I live near Santa Barbara, CA, and I can’t find any 4-units that have a positive cash flow anywhere near asking price. For most of them, I would have to offer 1/2 asking price to break even. I’m getting frustrated and wonder if I will ever find a 4-unit that meets my criteria. Any suggestions?
“Move closer to the food, sir”, Don and Mike, Radio Gods
I guess my problem is that I’m stuck in the central coast because of my job and I don’t feel comfortable investing far away. This is my first investment purchase and I’m most familiar with this area. Maybe after I’ve bought a few properties, I wouldn’t mind investing outside of CA.
I tend to agree. Is there anybody here making money in California? If so, how are you doing it.
very carefully young warrior…very carefully
In areas like San Diego, Orange County etc, the best you can hope for is break even. Every now and then you find one that might cash flow but with the recent run up in prices, there hasn’t been enough time for rents to catch up. Investors don’t buy properties here for positive cash flow, they buy for possible future appreication.
At least thats what they tell me.
looking for rental properties in Calif that are breakeven is like searching the gutter for a winning lottery ticket.
prices have skyrocketed and rents have only crept up.
that’s my view from working various parts of LA, Orange, San Bernardino Co. Six years ago when I got into the market is was really tough then and it seems the window got smaller and smaller over the years. I have not bought in Calif since '04.
maybe you could get something to work way out in the hitherlands, but I doubt it.
Mike in Calif.
How do renters in Ca. afford to even live there? A buddy of mine was looking to relocate to San Diego last year. We looked up an down at probably 150 condos, and SFR’s. For his price range (300-375K) we could not find anything that was even close to livable. Another friend of mine works for Countrywide in their full spectrum lending department and handles their KB homes account exclusively. He was telling me that the starter KB homes are 450-650K in Ca… How in the heck do people afford housing like that?
I was on a business trip to northern California. I was out eating dinner by myself and of course when I entered the restaurant in I grabbed the Homes for sale free publication to read while I waited for my food. After I finished and got up to leave a guy from another table started to follow me to my car. I stereotypically just knew this guy was going to hit on me (not that there is anything wrong with that) and so I turned to find out what he wanted. He said he was a realtor and saw me reading the magazine and wanted to know if he could help me find a house. I asked him that same question. How do people afford houses here? Basically they cheat. He said he could get me into any house I wanted. They take out loans for the 20% and loans for the 80% and they set the payments where you want them and defer the interest and even principle and play all sorts of games. They basically do negative amortization plans and rely on appreciation for equity.
It is whole nother world in California. Can anyone spell bubble?
very true blue moon. Country wide is leading the way with some of those predatory lending practices, and they have settled with I believe new York. anyway, the game is under pressure, and the market is starting to see a 4% bleed rate. If we see an increase beyond this we could really see some big corrections beyond what we have seen in CERTAIN parts of california. I was just featured in an article that referenced investor’s and in particular my starategy for SAN FRANCISCO. There are a few bubble proof markets as defined by a couple of very well known academics out of Wharton, and UCLA. Boston, New York, portions of LA, etc. San Francisco takes this to a new level. We have a few area’s here that are in a slight decline year over year, but the overall market continues to be healthy. Be very clear, San Francisco…not “the bay area”. Ryan
We have a similar situation in San Diego. There is not enough affordable housing. Certain areas of town have dropped considerably since the height of the boom bit those are mostly low income areas that got over heated.
On the other hand, there is currently a shortage of homes in the $2-$4 million range in Del Mar, La Jolla, and Rancho Santa Fe.
Negative amortization loans are nothing new. World Savings invented them back in the 80’s. They are good for the bank because if the lenders cost of money goes up, so do the owners cost. I wouldn’t recommend a neg am loan in St Louis but here, people do fine.
I think it was Will Rogers who said “Buy real estate, they aint making any more of it”. This holds particularly true of San Diego proper. We are bound on the south by Mexico, the west by the ocean and the east by Cleveland National forest. Unless you want to live 50 to 100 miles out, there isn’t much place to build new projects. We have a good economy and great weather. People pay the price to live here because since 1982, we have average 8.2% annual appreciation even counting the down years of the late 80’s. Time fixes all errors in San Diego real estate. The neg am loans allow borrowers to hold on until someone comes along and offers them more money. 8.2% is amazing in itself but remember, people don’t pay cash for a house, they usually put down less than 10% so the ROI increases exponentially.
Look for a bigger burst of the bubble in places like Phoenix and Las Vegas that could continue to build in all directions because there are no natural or artificial boundaries. People will probably not be able to pay off a home in San Diego in the future. They will pay a minimum payment similar to renting but get a tax write off and a big bonus when they sell. If they live in the home, the govt lets them keep the first $250K of appreciation tax free. With that kind of money they can pay cash for a home in a lower market and live out their retirement years.
A UCLA economist spoke to one of our civic groups. He said they don’t expect the bubble to burst in San Diego because people don’t day trade their homes like people day trade stocks when they start to go down. You gotta live somewhere and unless you quit your job and move, there is no place to go.