Posted by CTR (CA) on April 07, 2007 at 14:36:35:
The last CA downturn was about 5 yrs (Bay Area), maybe 6 yrs SoCal.
Cash Flowing areas on the West Coast? - Posted by CaliJoe
Posted by CaliJoe on April 03, 2007 at 12:35:57:
Hi everyone - What areas are still cashflowing on the west coast? I’m in CA and I really want to find some investments for the longterm, but I don’t want to have to sustain negative cashflow with the properties in my area.
Go East, Young Man - Posted by Jimmy
Posted by Jimmy on April 03, 2007 at 15:01:29:
forget about the West Coast and cash flow. get away from the coasts and look in the middle of the US.
California is not just negative cash flow, it is SEVERELY NEGATIVE.
I live in Austin, and Austin is mostly NCF. lucky to find 1% rent per month here (i.e., on a 100K investment, you might find $1000 in rent). that = NCF, and that is better that anything on the west coast. I used to live in the SF Bay Area, and if you could get a gross return of 1/2 percent a month, you were doing good. grossly negative.
but try Tulsa or Kansas City of parts of east TX. I can buy new properties and gt 1.5% per month. or I can buy rehab jobs and get 2-2.5% per month. now that’s PCF.
Re: Go East, Young Man - Posted by Frank Ruggiero
Posted by Frank Ruggiero on April 04, 2007 at 17:22:44:
You should consider the Akron ohio area.
there are some great deals in my area.
www.americanhomebuyers.biz
Feel free to contact me or check Craigslist.com for Akron, Ohio.
Thanks,
Frank
Re: Go East, Young Man - Posted by CaliJoe
Posted by CaliJoe on April 03, 2007 at 16:42:32:
You’re right about CA being severely negative. It’s ridiculous. I need to put together a plan to head out to one of those cities with purchasing in mind.
Cal is NOT ridiculous - Posted by Jimmy
Posted by Jimmy on April 03, 2007 at 17:33:25:
I wanna be clear about this: California real estate has been a terrific investment over the decades. I was in the SF market from 1997 to 2005 and my house quadrupled.
You can make a fortune in CA real estate, but you make it on the back end. You have to carry your property all the way.
and CAL wil hit bottom in the next 18-24 months, and people who buy in 2008-9 are going to look like geniuses in 2015-2017.
so figure out a way to squeeze into your first CA home, and use the equity you accrue to buy cash-flow rentals elsewhere. its a formula that works.
Re: Go East, Young Man - Posted by Mark (SDCA)
Posted by Mark (SDCA) on April 03, 2007 at 17:07:27:
If you had out to those cities to purchase then you need to have MANAGEMENT in mind.
Re: Cal is NOT ridiculous - Posted by Ryan (NC)
Posted by Ryan (NC) on April 06, 2007 at 19:21:41:
I am a believer that deals CAN be done in CA, not as easy as in other areas but their are motivated sellers in every market…
If we are to invest via your idea that time will take care of everything, how do we eat for the 6 year period before we become a genius? Speculation is gambling NOT investing, I’ll take a positive CF property any day of the week!
Best wishes,
Ryan Needler
Re: Cal is NOT ridiculous - Posted by Sammy
Posted by Sammy on April 03, 2007 at 17:58:09:
Prices can only continue to go up so far in a given amount of time. At some point the highest possible price is reached for a particular time period. A house is only worth its value in the amount of rent it offsets (including future discounts on what you would have paid for rent in the future; assuming you do not move) or brings in plus the emotional aspects of being a homeowner (which is a non-economical value to you personally). You can take your chance on if the change in the real estate market will not severely affect the emotional value of a home (most of the extra cusion in CA) or not. But if the emotional value goes down you might find yourself feeding a black hole. Also, the last real estate down turn lasted a decade and without the same preceeding huge bubble. Keep that in mind before betting on a negative cash flow. Also remember to calculate in your lost opportunity costs.
Re: Go East, Young Man - Posted by Frank Ruggiero
Posted by Frank Ruggiero on April 04, 2007 at 17:24:11:
You should consider the Akron ohio area.
there are some great deals in my area.
www.americanhomebuyers.biz
Feel free to contact me or check Craigslist.com for Akron, Ohio.
Thanks,
Frank
Let Me Re-Articulate - Posted by Jimmy
Posted by Jimmy on April 07, 2007 at 09:14:22:
I did not exactly recommend investing in CA homes. Embedded in the original posters message was the belief that resale values are “crazy” when they are out of line with underlying rents (well, I thought that was an embedded notion).
when it comes to SFR’s, that idea is simply not correct. resale values are driven by supply and demand, and not rental values.
resale values of multi-family properties (let’s say 2-4 units)are more closely connected to rents, but not entirely. there is still a supply and demand impact. I sold some 4-plexes in a CA probate three years ago, and the effective cap rate was somethih=ng like 5%. that’s nutty to me, but that’s California.
Once you get into CA apartment complexes, cap rates and “normal analytics” rule the day. These will not sell for negative cap rates.
Re: Cal is NOT ridiculous - Posted by Rich
Posted by Rich on April 03, 2007 at 22:53:18:
Huh? The last correction in Cali lasted about 4 years. Anyone that started buying in the 3-4 year time frame from the top were looking good starting the 5th year and were rich by the 10th when prices surpassed the previous top. This correction will be less deep than the one in the 1990s anyway, more wealth was created between the .com and real estate booms.
Re: Cal is NOT ridiculous - Posted by Sammy
Posted by Sammy on April 04, 2007 at 01:56:33:
The charts I have seen suggest something like 1987-1997, although to be fair that was nationwide and California may have recovered sooner. Either way just because there wasn’t a long correction last time, assuming that is true, doesn’t mean the same will be true or not next time. Japan finally had a non-negative year for land prices after a 15 or so year correction last year and only a 0.1 rise in prices at that and that doesn’t take inflation into account. As for the wealth created during the last two bubbles, that is questionable; one blew up spectacularly and the other is in the process of blowing up although we don’t know how bad yet. A doubling in a decade, or probably even more in CA, doesn’t bold well for prices in the near future. Inflation, rents, and salaries have not kept up. For prices to keep going up you have got to have willing and able buyers. With prices so out of control in CA your pool of able buyers is already much smaller. And of those able to how many will be willing to be paying much, much more than if they rented or buy a rental with negative cash flow once they realize they aren’t guaranteed a 20% growth in prices every year.