Cali Realestate Investing Bad Idea?
not sure if this is the right forum for this question.
i heard from a couple of people that california real estate is not a great investment as the housing market is likely to crash within a couple of years. does anyone have any comments or knowledge that they would like to share?
i live in the so-cal area and would like to get into real estate here. any suggestions would be appreciated greatly!
everything runs in cycles... and thats part of what makes this biz so much fun...can you survive the storm when it hits?....Then you're a true r.e. investor....Part of this is taking the risk>>>
what is your advice on real estate investing during the coming storm in california? how would you go about investing? what would you invest in? what would you not invest in. i am very much a newbie but love a challenge in life. just dont want to lose my ass in this (ad)venture while learning.
I guess i would be considered a newbit but i do own 3 properties, all 3 rentals. all i can say is this in all the years that my mom and i rented a condo (9) the owners NEVER said hey guys the market is crashing so im gonna lower your rent! as far as im concerned worse case scenario rents will stay the same but never drop and i will still be taking advantage of my tax writeoffs and getting appreciation, and having my tenants pay my mortgate, i cant wait till they pay for my new mercedes nxt year they are so nice!
cym, speaks a great truth. So long as you do not go insane, like buy units in Beverly Hills where they rent for $3,500 a month and have a lovely view of the alley or the frontal view of the apartment house across the street which is a combination of Moorish, cum McKinley stinker with essence of cream stucco thrown on the walls with a thick trowel. . Stay away from that.
If you are following the ethnic waves crossing the Valley from East to West, you can do well in cheaper units. Some designed similar to Motels, but if you combine two units into one unit creating slightly larger units with a central kitchen and living units on each side (a double up design) you can do well, you see there is a need for double up units in which two families or extended families can live cheaply. You must remember there is a very low level of income for non english speaking hard working recent arrivals and this double up unit makes it possible for two families each with two or more working adults to pool a portion of the income and pay the rent. Works great, but you have to get really involved in the management. You become half manager and half social worker, but it is fun. What you are doing is helping them conform to our strange ideas as to social acceptable conduct. Like paying the rent on time. Now this does well right now and is designed for bumps in the future. The largest group at risk of continued loss of jobs in this new period of adjustment to advanced tech is the middle class and those portions of it who aspire to slightly increased living costs. The gas guzzlers and the Beverly Hills apartments etc.
I hope this is helpful it is a lot of fun, you learn a lot. I have acquired a taste for Corona Beer and have started pouring salt and lemon on my wrist prior to slurping down Tequila.
If great wealth is your goal and you wish to spend the next two years aquiring it I suggest the following. Now don't tell anybody this is just our little secret.....
Starting on a line slightly West of Pasadena look for Motels that are neglected and run down due perhaps to the lack of working class persons taking vacations or the introduction of Freeways, overpasses etc. You can tell them from the cars being repair'd in the front and the mass of beaten up semi functioning autos in permanent emplacement on the streets nearby. Those should be bought up,about three to four times existing yearly rentals, the units combined into double family occupancy. A little landscaping lots of paint, correct plumbing and electrical cause these babies were built with spit and a promise, but nothing difficult. I put window boxes on all the windows and plant flowers Now you jack the rents of course to proper levels and get out of the way. You will fill as fast as the word gets around. Try not to mix the tenants, try to keep them in among their friends from the same Country. After about ten of these you are rich. In money, in increased linguistic abilities and a new conception of your fellow man which will turn you slowly into an Internationalist, damn I can never remember the words to that song.
Cheers Lucius
None of us has a crystal ball. For those of us who weathered the last cycle 90-95 the dip was deep in the high end (Beverly Hills, Corona Del Mar, La Jolla), moderate in the mid range ect. The prognosticators I have read suggest that Southern California has a 10-15% chance of seeing a slump in values. Northern Cal. has a 20-35% chance of a slump. Where, how and what you invest in depends on your goals. Flippers can get into trouble if values drop while they are attempting to re-market their treasures. Rehabbers, likewise. SubTo and LO investors could weather somewhat better if they write their contracts with slumps in mind. Us Buy and Hold guys are in this for the long term. If rents drop some then well…but they never retreat very far or for long.
There can be opportunities in dip markets, but as I said retreating values never stay down long.
My mentor taught me many years ago that you can never buy wrong, you may buy long but never wrong
JBW
[addsig]
wow! thanks alot for everyones input on my concerns. wintents advice was right along the lines with what my intuition was saying. very sound advice. and thanks to lucius for your wisdom. i get a kick out of your posts!
You think the dip of 90-95 was bad, you should have seen the dip of 1963. Tracts all over the west valley with partiually built houses with weeds up to the roof - sitting there for 2 years. In Valencia the 1990 dip got back to 1990 values in 1996 - and prices are about twice the 1996 values - so if you can stay in for the long haul you may be ok. However - cap rates and interest rates look like the early 1930's - which took 30 years and a world war to fix. That's why there's money to be made - it involves a gamble.
The challenge is to understand all of this well enought to devise a strategy that works. People that do that don't buy or sell courses - they make money buying and selling RE.