Where Will The California Real Estate Investor Be In 20 Years?
Posted @ 9:25 pm - Filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Retirement, Selling Income Property, San Diego Property Owners, Real Estate Markets, Retirement Income, Investment Lessons, Capital Growth, Predictions
Sometimes it’s human nature, I know I’ve done it more than once. Spin what we see, hear, and experience first hand to align with what we apparently need to believe. I’ll be the first to admit I Got Outa Dodge a year late. Why? ‘Cuz, ah, well, oh forget it. I was irrational about the trend I was watching in real time. And I’m a pro! Yeah, I got my clients into better markets in time for the most part — the ones who listened. But I should’ve had them out a full 12 months sooner.
Californians so often behave as if the 11th commandment, listed on the third tablet Moses lost on the way down the mountain, said, California Real Estate Shalt Forever Be Blessed…Not.
Take the California real estate market bordered geographically by Santa Barbara on the north, and the Mexican border on the south. Throwing out the low and the high prices for a selected property type, say a duplex for instance, and what do we have? Give or take a half million dollar property. Allow a fudge factor of $50,000 or so. Now, let’s assume an average appreciation rate of only 3.5% — historically way below what SoCal has become accustomed to. In 20 years that duplex is now valued at just under a million bucks.
Everyone who believes folks’ll be standing in line for ancient duplexes at that price, please stand on yer head in the corner and stack bb’s with yer nose. 
And the Kansas City Royals, in that same 20 year period will become the most impressive baseball dynasty since the Yankees of the ’20’s and ’30’s. See? Put into the perspective, it becomes even unworthy of meaningful debate. It’s simply not credible. Of course, if I had to choose which one I’d prefer betting on, it’d be the Royals dynasty before average SoCal duplexes selling for a million bucks.
The California real estate investor will, for the most part, still live here. Their real estate investments will be found sans the California address. The sooner they see what’s in front of them, the better off they’ll be 20 years from now.
Every $25-35,000 they spend on down payment/closing costs for new investment property will grow to around — here comes that glorious phrase again — a million bucks.
The core assumptions are +/- 5% annual average appreciation, and the ability to execute tax deferred exchanges when indicated by the market.
If the California investor insists on seeing what’s clearly not there, staying put, their net worth will literally be nowhere near what it would have been had they moved their capital out of state. Literally means literally. Not close by any means of measurement.
In terms of their retirement income, think five figures a month less than those who make the move now instead of staying forever. Don’t buy into this thinking? Fair enough.
Tell me then — if serious real estate investors are flocking away from your properties now, at half the price shown above, and have to put 35-50% down just to break even, where’s the beef? For the same exact capital amount it takes to buy your 20-50 year old CA duplex, they’re busy closing duplexes for less than half the price — and buying half a dozen of them.
Silence.
Cat got yer tongue?
I know exactly how you feel, ‘cuz it’s how I felt too. I empathize with how hard it is to cut the chord, so to speak. But the long term consequences to your retirement income are simply too painful not to make yer move now. This is your retirement we’re talking about here — not what kinda beer to drink with your rolled tacos, know what I mean, Verne?
If I am striking a chord with you, give me a buzz or email me. If yer a San Diegan I can probably save your more than $10,000 in selling costs when exchanging to growth regions. Ask me, I’ll spill the beans at the slightest provocation. You can reach me at 619 889-7100 or jeff@brownandbrowninc.com.
Together we’ll Purposefully Plan an exit strategy that makes sense for your situation. No kiddin’ — as far as your retirement is concerned? California’s over.
This entry was posted on Wednesday, May 14th, 2008 at 9:25 pm and is filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Retirement, Selling Income Property, San Diego Property Owners, Real Estate Markets, Retirement Income, Investment Lessons, Capital Growth, Predictions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.