Where to invest in 2017

#61

Huh?

#62

Come on hanera. 5000 years ago almost 100% of the people worked in the farm. Today, less than 5%. What happened??? Technology enabled more and more people to ditch farming for a living and work on more meaningful things, such as investing in real estateā€¦ :slight_smile:

#63

Not true. If forced to choose between Fresno and MV, I would choose Fresno. I like to look at intrinsic value. But Fresno is too far away.
I have 8 units in Watsonville insteadā€¦ that comes close to Fresno.

It is hard to buy more there todayā€¦ I would pay 900k+ for a 4 plex when I bought a similar one for 260k in 2012.

I am certainly not buying rentals in MV.

But I like this forumā€™s general optimism about Silicon Valley. I still have 11 to 13 townhomes in 94087 in the pipeline. I donā€™t mind selling them to landlords.

#64

I think we lost the context in the argument comparing Fresno with Mountain View. I was talking about a downturn. Very important to remember that. If things are honky dory and Nasdaq is making all time highs every week then maybe a 1.5M SFH in Mountain View is a better investment than a 1.5M apartment complex in Fresno. Although even there I am not so sure.

But in a dot-bomb style downturn? What if you lost your job and your one single tenant lost hers? Who pays mortgage on the MV house? Compare that to a 10 unit in Fresno. You may, at worst, lose 2 or 3 unitsā€™ rent but you have a very fat cap margin to begin with. You can easily pay the mortgage. Not only that. You get income.

Again, I am talking about a downturn. If your thesis is that we will never see a downturnā€¦ well, good luck with that. :slight_smile:

#65

Similar line of thought as to why I prefer 10 Austin SFHs vs 1 Cupertino SFH. However, it might be possible the single tenant works for the big boys like Apple, Google and FB, hence would be around, however the 10 guys in Fresno works for the farm that go insolvent. So my Austin SFHs are spread throughout Austin, not depending on a single employer or in single neighborhood.

#66

Everything is possible, but how likely is that?

#67

Another issue is that (some) people will always be able.to afford $600 rent for an apartment. $5000 for a SFR? In a downturn? Rents drop, fixed rate mortgages not.

#68

Thatā€™s the same as saying why not buy 100 rentals in Haiti vs. 10 rentals in Fresno because in a real downturn some people can always afford $20 per month rentals and maybe not $600 per month.

Again, all I see is that you have many rentals in good areas but not really any rentals in places like Fresno. Maybe grass is really greener on the other sideā€¦

#69

People had the same food need during 2008 too and 2000 too. Both times Fresno gets affected higher than Mountain View.

It is not the food that driving, but it is the economy and money that drives the price of real estate. Wherever money flows the growth is there.

Just because this lot is next to google complex, they list at 1.5M, it is near by company growth drives the price.

#70

Also, keep in mind that during a downturn, home values for places like Fresno would probably plunge like a falling knife. However, home values for places like Mountain View would likely be somewhat more stable. Itā€™s not just the cash flow you have to worry about but the bigger picture of why we do real estate investment is the overall appreciation of the asset as well.

#71

Demand and supply. No magic here.

#72

To be able to enjoy appreciation, you first need to keep paying PITI or else the bank will foreclose on you and you wonā€™t have nothing. My point is that with the hypothetical Fresno apartment building you are more likely to weather the downturn no problem. With the 1.5M MV house you better have ample reserves.

If you paid cash then all is fine.

#73

In a worst case scenario, one should always ā€œbankā€ on quality. Quality in this case would be MV. Fresno, up to now, has never been considered quality by any stretch of the imagination. Letā€™s be honest, the chances of MVā€™s local economy faltering to the point of complete disaster is very unlikely. Fresno, there is that chance. How do we know? Well, history for one tells us this. Places like Sac, Antioch, Fresno, Stockton and other outlier areas got hammered in the recession. Local places in SV not so much and def not for long.

#74

Also, if you want to take on the risk of buying in ā€œsub-primeā€ locations, why choose Fresno??? Itā€™s far away and hard to manage. Just go for places like Antioch or Vallejo. They behave more or less like Fresno and you save $$ by not having to travel and no need to hire a property manager because you can manage everything yourself since itā€™s local!!!

#75

not sure if this was directed at me, but nobody suggested to buy apartments in Fresno, right?

For me, Watsonville is similar enough to Fresno.

I stated that I bought rentals in Watsonville during the downturn, total investment pretty exactly $600k and gross rent has been over $10k/mo since 2012ā€¦ havenā€™t even raised rents. Let me add this upā€¦ 5 years ā€¦ 5 * 12 * 10,500 = $630,000 rent collected on a $600,000 purchase. And you know, taxes on $600k are only $7500/yr.

I havenā€™t had a day of vacancy either. (Which means, my asking rent is too low, I know.)

#76

Noā€¦ was not directed at you specifically.

#77

I have bought home at Morgan Hill (MH), just next to Watsonville (WV) during downturn and benefited, that does not means both locations (MH and WV) are better than mountain view(MV).

It is downturn timing that helped, but absolutely not a right choice for any time. Had we both placed the same amount of money in either Mountain view or Cupertino or Sunnyvale, our gain would have been better than what we had.

It is exactly like we have some amount, where can we buy so that we maximize returns.

#78

Actually, it is good to have a balanced portfolio of homes in both high end and low end neighborhoods. I have high end homes in SF, West SJ, and Walnut Creek. I also have the lower end ones in Oakley, Martinez, and Concord.

High end rentals provide stability during downturn since their prices donā€™t plunge as much, however they tend to generate subpar cashflows.

Lower end rentals yield excellent cash flow but not likely to appreciate as much.

So a mixture of the 2 would just be perfect: It gives you cashflow protection but can also generate significant appreciation overtime.

#79

Donā€™t buy long term in places like Fresno, Stockton even Austinā€¦flipā€¦make your money and leave. .

#80

Absolutely. In my opinion, nothing is worth holding on to besides BA, LA, and NY.