Posted by randyOH on January 03, 2005 at 14:15:56:
Warren,
Must be Barstow. Don’t think you could get deals like that in Victorville anymore.
Actually, I own a couple rentals in Barstow and I am presently trying to sell them. They are both in escrow, but one is going to fall out, I think.
Let me know if you would like to buy. 3BR 2BA 2 car garage, central air, built in 1986. This is a PUD with the houses attached in pairs. Community pool. Association fee is $140 per month. I am presently renting this one below market at $750. You could easily get $800. I will sell for $80,000. I am selling because I have not been able to get good tenants. You may be able to do better.
Randy
Re: California may have a huge A$$ earthquake… - Posted by Warren Priske
Posted by Warren Priske on January 03, 2005 at 14:11:06:
I plan to buy out of state, so the diversification is going to happen. My long-term plan is to have a heap of rentals in So Ca. paid for. I own 23 at this time and would like around 40. If I did sell everything and moved out of state I’d just be bringing the money back in 5 years to pick up the some deals. I just don’t think I’ll be able to buy at the same low prices I paid for my riginal properties. I also don’t think I’ll be able to buy back the low property tax rates.
I know some say I’ll make of those cost by being able to buy low here again, but by the time you add up all the costs of fixing up my CA properties, selling them, exchanging out of state, and then doing the same thing all over again to bring the money back, pay multiple sets of closing costs, do more rehabs and look for more tenats, a modest decrease in CA values doesn’t sound like that big of a deal. I feel like I’d be spending close to 25% of my equity (not to mention time and energy) trying to avoid a 30% downturn over the next 5 years.
Posted by Warren Priske on January 04, 2005 at 10:19:04:
Randy,
Most of my homes are in the Victorville area, but I do own a couple in Barstow that were just deeded to me Sub-2. I’m interested in your home. I emailed you directly regarding it, but got a “delayed delivery” message from my email service. Give me a call with the specs on the property. 951-371-7053
Here are the most recent California earthquakes and the damage they causes:
The May 1940 Imperial Valley earthquake killed nine people. At Imperial, 80 percent of the building were damaged and about 50 percent had been condemned. This earthquake was the first strong test of public schools designed to be earthquake-resistive after the 1933 Long Beach earthquake. Fifteen such public schools in the area had no apparent damage.
The towns of Tehacapi and Arvin were hit severely by the July 1952 Kern County earthquake. Twelve people died, many were injured, and $60 million property damage was sustained.
On October 17, 1989, the Loma Prieta earthquake ended decades of tranquility in the San Francisco Bay region. Minutes before the scheduled start of the third game of the 1989 World Series in San Francisco, a magnitude 6.9 earthquake rocked the California coast from Monterey to San Francisco. Centered near Loma Prieta peak in the mountains south of San Jose, the quake killed 63 people and caused an estimated $6 billion to $10 billion in property loss. It was the first large temblor to jolt the burgeoning urban region since the Great San Francisco Earthquake of 1906 (magnitude 7.8).
The Northridge earthquake of January 17, 1994, displaced more than 20,000 people from their homes in a modern urban environment generally designed for seismic resistance. There were 57 deaths and economic losses were estimated at $20 billion.
As you can see, California’s earthquake history and damage are wildly less significant than the devastation suffered by right coast folks.
When I buy houses to rent, I buy them BELOW market value. When I sell them I sell them for ABOVE market value. If fact I think I make a lot of my money when I buy. Because I buy good deals. This alone covers the costs of selling, commisions, 1031 fees, and all other closing costs.
I come out way ahead if I work a little harder, like…sell with a lease to own.
There are also other advantages to moving out of state that you did not address.
Such as:
A - the huge increase in cash flow you could make in a better rental market.
B - You could invest (out of state) in areas that are poised for growth, and which have great potential for appreciation.
I have 22 rentals in the DC area and have thought about selling one or two and going to other areas. I know I can buy in other areas and have a significantly higher % return from a cashflow standpoint, but is it worth the hassle as you said? We’ve seen great appreciation, but I live off of cashflow and although I have enough to live off of, more would be nice; however, I love the appreciation and a correction of 10-30% doesn’t bother me unless I decide to sell the day after the correction. I, too would like to own them free and clear and figure that’s in 20 years. When I die, my heirs inherit the basis on the date of death so I just have to figure out if I need the cash or not.
Now, regarding the weather, those lovely hurricanes cause tornados up the east coast, many of which landed in our area and leveled houses, so far over the last 2 years of tornados, I’ve only suffered $200 in roof damage where neighbors lost their entire houses.
I’d say, take out some equity (as long as they still cash flow), and buy somewhere else to diversify. Why sell a good property if you don’t need to, especially with awesome lifetime tenants!
Posted by randyOH on January 04, 2005 at 13:07:16:
Warren,
My email service is not working at this time. They are hoping to have it fixed sometime today. And, I have been sick with the flu, but I will be calling you today or tomorrow.
Thanks,
Randy
Re: California may have a huge A$$ earthquake… - Posted by Warren Priske
Posted by Warren Priske on January 04, 2005 at 14:35:07:
I’m curious as to where these “huge” increases in cashflow exist. I’ve noticed they’re usually accompanied by lower rents, higher property taxes, higher vacancy rates, and out-of-state management fees. Afterall, areas poised for appreciation are typically depressed at the moment, which leads to a tough rental market. Even with these drawbacks I’m well-aware of the benefits of out-of-state investing for appreciation. Again, I’m not arguing whether out-of-state investing is worthwhile. I’m just considering whether to sell my current properties or to refinance them to access the necessary capital.
Posted by Warren Priske on January 04, 2005 at 14:55:34:
You’re right about TX. I visited TX and researched price vs. rent. I could probably get about 25% more of a spread between mortgage payment and rent collected. Here’s the problem: That 25% disappears quickly with nearly tripled property taxes, doubled insurance premiums, higher vacancies and property managers. I still see appreciation as the main reason for buying out-of-state.
I’m in the same situation with the same thoughts. - Posted by David Vogeler
Posted by David Vogeler on January 04, 2005 at 19:34:49:
Hi Warren,
I operate in the Moreno Valley and Perris area. I too am torn between riding out a downturn, or selling a few to all.I have been to DFW Texas twice and concur with your observations. It is sure looking more appealing to just hang on to the low property taxes,less disruption, and less work by continuing to manage what I got. The cash flow is good. In 30 years I wonder what difference it would make.
You are not alone.
regards,
Dave