Author Topic: Invest property in California or Texas?  (Read 7875 times)

Us2bCool

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Invest property in California or Texas?
« on: December 31, 2013, 12:35:15 PM »
This question is partly monetary, partly emotional...guess which I'm trying to weed out.

We lived in Austin for about 15 years, during which we picked up a few rental properties that we still own and are pulling a modest cash flow from. They haven't really gone up in value but are almost paid off.

Two years ago we moved to the SF Bay Area; I'm a native Californian and we are most likely here to stay. We just purchased a house here (ouch!) and have a bit of cash left over that we'd like to use to invest in more property.

My family (all Californians who never really understood why I stayed in Texas for so long) think that I should buy something in California. My gut tells me they're right, but it would be much easier to buy in Austin for a couple of reasons:

- I have a great property manager already in place, plus a good realtor and lender
- Housing is just plain easier to get into; I know I could find a good place for a modest down payment
- I know the neighborhoods.

On the plus side for buying something in California:

-The rental market is strong
-Towns in the central valley, where I'm more likely to find something affordable, are about 1-2 hours from where I live
-Property values are expected to go up considerably.

I know a lot of folks in the bay area are on this board, but I guess this would go for anyone who lives in a very expensive area. Love to hear your thoughts.

JohnGalt

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Re: Invest property in California or Texas?
« Reply #1 on: December 31, 2013, 12:50:22 PM »
If you're already doing fine as a long-distance owner - I would just go with whichever way the numbers take you in terms of best overall expected return.  Don't let emotions or what your friends/family think come into the decision. 
« Last Edit: December 31, 2013, 01:56:29 PM by JohnGalt »

Another Reader

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Re: Invest property in California or Texas?
« Reply #2 on: December 31, 2013, 01:14:45 PM »
Investing in the Central Valley made sense in 2009 and 2010.  I can't think of anywhere out there where the numbers make sense today.  The rental market is nothing like the rental market in the coastal areas and I would be concerned about oversupply in many areas.  I'm not sure why you would expect significant appreciation out there, again the market is nothing like the Bay Area.

I'm surprised at your comments about the lack of appreciation in Austin.  Other posters have made it sound like a hot market.

honobob

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Re: Invest property in California or Texas?
« Reply #3 on: December 31, 2013, 02:14:30 PM »
30 year fixed mortgage, Prop 13 tax protection, market values doubling every 10 years & 7  percent annual rent increases & low/no vacancy.  Bay Area!  I'd avoid the central valley if the only reason you're looking there is price.

AlmostIndependent

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Re: Invest property in California or Texas?
« Reply #4 on: January 15, 2014, 12:06:46 PM »
Go where the numbers make the most sense. If you already do the long distance landlord thing then that is obviously not a hurdle. Go where the money is, and unless your friends and family are successful real estate investors I would ignore what they say.

arebelspy

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Re: Invest property in California or Texas?
« Reply #5 on: January 15, 2014, 12:16:11 PM »
Texas economy is strong.  California, not so much.

I'm a big fan of Texas real estate, not so much of CA.

The fact that you know the area and have a good team there is great.

Do what makes you feel best, but I vote Texas!
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Us2bCool

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Re: Invest property in California or Texas?
« Reply #6 on: January 15, 2014, 03:45:45 PM »
All good advice.

My family is very successful at real estate investing. In fact, my younger brother (aka "the smart one") is financially independent just from RE investing in California.

However, I think what I'm going to do is look at both options and buy wherever the opportunity looks best.

Another Reader

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Re: Invest property in California or Texas?
« Reply #7 on: January 15, 2014, 04:20:14 PM »
It sounds like you could learn a lot from working with your brother. 

You really have to distinguish the various California markets.  Investing in San Francisco is the polar opposite of investing in Fresno.  There is a fellow that posts on Bigger Pockets that works a Silicon Valley job (lives here too) and invests in Fresno.  He is heavily cash flow positive.  However, he buys and sells with the market cycle, and in his last post stated he expected to sell in 2015-16.  Prime coastal California real estate is all about appreciation and long term thinking about cash flow.  Unless you put 50 percent down or more in some areas, you will likely come out of pocket every month.

Buy where the opportunity is best and where you have the necessary support to manage the properties.  I bought in Phoenix when the numbers made sense.  They no longer make sense, so I'm also looking elsewhere.

dragoncar

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Re: Invest property in California or Texas?
« Reply #8 on: January 15, 2014, 07:48:21 PM »
Management issues aside, I'm all for geographical diversity.  I'm impressed you bought a place in California and had "money left over".  What would be the percentage split between your CA property holdings and TX property holdings?

adamcollin

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Re: Invest property in California or Texas?
« Reply #9 on: September 30, 2014, 10:59:34 PM »
Texas Real Estate market is more blooming than that of California. So, you should go for Texas.
« Last Edit: September 30, 2014, 11:01:49 PM by adamcollin »

escolegrove

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Re: Invest property in California or Texas?
« Reply #10 on: October 04, 2014, 01:19:53 AM »
I invest in Central Valley still today. While the numbers don't follow the 1%, 2% or 50% rule. I have been very happy with my returns. I also love the fact that they appreciate more than inflation AND have low taxes and insurances. We have been looking into South Texas. While the cost of entry is less, after running all the numbers and are long term position. I just can't make it make sense.

clarkfan1979

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Re: Invest property in California or Texas?
« Reply #11 on: October 17, 2014, 03:35:49 PM »
I would normally say Texas, but I have a friend that bought a condo in Orange county for 200K two years ago. He could easily sell it for 300K today. He had a it listed for 325K and had a few offers in the 310K range. He decided to take it off the market because he just switched employers.

California = appreciation

Texas = cash flow positive

DarinC

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Re: Invest property in California or Texas?
« Reply #12 on: October 17, 2014, 06:27:15 PM »
I wouldn't bet on appreciation in CA unless you're purchasing for less than the cost to build, or the area is geographically constrained (SF/LA/OC/SD) and there isn't room for more homes. Even in the areas that are geographically constrained, there's a risk that home prices are a function of the market, mostly because wages aren't scaling with home prices. If the market/economy drops, so will home values and rents to some degree for all the usual reasons.

arebelspy

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Re: Invest property in California or Texas?
« Reply #13 on: October 17, 2014, 08:38:43 PM »
I would normally say Texas, but I have a friend that bought a condo in Orange county for 200K two years ago. He could easily sell it for 300K today. He had a it listed for 325K and had a few offers in the 310K range. He decided to take it off the market because he just switched employers.

Not sure how that's relevant to today.

Unless you're saying one ought to expect 50% appreciation every two years in CA...  :)
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

GizmoTX

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Re: Invest property in California or Texas?
« Reply #14 on: October 20, 2014, 09:22:42 AM »
Austin is going crazy right now. Where are your properties located?