Riverside market for Investment properties?

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Cornflakes

Cornflakes

Active member
For Irvinites here, Riverside is in the backyard and offers good sub-150 GRM. There could be a decent cashflow at <=75% LTV with those numbers.

Any reasons one should stay away from Riverside? Or, are you convinced enough and has already invested in that market? Why?
 
Cornflakes said:
For Irvinites here, Riverside is in the backyard and offers good sub-150 GRM. There could be a decent cashflow at <=75% LTV with those numbers.

Any reasons one should stay away from Riverside? Or, are you convinced enough and has already invested in that market? Why?
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Hard to find anything that cash flows even in Riverside.  You have to go way out in high desert like victorville.  Then you have to deal with class C and D tenants...
 
Cornflakes,
From my experience, My A and B class properties have done far better than my C and D in terms of tenant quality and CAPex. Today, I hold only A and B class properties as they are more profitable and less headache over the long haul. C and D is all about the cash flow but there will hardly be any appreciation in these type of assets. Finding good properties in the A and B class assets in a growing area will provide you with nice appreication growth with cash flow. For those investors who had picked up 5 SFR rental properties in Irvine in 1997 for $250k each and own them free and clear would be fully retired today. In my opinion, appreciation is more important than cash flow over the long haul in increasing your networth and building your real estate wealth. The investor who bought 5 SFR rental properties in Irvine in the mid 90s would have seen his networth increase by $2.5M from appreciation alone without calculating the cash flow.

When I took Economics 101 during my freshman year in college, the first thing we are taught by our professor is supply and demand. Real Estate is no different. You have to look at the population growth, inventory levels, school rankings and test scores, job growth, and Asian migration patterns. These are things that I looked at closely when deciding where to invest for my buy and hold portfolio. Don't chase after the just the number, but chase after the demographics and growth potential of the area. I could buy cheap properties in the south side of Atlanta that will give me a very high cash and cash return, but the vacancy rate and tenant management would be a nightmare there which is the reason I don't do C and D class.
 
Cornflakes said:
For Irvinites here, Riverside is in the backyard and offers good sub-150 GRM. There could be a decent cashflow at <=75% LTV with those numbers.

Any reasons one should stay away from Riverside? Or, are you convinced enough and has already invested in that market? Why?
Click to expand...

So you changed your mind about Johns Creek the so called unofficial Irvine like city in Georgia? (But don't quote me that's what I hear)
 
These are the markets that show as undervalued according to Subsolar's investopedia link. I can't speak for Providence and NJ, but Detroit, Cleveland, Warren, MI are not good places to buy and hold investment properties although the yields are high. Cleveland, OH is currently losing population and jobs are moving out. Similar situation in Michigan and other midwestern / rust belt cities. You want to identify under valued housing markets where the population and job growth are both growing which is not the case in Detroit and Cleveland..

Detroit 17%
Cleveland 16%
Providence 12%
Warren, Mich. 8%
Newark, N.J. 8%

SubSolar said:
http://www.investopedia.com/articles/investing/081015/understanding-new-housing-bubble.asp

Based on those factors, Fitch found the following cities to be overvalued and listed the percentages of how overvalued they are:

Austin, Texas 19%
Houston, Texas 18%
Phoenix 18%
Riverside, Calif. 17%
Miami, Fla. 16%
Las Vegas 14%
Click to expand...
 
I agree that Victorville will be awash in class C and D tenants. I'd imagine that Riverside will be able to offer decent chunk of A and B grade tenants.

FWIW, a quick scan in Zillow shows plenty of SFRs in Riverside at 150ish GRM. Without doubt, those homes will cashflow positive at 75% LTV.

My whole reason of starting this thread is to seek wisdom of crowd if enough readers believe that Riverside has decent upside for appreciation (or not). I do agree with Panda's philosophy that money is made in appreciation, not so much in cashflow.
 
Panda said:
These are the markets that show as undervalued according to Subsolar's investopedia link. I can't speak for Providence and NJ, but Detroit, Cleveland, Warren, MI are not good places to buy and hold investment properties although the yields are high. Cleveland, OH is currently losing population and jobs are moving out. Similar situation in Michigan and other midwestern / rust belt cities. You want to identify under valued housing markets where the population and job growth are both growing which is not the case in Detroit and Cleveland..

Detroit 17%
Cleveland 16%
Providence 12%
Warren, Mich. 8%
Newark, N.J. 8%
Click to expand...

Not a granular enough analysis.  Just as you differentiate south HOTlanta from john's creek, each of these MSAs have areas that are growing with high tech/professional influx.

 
Do you consider Corona as part of Riverside?

As I've stated in another thread, having visited there recently, it looks like there is a lot of building going on close to the 91/15 area. I really haven't looked at home prices though.
 
Freedom,
I will provide some more detailed analysis to support this when I have some time.

Yes, there are pockets (zip codes) of Detriot and Cleveland that are growing in population but from a macro analysis, the capital, population, jobs are moving out of these MSAs. I look at MSAs like a large CAP Blue Chip Stock. San Francisco (Apple), Seattle (Amazon), LA (Disney, Atlanta (Coca Cola). You have to research an MSA where the Good data out weighs the bad. Also I believe in the law of concentration of Mastering one or two markets vs diversifying into too many MSAs. You lower your risk, and increase your chances of success with the law of concentration.

freedomcm said:
Panda said:
These are the markets that show as undervalued according to Subsolar's investopedia link. I can't speak for Providence and NJ, but Detroit, Cleveland, Warren, MI are not good places to buy and hold investment properties although the yields are high. Cleveland, OH is currently losing population and jobs are moving out. Similar situation in Michigan and other midwestern / rust belt cities. You want to identify under valued housing markets where the population and job growth are both growing which is not the case in Detroit and Cleveland..

Detroit 17%
Cleveland 16%
Providence 12%
Warren, Mich. 8%
Newark, N.J. 8%
Click to expand...

Not a granular enough analysis.  Just as you differentiate south HOTlanta from john's creek, each of these MSAs have areas that are growing with high tech/professional influx.
Click to expand...
 
Cornflake,

Don't get me wrong, the cash flow is very important. I would not encourage anyone to buy an investment property with negative cash flow, refinance into a 15 fixed with negative cash flow, just to speculate on appreciation. That would be a poor financial decision.

I believe that cash flow is the icing on the cake, appreciation is the actual cake and I like to have my icing and eat it too. I have gotten into several heated debates with investors in Cleveland and Detroit that appreciation is speculation and cash flow is everything. They argue that appreciation is impossible to predict and I am just speculating and I argue that appreciation can be predicted with strong understanding of macro trends and demograpihcs of an area.

Cornflakes said:
I agree that Victorville will be awash in class C and D tenants. I'd imagine that Riverside will be able to offer decent chunk of A and B grade tenants.

FWIW, a quick scan in Zillow shows plenty of SFRs in Riverside at 150ish GRM. Without doubt, those homes will cashflow positive at 75% LTV.

My whole reason of starting this thread is to seek wisdom of crowd if enough readers believe that Riverside has decent upside for appreciation (or not). I do agree with Panda's philosophy that money is made in appreciation, not so much in cashflow.
Click to expand...
 
http://www.zillow.com/homes/28-fox-hill-drive,-irvine,-CA_rb/?fromHomePage=true&shouldFireSellPageImplicitClaimGA=false

My wife came to the United States in 1997 straight from Seoul, Korea and her family moved to Irvine where she attended Venado Middle School. Two Korean families stayed at 28 Fox Hill, Irvine, CA 92604 in 1997 and split the $2000 - $2100 monthly rent. The landlord purchased this home for $310,000 in October 1996. If the landlord was smart, he should have owned 4 - 5 of these SFR rental properties and held onto them forever until retirement.

Rent at $2100 with a purchase price of $310,000 will generate a Adjusted Gross Yield of 8.1%. Today's market value for rent for this home is $3750 a month which is a 78% increase. However the property value has appreciated to almost $900k making the increase in property value 287% from its orginal purchase of $310,000 in 1996. The AGY is 5% today which is a grade of an "F" in my books. Cash flow will provide you passive income, but appreciation is where Real Wealth is built.

A quality rising asset paired with depreciating low cost debt is an ideal wealth builder.
 
irvinehomeowner said:
Do you consider Corona as part of Riverside?

As I've stated in another thread, having visited there recently, it looks like there is a lot of building going on close to the 91/15 area. I really haven't looked at home prices though.
Click to expand...

I have not driven through Corona myself. But if it gives good cashflow, that might be more attractive then Riverside. I know tons of ppl who drive to Irvine for work but choosero live in Corona because of housing costs. As long as OC employment is kicking it, Corona will ride the wave.

As for new construction, apts are built pretty much everywhere. Just met friends from SFV and they were saying apt construction everywhere in valley. Its just part of mega trend of us becoming renters nation for some time.
 
Panda said:
http://www.zillow.com/homes/28-fox-hill-drive,-irvine,-CA_rb/?fromHomePage=true&shouldFireSellPageImplicitClaimGA=false

My wife came to the United States in 1997 straight from Seoul, Korea and her family moved to Irvine where she attended Venado Middle School. Two Korean families stayed at 28 Fox Hill, Irvine, CA 92604 in 1997 and split the $2000 - $2100 monthly rent. The landlord purchased this home for $310,000 in October 1996. If the landlord was smart, he should have owned 4 - 5 of these SFR rental properties and held onto them forever until retirement.

Rent at $2100 with a purchase price of $310,000 will generate a Adjusted Gross Yield of 8.1%. Today's market value for rent for this home is $3750 a month which is a 78% increase. However the property value has appreciated to almost $900k making the increase in property value 287% from its orginal purchase of $310,000 in 1996. The AGY is 5% today which is a grade of an "F" in my books. Cash flow will provide you passive income, but appreciation is where Real Wealth is built.

A quality rising asset paired with depreciating low cost debt is an ideal wealth builder.
Click to expand...

1996 is around the time houses were bottoming out from the drop that started in 1989. It was 2 years after the OC BK and there was no way to know at that time it was THE bottom.

Buying anytime before that would have resulted in a wait just to recover principle.

To say you should have loaded up in 1996 is like saying you should have known to load up in 2012 (not to mention not everyone has unlimited capital for down payments on multiple homes and the stomach to be on the hook for multiple mortgages).

I knew people who were loading up on houses to rent out starting in 1991 "for their retirement". They sold a few along the way for a loss.

Hindsight is 20/20.
 
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