Re: Could I be right? - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on August 20, 2003 at 13:14:38:
The higher that prices get, the lower the ratio of rents to property values. So it becomes harder to invest for positive cash flow.
Yes, property values will decline some?or, what is about the same, not go up as steeply?when interest rates on mortgages go up. But your rental income should not be changed much by the change in housing values in an area. The relationship between house values and rents is pretty loose, in my view.
I agree with your view of that WSJ-reported real estate licensee. Nonsense. It is just that here in Coastal CA, the demand is extremely strong. So, unless there is something to change that, the prices will continue to go up.
You say it is hard to find positive cash flow in parts of the central valley. True. But, I think you will find it even harder to find them in the Coastal area. You might have to settle for breakeven cash flow. Or you might want to look harder where you mention and get the best of the deal that are out there. Or concentrate on other areas. Just last night an investor at the BAIES meeting told me he is getting very good positive cash flow in the Fresno area. I think the places to look are: Madera, Fresno, Tulare, Kings, and Kern counties. Although you are likely to face some competition even there. Kristine(CA) reports many out of area investors looking for rentals in the Bakersfield market. I?d also recommend looking in Butte, Lassen, Shasta, and Tehama counties. Also, in the foothlls from about 2500-4000 foot elevation. Paradise down to Mariposa.
It might not be easy. After all, with all the people in the Coastal areas who want to invest and find local properties unappealing on a cash flow basis, there is inevitably pressure on the inland locations. One possibility is to go further away. I have been buying my rent houses in Oklahoma state for the past four years. Good cash flow there. Probably not much appreciation. So, if you want appreciation and cash flow buy whatever positive cash flow properties you can in CA.
These days it is not easy to be a real estate investor in the great place to live, Coastal California. Have you considered putting your investment capital into high technology stocks?
Good InvestingRon Starr*****