Ian asks: Move to CA & Invest? - Posted by Ronald * Starr(in No CA)

Posted by Glen (CA) on March 02, 2002 at 17:57:28:

Ronald Starr—(CA)—

No, I’d never butter you up just to ask you some favor. Flattery? Never. It’s beneath me.

By the way, did I see you on TV with, John Beck? You’re actually a very handsome man. And I mean that in a good way.

But since you asked, I did send you an email a while back asking about your company’s decision to go for CD-Data though. You were in OK at the time and were probably buried and so didn’t respond.

I think your company was/is using CD-Data disks and FARES but decided to go with CD-Data online soon.

My question concerned your appraisal of the two services (FARES and CD-Data) for cost, accuracy, and timeliness.

A CD-Data salesperson mentioned that their information gathering system involves an expensive software program developed by CD-Data to interface with assesor information elecronicaly, and in transcribing the property info automaticaly, it bypasses the human intensive transcription process used by (others), and in doing so reduces transcribing errors.

CD-Data disks were much less expensive than FARES also.

Could you do me a favor? (here it comes…) I’d like to know why your company is going to CD-Data online only. Also, did you find the CD-Data disks to be as informative as FARES, and were there any search options or tools that FARES had that made it a better ‘disk’ alternative than CD-Data?

I plan to use only disks for now. So I’m mostly interested in you comparison of the two. And I would like to hear/read your thoughts on going to CD-Data online ‘only’.

I know you’re busy, so thanks for whatever info you can give on the subject.

And I’d still attend your seminar even though you get cranky sometimes.


Ian asks: Move to CA & Invest? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on February 28, 2002 at 21:30:19:

I received the following question via e-mail. I don’t see a problem with personal privacy, so post here for anybody to read or to comment. I removed Ian’s last name initial to increase privacy.

--------THE E-MAIL--------*

From: "Ian " | Block Address | Add to Address Book

To: tigerinpa@yahoo.com

Subject: California Real Estate Investment

Date: Thu, 28 Feb 2002 03:13:33 -0500

Hi Mr. Ronald Starr. I had coordinated with you a few times a little while back. Recently I’ve begin seriously considering investing in California.
My initial thoughts were to focus on the Sacramento area, but I don’t have a lot of knowledge on California’s vast areas. Any input on possible areas of appreciation, current market conditions, etc. would be much appreciated
(no pun intended).

Sorry I had a long e-mail written out being more specific on my requests but my computer crashed and it demoralized me for the night. Any information you could give me would be great. Thanks.



Ian, there are three major categories of financial benefit from real estate investing: Cash Flow, Appreciation, and Tax Benefits. There are a lot of different areas of California, since the population here is bigger than any other state of the union and the land-mass is pretty big also, something like 4th largest, if I recall correctly.

I’m sure that there are many ways to conceptually divide up CA for investment purposes. I tend to think of four major categories myself. Coastal California, from about Mendocino County (an hour’s drive north of San Fran) to San Diego, going inland perhaps 35 miles or so. Then there is the “Inland Empire” which is east of Los Angeles and Orange county. The “Central Valley” is east of the coastal area and runs roughly from Redding–Shasta County–in the North to Bakersfield–Kern County–in the South. Then there is the “other” or remaining area: North coast, north inland, foothills, the Sierra mountains, and perhaps the Imperial Valley east of San Diego.

If you want cash flow, you will want to avoid coastal CA. Prices are very high, rents are low relative to the prices. You will do best for cash flow in the central valley and the “other” areas.

Appreciation has been greatest in the Coastal area for at least 30 years, perhaps more. Whether this will continue in the future is hard to know. There have always been people saying that the prices can’t go up much more in the coastal areas. But then they do. I bought a modest 1952-built Eichler house in Palo Alto in 1964 for about $21,500, if I recall correctly. Sold it in 1990 for $315K, as a fixer-upper, as I had had it rented out for about 15 years. I think now it would be worth about $750K!

Houses here in Oakland that sold for $35K in 1980, when I started investing here, now sell for about $125K-150K. And this is in the below-average neighborhoods, sometimes called the “ghetto.”

I predict that the Central Valley will show fine appreciation over the next 10 years. I suspect that the Inland Empire will also show very good appreciation. I make no projection for the “other” areas, as they are diverse and local economies will probably be very divergent in what happens. A lot of those areas have traditionally been dependent upon fishing, logging, and mining, as well as ranching. The outlook for those industries is murky at best.

The tax benefits of owning rental real estate are probably very independent of the cash flow levels and the appreciation rates. So, if you are mainly interested in tax benefits, you could probably do pretty well anywhere. There are some places to get more tax benefits: buying and renting condos. This suggests larger towns and cities. They will be more concentrated in Coastal CA and maybe in the central valley areas. There are some special tax benefits for raising Christmas trees, probably other forestry activities, and maybe agriculture. This suggests the central valley and the “other” areas of CA. There are tax credits for investing in historical districts and historical properties. This suggests older cities.

The Coastal Area is the most popular place to live because of the great year-round climate. The “other” areas are the least popular because of heat in the desert areas to the east, snow in the Sierra Mountains, and miserable cold and fog in the North Coast. In between are the central valley and the inland empire. The are hot in the summer, enjoyable in the winter.

I project a very good population growth in what I call the “rim”–west side of the Sierras–in the foothills at about 3000 to 4500 feet altitude. Not very hot in the summer, not too much snow in the winter: Paradise, Nevada City, Placerville, Jacksonville, Sonora, Mariposa, the foothills in Fresno County. There seems to be pent-up demand in those areas for rental housing. But the economics of building new properties and renting them out is not very attractive. Little profit for all the work one has to do. Probably that is why the demand is strong and the supply is low. If you could find a way to build acceptable rental properties in those areas at lower cost than currently, you could make out well.

Sacramento has potential for appreciation. It is in the central valley. The largest city in the central valley. It has a diverse economy, although rather heavily weighted with state government jobs. When the overall economy in CA is weak, the state cuts back on job positions. When the economy booms, so does Sacramento. The prices are much lower than on the coast, so many people move from the coast to the Sacramento area, especially young people who cannot afford to buy houses in the coastal areas. There are areas there from below below average to very nice. There are old areas with rundown properties and lots of new construction. So there are a lot of opportunities for different investment strategies there.

If you have more specific questions, I will try to answer them.

Good InvestingRon Starr****

Ian’s follow up questions - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on March 02, 2002 at 17:01:07:

Subject: Re: California Real Estate Investment

Date: Fri, 01 Mar 2002 04:30:21 -0500

Thanks for your very informative letter. So the area you deem the “rim” has a strong rental demand but not as strong of a housing demand? I was a little shaky on interpreting it. Do you think the area has a strong chance for appreciation? Also, do you know what specific areas of Sacramento are the “better” places? One last thing… please don’t laugh. Being out of state and not knowing the true extent of the worries assocatied with it, do earthquakes play as big of a role as the media sometimes plays it out to be?
And how hard is it to get insurance for this? Thanks as always.



The rim will certainly have a strong growth in population. There has been a strong appreciation over about three or four years up there. Whether there will be a lot of appreciation is hard to tell. It is, as always, dependent upon supply and demand. There is a lot of vacant land up there, so it is relatively easy to increase the supply of housing. However, therer are no a whole lot of builders, so the supply may not keep up with demand. The single family properties are in strong demand as rentals as well as for buying by home-owner occupants.

Earthquakes? Only along Coastal CA do you worry about them. Not in Sacramento, the central valley (mostly) or the other areas. I’m not sure of the inland empire. There is earthquake insurance available. It tends to be pretty expensive.

Earthquakes are scary when they are stong, not the little ones. The media over-plays all disasters. I invest in OK in spite of seeing destruction almost every time I go there. One time after tornadoes, I saw buildings, including commercial strip centers that were destroyed. On the trip last month I saw a lot of big tree damage from an icestorm. I could see it on the shuttle bus from the airport to the rental car location. Then, saw it in lots of the areas I drove in.

Overall, I think CA is a good place to live. The earthquakes are not too frequent and rarely very destructive. Even the big “Loma Prieta” quake of 1998 which damaged the San Francisco-Oakland bay bridge only seriously damaged a very small percent of homes – maybe less than 1% in the San Fran Bay Area. It did cause some cracks in the ceilings and walls in my house. But those are easily patched.

Good InvestingRon Starr****

Re: Ian asks: Move to CA & Invest? - Posted by Kristine-CA

Posted by Kristine-CA on March 01, 2002 at 10:44:41:

Hello. I agree with Ron Starr’s views about growth in the CA’s Central Valley. I work in Kern County and feel that the Bakersfield area is one with great potential. There are jobs and there is growth for the economy there. I also think that the Apple Valley and Victorville area in San Bernadino counties will be very interesting to watch develop.

CA simply does not have enough housing and many people will not be able to afford to continue to live in coastal CA. That includes me unless these deals I’m working on start to pay off.

Hanging on in Santa Barbara, Kristine

Are you sure you aren’t ready for the road? - Posted by Glen SoCal

Posted by Glen SoCal on March 01, 2002 at 02:02:20:

Let us know when you are on the lecture circut. We’d like to get a jump on the tickets as the, ‘Ronald Starr Happening’ will surely be sold out.

Re: Ian asks: Move to CA & Invest? - Posted by Daniel Burger

Posted by Daniel Burger on March 01, 2002 at 24:28:15:


What about the multi-unit market? (6-30 units)


University towns - Posted by Bryan in Cali

Posted by Bryan in Cali on March 01, 2002 at 21:55:17:

I would never live nor invest in a place where a university is the major employer and source of population (like Santa Barbara). Such places tend to be very anti landlord and have lots of very immature residents (young college students). I know that even in college towns like Davis where there is lots of land nobody wants to build housing because local politicians are so anti growth. And 18-22 year old college students, away from home for the first time, make poor renters. They tend to trash places and party all night and throw up in the hallways after binge drinking contests. I know that when I was a young renter, even though I didn’t go to a university, I had to agree to stuff that more mature renters didn’t, like restrictions on visitors and stereo equipment and longer leases. That’s because young people are a greater risk to do business with.

Re: Are you sure you aren’t ready for the road? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on March 02, 2002 at 16:47:46:

Glen Bradley–(CA)----------

Are you sure you aren’t trying to butter me up to ask some favor?

Well, I left two phone messages for John Beck and he hasn’t called me back, so I guess I’m back being a bench-warmer until I can figure out how to get something going for myself. At the present time, I am too busy with my current job, current properties, and trying to buy more properties to spend much time worrying about speaking and writing.

Good InvestingRon Starr**********