Hi Zman, in general rental ownership in most parts of urban California is currently unwise.
I'm not saying you can't make an appreciation play there, but real estate there does not cash flow.
You're better off renting in California.
A good way to arrive at this conclusion yourself is to run some numbers using some common real estate investing assumptions - here's a little more info about it.
http://www.mrmoneymustache.com/2011/10/10/lets-buy-a-foreclosure-episode-2-what-is-the-50-2-rule/So it can be done, but here's the purchase price you'd need to have to be cash flow positive on a duplex with both units getting, for example, $2,000 in rent.
Top line income - $4,000
Expenses other than mortgage payments (repairs, vacancies, taxes, insurance, mortgage insurance- estimated at 50%) - $2,000
Amount leftover to pay mortgage with - $2,000
Mortgage payment on a $400,000 loan @ 4.375% - $1,997
So there you have it, if you can find a ~$410,000 duplex that meets the 1% rule (gets $4,100/mo in rent), you have a good chance at breaking even.
I've heard that's hard to find in California, which is why I would discourage owning rentals there.
However, if you plan on owner occupying a duplex for a while, your accounting would be different. Then you'd compare your monthly cash flow vs your current renting situation. Many people look at it as having your tenant pay your mortgage, although that's a bit of an oversimplification. Your tax situation will be a lot friendlier as well.
I am currently in the process of buying a duplex (twin cities, MN) , looking at a purchase price of about 230k that reported $2500/mo in rent.
So it's a decent enough rental play, a solid owner occupant play (we'll get about $1,000/mo from the other unit), and given the neighborhood and school district, it's not a bad appreciation play. I'm not really betting on appreciation though, but I am at least hoping it'll get me much better tenants.
Arebelspy has written about buying real estate out of state, as risky as that is for some people, it follows more sound logic than buying cash flow negative rentals.