If you believe, as I do, that the two reasons to buy rental property are cash flow and appreciation, then I’d suggest anywhere but California. That assumes that you are concentrating on the very long run and that demographic trends are the best predictors of real estate profitability.
A close look at CA’s future reveals so many reasons why we have doomed ourselves to a bleak economic future relative to other states. The populist Sacramento politicians are driving businesses and the middle classes away with mindless regulation and job-killing laws. Income taxes on the richest 1% of our population now account for 50% of personal income tax revenues. Why should these few people (aka employers) stay in CA?
Who is replacing them demographically? One hint comes from the recent revelation that CA has 30% of the nation’s welfare rolls, but only about 11% of the population.
We’ll soon get soaring utility bills as a result of the recently-passed mandate for 33% of our energy to be from renewable resources by 2020 (AB 32). Look for our electricity rates to be twice that of neighboring states, and very soon, since this is a breathtakingly expensive leap in such a short time.
Studies show interstate mobility actually slows during economic downturns, so there is a pent-up demand currently of people who would like to move but can’t. With any kind of return to normalcy nationwide, Californians seeking a better long-terms future will have many other states to chose from.
