[EconProf]

Concho raises good points about the hazards of investing in TX that also apply to AZ and, I suppose NV.
The biggest mistake CA investors can make is extrapolating their own CA real estate lessons and applying them in a different state.
CA, and especially San Diego investors, have often made their money because of our expensive and limited land. But RE development in other states can quickly expand in all directions, making the land component of your investment tiny. It is easy to be seduced by fine-looking buildings that seem incredibly cheap, a tendency the local RE hawkers easily capitalize on when successful CA 1031 exchangers come visiting.
Because land is so cheap and easily developed because of lower entitlement costs and government hassles, value appreciation cannot be counted upon. Instead, cash flow is primary. You must control costs, attract and keep tenants, and just work the property hands-on style the old fashioned way. (That’s why most of my properties are in Yuma, a pleasant 2 3/4 hour drive away).

[EconProf]

Concho raises good points about the hazards of investing in TX that also apply to AZ and, I suppose NV.
The biggest mistake CA investors can make is extrapolating their own CA real estate lessons and applying them in a different state.
CA, and especially San Diego investors, have often made their money because of our expensive and limited land. But RE development in other states can quickly expand in all directions, making the land component of your investment tiny. It is easy to be seduced by fine-looking buildings that seem incredibly cheap, a tendency the local RE hawkers easily capitalize on when successful CA 1031 exchangers come visiting.
Because land is so cheap and easily developed because of lower entitlement costs and government hassles, value appreciation cannot be counted upon. Instead, cash flow is primary. You must control costs, attract and keep tenants, and just work the property hands-on style the old fashioned way. (That’s why most of my properties are in Yuma, a pleasant 2 3/4 hour drive away).

[EconProf]

Concho raises good points about the hazards of investing in TX that also apply to AZ and, I suppose NV.
The biggest mistake CA investors can make is extrapolating their own CA real estate lessons and applying them in a different state.
CA, and especially San Diego investors, have often made their money because of our expensive and limited land. But RE development in other states can quickly expand in all directions, making the land component of your investment tiny. It is easy to be seduced by fine-looking buildings that seem incredibly cheap, a tendency the local RE hawkers easily capitalize on when successful CA 1031 exchangers come visiting.
Because land is so cheap and easily developed because of lower entitlement costs and government hassles, value appreciation cannot be counted upon. Instead, cash flow is primary. You must control costs, attract and keep tenants, and just work the property hands-on style the old fashioned way. (That’s why most of my properties are in Yuma, a pleasant 2 3/4 hour drive away).

[EconProf]

Concho raises good points about the hazards of investing in TX that also apply to AZ and, I suppose NV.
The biggest mistake CA investors can make is extrapolating their own CA real estate lessons and applying them in a different state.
CA, and especially San Diego investors, have often made their money because of our expensive and limited land. But RE development in other states can quickly expand in all directions, making the land component of your investment tiny. It is easy to be seduced by fine-looking buildings that seem incredibly cheap, a tendency the local RE hawkers easily capitalize on when successful CA 1031 exchangers come visiting.
Because land is so cheap and easily developed because of lower entitlement costs and government hassles, value appreciation cannot be counted upon. Instead, cash flow is primary. You must control costs, attract and keep tenants, and just work the property hands-on style the old fashioned way. (That’s why most of my properties are in Yuma, a pleasant 2 3/4 hour drive away).

[EconProf]

Mercedes7 you say you can put 2/3 of the purchase price as a down payment. This suggests you are getting pretty tired of getting 1 – 3% on your savings, right? This is budging you into the category of possible buyers.
I mention this because it strikes me that the puny interest rate that high-liquidity investors are getting on thier money may be pushing a lot more people onto the buy side–both for residential and commercial real estate.
We are seeing more cash buyers out there, who do the pro forma numbers on a possible purchase and discover they can, even with reduced rental income, make a relatively decent rate of return on a purchase. This applies to apartments, and especially CRE for the more adventuresome. Adds up to one more factor suggesting we are at the bottom of the cycle.

[EconProf]

Mercedes7 you say you can put 2/3 of the purchase price as a down payment. This suggests you are getting pretty tired of getting 1 – 3% on your savings, right? This is budging you into the category of possible buyers.
I mention this because it strikes me that the puny interest rate that high-liquidity investors are getting on thier money may be pushing a lot more people onto the buy side–both for residential and commercial real estate.
We are seeing more cash buyers out there, who do the pro forma numbers on a possible purchase and discover they can, even with reduced rental income, make a relatively decent rate of return on a purchase. This applies to apartments, and especially CRE for the more adventuresome. Adds up to one more factor suggesting we are at the bottom of the cycle.

[EconProf]

Mercedes7 you say you can put 2/3 of the purchase price as a down payment. This suggests you are getting pretty tired of getting 1 – 3% on your savings, right? This is budging you into the category of possible buyers.
I mention this because it strikes me that the puny interest rate that high-liquidity investors are getting on thier money may be pushing a lot more people onto the buy side–both for residential and commercial real estate.
We are seeing more cash buyers out there, who do the pro forma numbers on a possible purchase and discover they can, even with reduced rental income, make a relatively decent rate of return on a purchase. This applies to apartments, and especially CRE for the more adventuresome. Adds up to one more factor suggesting we are at the bottom of the cycle.

[EconProf]

Mercedes7 you say you can put 2/3 of the purchase price as a down payment. This suggests you are getting pretty tired of getting 1 – 3% on your savings, right? This is budging you into the category of possible buyers.
I mention this because it strikes me that the puny interest rate that high-liquidity investors are getting on thier money may be pushing a lot more people onto the buy side–both for residential and commercial real estate.
We are seeing more cash buyers out there, who do the pro forma numbers on a possible purchase and discover they can, even with reduced rental income, make a relatively decent rate of return on a purchase. This applies to apartments, and especially CRE for the more adventuresome. Adds up to one more factor suggesting we are at the bottom of the cycle.

[EconProf]

Mercedes7 you say you can put 2/3 of the purchase price as a down payment. This suggests you are getting pretty tired of getting 1 – 3% on your savings, right? This is budging you into the category of possible buyers.
I mention this because it strikes me that the puny interest rate that high-liquidity investors are getting on thier money may be pushing a lot more people onto the buy side–both for residential and commercial real estate.
We are seeing more cash buyers out there, who do the pro forma numbers on a possible purchase and discover they can, even with reduced rental income, make a relatively decent rate of return on a purchase. This applies to apartments, and especially CRE for the more adventuresome. Adds up to one more factor suggesting we are at the bottom of the cycle.

[EconProf]

Thanks for all the feedback.
My basic philosophy is to invest according to long term secular trends, especially demographic and political, and following from them, the economic health of a city or state. Looking back, we can all see that Michigan’s decline, along with other union-dominated neighboring cities in the midwest became inevitable with the predictable rise of foreign competition. The high-tax, high regulation states in the northeast are now losing population and businesses to the south and southeast.
If you google “unemployment rates by state” you’ll see that the healthiest ten states, all with unemployment rates under 7%, are inevitably low tax, business-welcoming states (with the exception of Hawaii). That’s where I’d put my money.
While AZ, like CA, NV, and FL was not a great choice for my investments because it had an even worse housing bubble than CA, it has the ingredients to come back, as will NV and Fl. CA will not, because of its entrenched liabilities and decline relative to the neighboring states.

[EconProf]

Thanks for all the feedback.
My basic philosophy is to invest according to long term secular trends, especially demographic and political, and following from them, the economic health of a city or state. Looking back, we can all see that Michigan’s decline, along with other union-dominated neighboring cities in the midwest became inevitable with the predictable rise of foreign competition. The high-tax, high regulation states in the northeast are now losing population and businesses to the south and southeast.
If you google “unemployment rates by state” you’ll see that the healthiest ten states, all with unemployment rates under 7%, are inevitably low tax, business-welcoming states (with the exception of Hawaii). That’s where I’d put my money.
While AZ, like CA, NV, and FL was not a great choice for my investments because it had an even worse housing bubble than CA, it has the ingredients to come back, as will NV and Fl. CA will not, because of its entrenched liabilities and decline relative to the neighboring states.

[EconProf]

Thanks for all the feedback.
My basic philosophy is to invest according to long term secular trends, especially demographic and political, and following from them, the economic health of a city or state. Looking back, we can all see that Michigan’s decline, along with other union-dominated neighboring cities in the midwest became inevitable with the predictable rise of foreign competition. The high-tax, high regulation states in the northeast are now losing population and businesses to the south and southeast.
If you google “unemployment rates by state” you’ll see that the healthiest ten states, all with unemployment rates under 7%, are inevitably low tax, business-welcoming states (with the exception of Hawaii). That’s where I’d put my money.
While AZ, like CA, NV, and FL was not a great choice for my investments because it had an even worse housing bubble than CA, it has the ingredients to come back, as will NV and Fl. CA will not, because of its entrenched liabilities and decline relative to the neighboring states.

[EconProf]

Thanks for all the feedback.
My basic philosophy is to invest according to long term secular trends, especially demographic and political, and following from them, the economic health of a city or state. Looking back, we can all see that Michigan’s decline, along with other union-dominated neighboring cities in the midwest became inevitable with the predictable rise of foreign competition. The high-tax, high regulation states in the northeast are now losing population and businesses to the south and southeast.
If you google “unemployment rates by state” you’ll see that the healthiest ten states, all with unemployment rates under 7%, are inevitably low tax, business-welcoming states (with the exception of Hawaii). That’s where I’d put my money.
While AZ, like CA, NV, and FL was not a great choice for my investments because it had an even worse housing bubble than CA, it has the ingredients to come back, as will NV and Fl. CA will not, because of its entrenched liabilities and decline relative to the neighboring states.

[EconProf]

Thanks for all the feedback.
My basic philosophy is to invest according to long term secular trends, especially demographic and political, and following from them, the economic health of a city or state. Looking back, we can all see that Michigan’s decline, along with other union-dominated neighboring cities in the midwest became inevitable with the predictable rise of foreign competition. The high-tax, high regulation states in the northeast are now losing population and businesses to the south and southeast.
If you google “unemployment rates by state” you’ll see that the healthiest ten states, all with unemployment rates under 7%, are inevitably low tax, business-welcoming states (with the exception of Hawaii). That’s where I’d put my money.
While AZ, like CA, NV, and FL was not a great choice for my investments because it had an even worse housing bubble than CA, it has the ingredients to come back, as will NV and Fl. CA will not, because of its entrenched liabilities and decline relative to the neighboring states.

[EconProf]

Water and its cost is a problem everywhere in the West, but I’m finding it costs about one-third as much in AZ as in CA. Reason is that the main source–the Colorado River–with its water rights set over a century ago, treated AZ more generously on a per capita basis than CA.
As far as cost of living and operating a business there is a huge difference, and not just taxes and government regulations. New and used homes are 1/4 to 1/2 the price of houses within 20 miles of our coast. So workers are willing and able to work for far less than in CA and still raise a family in their SFR.

[Author]

Posts