistake. I’m a native of San Diego and currently reside in same. I don’t profess to speak for all of California, nor all it’s citizens, but I might be able to add some perspective to this discussion.
IMHO California won’t slip into the ocean anytime soon, and real estate values will not drop through the floor. Without a doubt, prices will level out before the next increase - but increase it will! Love us or hate us, lots of people keep moving here and somehow they come up with the money to pay these ridiculous prices!
In many respects the challenges facing RE investors HERE are the same as they are everywhere else. Finding a “deal” and a motivated seller can be tough! (It’s not your market, it’s your marketing!) The major difference is the $$$$$$$ amount involved. (It’s not your bank, it’s your bank account!) To buy, rehab, and flip a median priced home (approx. 600K) may take 250K cash flow! Then you have to find someone who can qualify for the mortgage to buy the beast! For most people this is the equivalent of high-stakes poker and you’re all in! This is not a friendly Friday night game.
Rentals ARE a challenge, too. The average cost per unit (in a building with 6 - 10 units) is about 150K! Duplexes and four-plexes will be higher, larger buildings will be slightly lower. Prices for rental buildings have been partially driven by the condo conversion market in this area. With housing prices being SOOO high the condo market has become quite hot. There are substantially fewer restrictions doing a conversion than building new. “Cash flow” in the early years of owning a rental here is unlikely - long term of course your odds improve. Breaking even is a huge accomplishment. Appreciation is the primary reason for owning rental property in this market, not to mention tax advantages.
In closing, ('bout time this guy shuts up!) I’m mostly jealous when I read about doing deals for substantially less $$$ than we need to put up for the same type of transaction.
Regards to all…MG
GET OUT OF CALIFORNIA…
… and look where the probabilities for growth are converging. Retirement population and new infrastructure for example are very important.
I am looking into the Carolinas. I found a great research study on that region at http://www.convergentacquisitions.com
Bottom line is: we need to look for where the next real estate boom area will be, not where it already happened.