Current REI Strategies in CA

[ajackson]

Just wondering what people are doing here in Califonia right now in terms of beginning REI.  I've talked to a few people similarly situated and they are losing money hand over fist flipping properties.  The cost of property (especially in the bay area) does not seem to lend itself to lease optioning.  Others I've talked to are just building up cash reserves in the hopes of the upcoming increase in foreclosures.  Thoughts? Wait & see?  Commercial REI?

[propertymanager]

If I accidentally found myself living in California - I'd MOVE!  I heard on the radio yesterday that California had a new initiative to reduce carbon dioxide.  Maybe if everyone held their breath!  No wonder things are expensive in California!

Mike

[archer]

We're investing out of state. But we're keeping a lookout for something local as well. There's still money to be made in REI in CA, but I think it requires a lot of cash, ie 20% and higher downpayments for mulit-unit properties.

The Bay Area is as robust a market as ever. Friends of mine have been outbid on every property they've made an offer on. Selling prices are still going 10-30% above asking, if the place is right.

[ajackson]

Appreciate the responses: How is out of state investing working for you?  There are certainly a lot of annecdotes on this message board about naive Californians who are throwing money at AZ & TX and failing miserably - and as a beginning investor no desire to fall flat on my face initially.

[archer]

It's going well for us. We bought in the Portland/Vancouver area. You can still get SFH's there around the 200k mark that will cash flow. Appreciation is solid, lots of demand for quality rentals, property management is affordable. What's not to like?

We were also smart enough to do our homework and identify growth markets. We didn't chase the dream into AZ or Las Vegas. We're also looking at North Carolina and Arkansas for future investments. They may not sound sexy, but we like the market indicators in those areas.

[CoronaGirl]

If I accidentally found myself living in California - I'd MOVE!  I heard on the radio yesterday that California had a new initiative to reduce carbon dioxide.  

Well you know, Arnold has to do something to look like he's done anything...

I've been told that if I wanted to invest in California to look in San Bernadino and basically in growing near desert areas. I'm really interested in doing something out of state as well, but curious how do you gage appreciating markets or how good a price you are getting when you aren't on the ground? Do you just trust a real estate agent? I've been growing interested in preconstruction because it sounds like you at least often have a built-in discount from stuff that's already built..

[ajackson]

I am also interested in preconstruction - the bay area (not san francisco) has a lot of new construction in surrounding areas + new construction for senior citizen housing which I was also looking into investing in.  

However, cash flow SFH & apartments, just won't happen in my local area.  Love living here personally, just can't invest really in RE here...sucks to know that a "great deal" on a SFH is 650K, and the max rent you can get for it is ~2k.  

[CoronaGirl]

Sounds like home  

[aak5454]

I would say that people going out of state particularly from Calif are losing money becuase they don't understand what they are doing.  A blind monkey could make money in California (particularly SoCal) in the last 5 years; even a tool shed with termites and a bad roof on sloped lot went up in value.

As for San Bernardino (I have and currently hold some property in that area for quite ahile; also sold a lot), the market inventory in that area is up over 2x and still climbing.  I think you could see some the biggest drops in SanBernd and Riverside Co.  With that said, the Inland empire is become its own entity and its the future growth area for the LA metro area.

The only people I know making money in Calif at this point are people doing preforeclosure buyouts and even from what I heard there are a lot of "dry holes" becuase people have little or no equity.

[ajackson]

I'd love some suggestions?

[jcmay]

I live in So. CA and also invest in TX.  If you know what you're doing, you are not going to lose.  Rental for positive cash flow is almost impossible here.  Holding and flipping requires you to have money in the bank for holding costs (and nowadays, you have to account for at least 4 to 6 months), and just finding a "good" deal is not as easy because fixers are starting at $400K, even in the ghetto.  The only way I see to make money in CA in this market is to wholesale, but ALL the numbers have to work - including YOUR assignment fee, and in the end, your bottom line offer price won't even be entertained by the seller.

I'm looking at other states too.  If the deal makes sense and is a money maker, I'll be all over it.

[ginasands]

In Northern California, particularly my neck of the woods, Sacramento, foreclosures are at an all time high.  some builders have stopped their large projects because the housing bubble is bursting.

Bay area buyers flocked to Sacramento with cash money in hand and bought everything that was hitched to a horse and buggy.  Now that the prices are over 50% of what they should be and Equity Lending has topped out a lot of home owners, we are left with a lot of upside down loans.

There was an article in the newspaper about a real estate investor who found himself 40,000+ in the hole on two properties and was attempting a short sale supposedly he had been doing his flipping thing for about 4 years and is now in HOT SOUP!!

Short Sales are on the upswing in this area.

[jcmay]

You are so right about short sales on the upswing.  What I've found was that many of them moved out of state, bought their home in that state while they still qualify, then started to stop making payments on their home in CA and listed them with Realtors as a (possible) short sale.  I guess they figure since they already purchased their homes to live in, they would take a hit on their credit for a few years b/c it was bound to happen anyway if they couldn't afford CA payments.

[aak5454]

You are so right about short sales on the upswing.  What I've found was that many of them moved out of state, bought their home in that state while they still qualify, then started to stop making payments on their home in CA and listed them with Realtors as a (possible) short sale.  I guess they figure since they already purchased their homes to live in, they would take a hit on their credit for a few years b/c it was bound to happen anyway if they couldn't afford CA payments.

let a property go into foreclosure does not seem like much of an investment strategy.

I hear a lot of talk about doing short sales, but what percentage of offers actually get accepted.  The market right now is NOT that bad; really just get back to a "normal" state of being.  I guess that skeptical that banks are already willing to take deep discounts to unload properties; my point being that even a short-sale price might be over paying is some markets.  Anybody got live-fire war stories in that area (it not my bag, baby!)

[ginasands]

These people are homeowners in trouble, not real estate investors.  The properties here were just overbid from the bay area cssh crowd now everyone is suffering because the equity refinance boom took their property above the real price.  These folks don'w have an exit strategy they just have house payments that are too high!