Despite all the hype about massive workforce migration to lower-cost cities due to the work from home trend, I now believe the migration trend may be slower than hotly anticipated. The best near-term real estate investment opportunity really is right in your city.
We've been talking about investing in the heartland of America since 2017. I'm glad everyone from the mass media to various famous pundits is now on board after most of our nation has experienced more than two months of lockdowns.
Hometown firms such as Google, Facebook, Twitter, Square, and Salesforce are either allowing their thousands of employees to work from home until the end of the year or forever. To retain talent and stay competitive in attracting talent, other companies must follow suit.
And it's not just other tech companies that need to allow their workforce to work from home indefinitely. It's other industries as well that pay similar wages and vie in the same talent pool.
For example, the finance industry began to relax its dress code and reduce its arduous interview process after it saw many of its targeted candidates get lured away by the tech industry in the early 2000s.
However, in addition to investing in real estate in cities that will benefit from mass migration out of more expensive, more densely populated cities, also take a hard look in your back yard.
Why The Mass Migration Trend To Low-Cost Cities Will Be Slow
The best near-term real estate investment opportunity is investing in less centrally located areas in your existing city. The simple reason is that it is extremely difficult to leave an existing life behind for a new city.
I know it's difficult to leave from first-hand experience because my itch to leave San Francisco began in 2012 when I left my job. By 2014, my urge to leave surged higher once we started my wife's severance negotiation process.
We figured that once both of us had left the workforce, we would relocate to Honolulu, Hawaii and live a more relaxed lifestyle during our mid-30s and beyond.
With the cost of living in Honolulu ~30% cheaper than in San Francisco, we would be able to stretch our retirement income further while also being able to keep our minds mentally sharp writing on Financial Samurai.
What Prevented Us From Leaving
1) In 2012, I tried to sell our home in the northern part of SF and failed. We pulled the listing after 29 days after some sharks were looking to offer 15% below asking. With such a large asset outstanding, I was reluctant to leave it behind in the hands of someone else. The home was ultimately sold in 2017.
2) In 2014, we found our “Hawaii home” in San Francisco. The home was in a quiet neighborhood with ocean views. We spent 18 months remodeling the property, largely because our contractor disappeared for six months. We didn't want to move after spending so much time and effort fixing up the place.
3) We had our first child in April 2017. As new parents, we wanted stability for at least one year as we tried to figure everything out. We liked our doctors and wanted to stick with them. Besides, what a great way to maximize our house we had just remodeled.
4) Our son got into our local preschool in 2019. I had thought we would be rejected by every school since we are nobodies. But as fate would have it, we bumped into one of the teachers at the science museum every week for a year before our son was eligible to attend. He recommended us for admission. After spending so much time and money on the application process and knowing how difficult it is to get into preschool, it felt bad to decline the acceptance.
5) We had our second child in December 2019. Preschool was going well, although we were all getting sick more often. We thought preschool would be the perfect relief during the day so we could focus on raising our baby daughter.
6) Preschool shuts down in March 2020 and the San Francisco lockdown ensues on March 16, 2020. Even if we wanted to leave right now, it would be an extremely unpleasant moving experience. We'd have to sell our stuff, work with movers, and find storage if we can't sell and ship everything.
We'd then need to hire someone to either sell or rent out our existing house. Then we'd need to find a rental house in Honolulu for at least 30 days. Then we'd have to quarantine for 14 days once we get to Hawaii.
It's Hard To Leave If You're A Regular Person
Do all these reasons sound like excuses for not leaving? Sure. Everything is rational. We could have left if we really wanted to. I'm just pointing out some of our friction points. The best real estate opportunity is where residents are the stickiest.
Besides, San Francisco is a nice city. With moderate weather, amazing food and entertainment, great snowboarding in Lake Tahoe 3.15 hours away, Napa Valley 1.15 hours away, and endless coastline, it would be odd not to enjoy living here if you have the financial means.
The other main reason for not leaving is our social network. I love my group of tennis and softball friends. I've built up a lot of social capital over the past 19 years. Further, in the good old days, not so long ago, there was always something exciting going on in The City.
If you are a regular person with friends, a home, a family, and a job, moving to a different city is difficult. There has to be something extremely enticing to make you want to pack up and leave.
That something is usually a better job opportunity.
However, if your job allows you to actually relocate, would you leave all your friends behind just so you can save money? Unlikely, since you're not going for a new, better-paying job opportunity.
In fact, moving will likely stunt your professional growth because you will be away and therefore miss important networking opportunities once a new normal office business routine is established.
The only reasons why you would leave your city is if you:
- Have few-to-no friends
- Have family elsewhere you want to be with
- Are bored out of your mind
- Are already very established in your career
- Feel like you can't effectively compete
- Found a new job opportunity that allows you to work remotely and pays more
- Have a mobile business
- Have enough passive income for retirement
- You're super rich and want to save on taxes
There's also another big issue to consider about relocating to a lower cost area of the country to save money. Companies aren't stupid! Instead, companies are focused on profit-maximization.
Organizations that allow employees to work remotely in lower-cost areas will logically want to pay these employees a little bit less. There's nothing to prevent a company from hiring an English-speaking employee across the globe for 80% less if it is going to allow 100% remote work.
Facebook has already said it will pay employees less for relocating. Other companies will do the same to stay competitive.
If your pay is a little bit less, the desire to relocate to save money gets tempered. Instead, of taking a pay cut and leaving your life behind, there's a much easier solution.
Relocate to a lower-cost area in your city. It's so much easier than moving to one of the unhappiest cities in America to save money. Who wants to move to Houston or Dallas?
Best Near-Term Real Estate Investment Opportunity
After living in the more expensive, northern part of San Francisco for 13 years, I wanted a change of pace. Everybody looked the same, worked at the same jobs, went to the same parties, did the same events, and ate the same food.
I also wanted to save money since neither my wife nor I had full-time jobs and we wanted to start a family. If we could find a more quiet neighborhood in San Francisco that was more family-friendly that also cost less, we'd move. And move we did in 2014.
By moving just three miles west, we were able to reduce our housing expense by a whopping 45%! The house we sold in 2017 cost $1,326 a square foot. The house we bought in 2014 cost $725 a square foot.
Not only did we cut our housing expense by 45%, but we also cut our food, basics, and entertainment expenses by at least 30%.
For example, it used to cost $15 pre-tip for a haircut where I used to live. That was the cheapest barber I could find since my hair was already so luxurious. But when I moved to my new neighborhood, the average barber charged only $11.
If it's just to save money, you can easily save 20% – 50% by moving to a lower cost area of your city. You should absolutely do this rather than relocate to an entirely different city just to save money.
Our move across town was a relatively painless affair that took only three hours. I discuss this concept in the proper geoarbitrage strategy to save money.
Further, the air is much fresher and clean out west as well, especially when we have the occassional forest fire burning north or south of San Francisco.
Think Rationally Before Moving
I'm absolutely certain the vast majority of people thinking about leaving cities to save money will eventually come to the realization they don't have to go to such extremes.
After all, if millions can more often work from home, an extra 15 – 45-minute commute two or three times a week is no big deal.
Further, if you can work from home and keep the same salary, then relocating within your city to save on living expenses becomes an absolute no brainer. In this scenario, you are triple-winning.
In addition to researching the best cities to buy real estate, spend time expanding your real estate investment search in your own city.
The Types Of Real Estate You Should Consider Buying
Cheap ridesharing options have already made commuting from less centrally located areas of your city much more affordable. With work from home becoming more common, the demand for property in less densely populated areas in or around your city will boom.
Here are the types of property in your city you should consider investing in:
- Single family homes over condominiums if your budget allows.
- Small condominium buildings three stories or lower that allow easy stairwell access to all units versus mega condominium projects where an elevator is the main way in and out.
- Condominiums or single family homes that back up to or are near a beach, a lake, a golf course, or public park.
- Single family homes in the hills, which are harder to find and get to by the public.
- Condominiums or single family homes as far away as possible from public transportation routes (buses, trains, etc). This is a big shift from the past.
- Single family homes with backyards.
- Condominiums with large common open space.
The mass migration to lower cost areas of the country is a multi-decade trend. It's happening. However, now that everybody is all hyped up about the trend, I think expectations should be tempered.
Real estate is performing well so far due to a collapse in mortgage rates. There is also a great desire to invest in real assets. However, please don't get into a bidding war.
Instead, patiently look for the Doomer who doesn't read Financial Samurai. The Doomer is one who is willing to sell you his or her non-centrally located property at a discount. They are out there!
Bottom line: Before uprooting your entire life to try and save 50%+ on living expenses, try relocating to a different area of your city to save 20 – 50% instead. Besides, the more people who leave, the more livable your city will be. The best real estate opportunity may be right in your city.
Real Estate FOMO Is Coming Back In Big Cities
I was playing softball yesterday and got to talking with my 30-year-old friend who has been thinking about buying real estate in San Francisco since early-2020. But he was too nervous to take advantage last year.
He worked at Uber for four years and left last year to join another startup as a VP of Product. After selling off all his Uber stock, he cleared at least $2 million after taxes. I'm assuming he makes between $200,000 – $250,000 a year in salary at his new job.
When the pandemic hit in March 2020, he was very doubtful about buying real estate then, despite my encouragement. I even sent him my comprehensive post on how real estate gets impacted when stocks sell off to shake some fear out of him. There's no way you can read the post and not believe in some of my arguments.
Yet, every month we chatted in 2020 he said he wanted to wait. When I asked him what he was up to now, he told me he recently got preapproved for a mortgage and is ready to buy!
When I asked him why the change in heart, he said, “Now that there are vaccines, there's a clear path to recovery starting around the second half of this year.”
Then I asked him whether he was feeling some FOMO with the successful IPOs of Airbnb and Affirm. He responded, “Absolutely. I want to buy a place before herd immunity is achieved and before the people from Airbnb and Affirm get to sell their stock by this summer!”
And this, my friends, is an example of how investor sentiment works. Only until there is a “green light” do most investors dare to put significant capital to work.
The Future Of Supply And Demand
One of the key issues for today's buyers is low supply. Any rational real estate seller will hold off listing their property now. The path to recovery is now so much clearer.
Hence, there may be a wave of new supply coming to the market in 2022+. However, I bet there will be an even bigger wave of demand after there's an all-clear sign.
I believe the time to buy big city real estate is now, before there is herd immunity. People will rush back to big cities in waves once everything is good to go.
You are already seeing rents tick up. I'm personally looking to buy a condo in Manhattan. If I can buy property in NYC and San Francisco, it will act like a fantastic hedge against inflation. Further, it will provide a place for my children to live when they are older. As a result, the best real estate opportunities may now be on the coasts given they underperformed during the pandemic.
Real Estate Diversification
In addition to looking for the best real estate opportunities in your own city, look to diversify your real estate investments across the country where valuations are lower, net rental yields are higher, and growth rates may be higher.
Check out Fundrise and their eREITs. eREITs give investors a way to diversify their real estate exposure with lower volatility compared to stocks. Income is completely passive and there is much less concentration risk. For most people, investing in a diversified fund is the way to go.
If you are bullish on the demographic shift towards lower-cost and less densely populated areas of the country, check out CrowdStreet. CrowdStreet focuses on individual commercial real estate opportunities in 18-hour cities. If you have a lot more capital, you can build your own select real estate fund.
Both platforms are free to sign up and explore. I've personally invested $810,000 in 17 different real estate crowdfunding projects to diversify my investments and earn income 100% passively.
The Best Near-Term Real Estate Opportunity Is In Your City is a FS original post.
Hi,
Thanks for your post as always. I am considering CrowdStreet and the whole idea of investing entities made me think about how to go about these as an individual investor. When you have a change, would you be able to dedicate a topic around pro/cons on setting up vehicles for investments, LLCs, Sole prop, etc etc. Thanks!
Sam – great post. We are in the same boat with kiddos. I read your real estate posts, especially about the bay area – here’s what I don’t understand:
-Rents are going down in SF and SJ (seems like people are leaving SF at least for the near term; do they return?)
-Homes seems to be sitting a bit more, in general, in SF and SJ.
-Homes are NOT sitting in Oakland but there’s very little supply! The price increases seem like they should be driving more people to list – especially those that were planning to list in early 2020. But – not happening yet.
-The explanation – people want to be in the suburbs – doesn’t seem right to me, as SJ is just as suburban as Oakland, maybe more so, and there are a lot of other suburbs that are cheaper than both of them!
This article from Barron’s is very interesting, and indicates that sellers actually are starting to come back to the market. This read to me as: ‘sellers realize this is the last best time to sell, for a while’ – https://www.barrons.com/articles/sellersparticularly-in-the-higher-endreturn-to-market-01591021701
Newish subscriber — love the posts, especially this one. As I am just now truly getting my s*** together financially, I am finding myself in the same thought and analysis pattern as you outlined but with renting.
I live in SF where one of your migration arrows points to and have been thinking about moving to other parts of the Bay for space mostly. But, none of the ‘reasons why you would move’ boxes would be checked in what you outlined and are living within our means.
Certainly, we would have more money in our pockets if we moved or more space but there’s something about SF where once you’ve found your ‘spot’, it’s so hard to leave.
We just moved from the Peninsula to a town 20 min north of Tahoe last month. We were planning on doing so when school was out so the kids could finish out their year. I was reticent for all of the reasons you mentioned above, but oh my goodness, it has been a wonderful move! The selling/buying/moving processes were harder and we closed on the new house 2 weeks later as the banks tightened up, but we made it and closed in RWC last week. The RWC house did not take long to sell (never hit the market) and we probably accepted 100k-150k less than preCovid. We also did all of the packing and moving ourselves. We were sore, but had a free, good workout every day for about 3 weeks as we packed/unpacked. We are not FIREd, but my husband works from home already and travels for his “side gig” of consulting–but not since March. I also was reticent to move as we didn’t have our FIRE number reached yet, but the change in quality of life has been worth it, especially at this time. It’s such a relief and I’m an advocate for making the leap if it’s something you feel you want to do eventually and are in a place financially to do it. We are only guaranteed today and I am so thankful we made the leap to start living the dream! I will be encouraging others to make the leap if they possibly can and know for certain where they want to be. I heard Joshua Sheats say on one of his podcasts one of the best decisions he made was to live somewhere that inspired him and that is true for us. The Bay Area is beautiful, exciting and vibrant, and has many wonderful other opportunities. Although the moving experience in COVID was worse, it was doable to achieve our dream.
In response to Renting in SF, we have seen a significant increase in people looking at homes for sale in our area the last 2 weeks versus the first 2 and our realtor told us today, the house we bought in our new location has already increased in value by 150k due to the Bay Area folks getting out of the city. Best of luck to you all and please don’t put off your dreams too long. I know if you cannot make it work telecommuting in your dream place, it can be challenging, but if you are at a place to do it now, consider it! We are so thankful we did. Also, results may vary and others’ experiences will differ from ours. I just want to give others hope and share that a dream can come true today. There’s always a reason to wait and moving is never easy, but if what is holding one back is uncertainty, our experience has been great, even with limited ability to make new relationships here. There is also research indicating happy people explore new places almost daily, so change is actually a major contributing factor to increased happiness!
“We are only guaranteed today and I am so thankful we made the leap to start living the dream!”
You’re right!
And congrats on the move! Nice job and I’m glad you’re loving it.
We have a place in Tahoe, but not a SFH, but a condo at The Resort at Squaw Creek. It was a bad purchase due to timing, but it was GREAT when we went back last summer with my son. We had so much fun.No maintenance either since we just pay them the monthly resort fee/hoa, which is expensive.
Enjoy the great outdoors!
I was shocked recently when I did an analysis of my homes value (here in the heartland), it would appear that I have been drastically underestimating what it would sell for. Seeing a for sale sign going in my neighbors yard prompted me to take a peak. A quick scan of recently sold property and what’s available has lead me to believe that the flight to having a quality home in the best location is in full effect. Before all this I would have said I’d sell it quickly and net $2M or so after fees/commissions, but with 2 homes that are not as nice or new as mine asking $3.8M and $3.2M respectively, I’m thinking I was way off. I’m conservative by nature, and understand people can ask whatever they want, but recently sold $2M properties are clearly not in the same league, so in today’s market it is probably a $3M home all day.
I follow real estate pretty closely, and admittedly didn’t see this coming. If anything I thought the COVID situation would have had the opposite effect. I’m sitting on a bunch of cash right now because I thought I’d pounce on some real estate deals, maybe it will still happen, but I’m starting to doubt it.
$2M and $3M is a big diff. I hope you are right!
Curious, did you not read this post? https://www.financialsamurai.com/how-does-real-estate-get-impacted-by-a-decline-in-stock-prices/
I highlight that real estate performs very well when stocks are down 10% – 15%.
Yep, I read it I just my conservative side was skeptical. Kind of like I’m skeptical of how in the hell the S&P is where it is today. I also read your post on how you sold out everything you had purchased in the downswing and was kicking myself for not doing the same then because I totally agreed, now its up another 10%. I’m officially admitting I am clueless and have zero understanding of how stuff works because this makes no sense to me.
For sure. I got lucky on my purchase, but not on my sale, even though a gain is a gain.
I’m just happy that the whole market is up because our main portfolios are winning.
How in the heck were you able to find an $11 haircut? I can’t find anything below $15 and I live in a Maryland suburb. LOL. Thanks for your post.
Haha, seriously, when I walked in to my new neighborhood barber, I was pretty giddy! And it’s not just the haircuts, it’s the neighborhood food, gas, everything is so much cheaper!
The only downside is I have to drive 7 minutes further to play tennis at my club and spend 15 more minutes going downtown once a quarter. Who cares!
Another interesting one. I was thinkng about it and I’ve actually been in a mental struggle on this for a couple of years now. Why do I live where I live in the Old Town Alexandria area? It’s expensive in NOVA! Sure there are plenty of perks, easy access to DC and all of the surrounding areas. Restuarants, mueseums, parks, 15 minutes to the airport, etc. The list goes on. All within a 5+ mile radius of my house. Walkable, Metro, even bike shares, scooters and all that jazz. There are numerous biking/walking trail systems and even water taxis. some of the most iconic building in the world as your backdrop for running and biking routes. There is never a dull moment in the DC area unless you want there to be. It’s a great area if there weren’t so many people everywhere all the time, and the traffic is less than desirable.
The funny thing is I don’t even work in this area typically. Most of the time i’m working within a 1-2 hour radius (largely due to traffic), and often in other states when traveling. My wife also works about an hour (with traffic) outside of oldtown as well. So, why do we pay all of the high fees, and taxes, etc for proximity to things that we could drive slightly further to get to on weekends and holidays?
I suppose it’s one of those phase changes in life, where you start to realize you don’t need to be near “downtown” anymore. Walking proximity to cool bars, restuarants and nightlife are not ranking as high as they used to, especially with two kids. Perhaps, it’s time to let the location go and move on to a lowercost area and get a bit more bang for the buck. Considering single family houses in my neighborhood are starting in the $1M+ range, for a 1940’s fixer upper. Or you can have the privilege of buying a 700sf condo for $400k+.
You have nailed it with the price comparison for surrounding areas though. I always drive out 10-15 minutes for mechanics, barbers, dentists, etc. the price drops like 10% per mile outside of the beltway. Sure the traffic can suck getting to and from those areas, but if you can stack those errands then why not.
As it is I have a $600k+ townhouse that my family is rapidly outgrowing. So a move is pending. As I sit back and reflect on these previous paragraphs and my thoughts on this area, maybe this area still does mean something to me and perhaps I should start looking a bit wider for a discounted house. Who knows maybe there is a nice 5B/3B a couple miles over…
Good reflections. And the best part? You can easily widen your search for property online.
For 13 years; I lived in two of the most expensive neighborhoods in San Francisco. I thought this is what you were supposed to do and this is all there was to San Francisco. How little did I know how beautiful the rest of the city is and how they were such amazing gems “hidden” from me bc I just didn’t bother to look.
If I had bothered looking for a different real estate 10 years ago, I would’ve bought up more of these ocean view homes.
For us, life is better in a quiet neighborhood with a backyard that is less dense. It feels safer, and feels like an oasis. Gl!
Hello Irish and Sam!
I don’t know how much a bargain you can find without moving really further out today. I’m also in NoVa. I have expanded my search area from McLean to Great Falls, and you know what? The price change isn’t much. Sellers are still very very very stubborn. And they know what their houses can offer in this quarantine time.
Are you suggesting moving out of NoVa? But that’s not within the city anymore!
What do you think?
Well, I hear that, but Mclean to Great Falls, is more like $2M+ for a fixer upper. I don’t know about all that, anything starting with a $2M should come with a lake or ocean view (perferably access), a boat, maybe even a guest house/pool house, etc. I have a hard time justifying going over $1M, let alone $2M in this area, when you know a few miles across the state line in PA you could probably buy a castle for that much.
As far as widening the search, I’m thinking of expanding to Fairfax County and East, staying on this side of the river. Plenty of options in there. My main problem is I typically run projects in DC,MD,VA and NC at the same time. So moving too far in one direction puts a sea of traffic between me and the other side.
Sam, I too have lived in Arlington and Alexandria City (two of the more expensive areas in NOVA as you are aware) for the last 13+ years… basically in the same 6 mile radius. Originally I moved from Arlington to a cheaper place I bought in Alexandria for the cost savings. At the time I didn’t realize the cab fee was only like $12 (traffic dependent) and I could be back in the same bar area. I was living up the Arlington bar scene, while paying 1/2 price at the time. However, once the family came along I had to upgrade the neighborhood and the house by a few hundred K. Now, I’ve been so engrained with driving against traffic patterns around the DMV that I have been hesistant to move out of the beltway. Though, as the need and wants grow, so does the potential search area.
A quiet neighborhood with a fenced in backyard is on the list.
My other thought is to just ride it out with this house M-F until the kids graduate highschool, and buy a lake house in the surrounding area for S-S. Try and make the weekends count more I guess. There are surprisingly a large number of lake properties in the area (1-3hr radius), which also (pre-COVID19) do very well as rentals. I actually have three lake properties in NY but rarely get to use them personally because of the distance. So I’m starting to think, a closer lake house for weekends may be better than a larger house M-F. Could always try to adjust the schedule and work from home Fridays or something, make the Thursday evening traffic fight worth it. Then again, I’ve got these kids and their schooling to think about, taking off every Friday might not go well with the education requirements.
Life is a fun balancing act isn’t it?
Wow, McLean is that much now? Guess we shouldn’t have sold back in 1999!
Not really… you can get something decent for 1.3mn and above. 2 mn is only McMansions. If you held onto your house in 1999, it could double the value, not triple in SF. So still a good move for you!
Hah, OK. Well, it was my parent’s home. I just lived in it and flipped burgers at the McLean Mcdonald’s.
Chantilly? Is Vienna crazy expensive now? Surely, there are cheaper places than Langley, McLean, and Great Falls. Wow… I remember those mansions in Great Falls near the Mars Inc. mansion.
I just put my Vienna 3BR Townhouse out on the market. Very low stock in the market. Decent, not stellar appreciation but at least it’s walking distance to Tyson’s / Metro to Dulles. Been a great rental property, but I’m committed to SoCal and leave the DC rat race. PM me if interested.
Check out the Takoma Park neighborhood in MD. I used to live in a charming house on Elm Avenue and worked in DC. Loved the neighborhood and the people. Amazing farmer’s market. And so close to everything especially if you take advantage of the metro.
I don’t like to admit it but I was the snob who didn’t want to live on the east side of town, where homes are typically older and includes Section 8 housing. This was before I met my husband. I was so used to having co-workers and friends that all lived on the “nicer” west side of town. Now that I’ve lived on the east side of town, in the same home for the past seven years, I’m thankful for the perks of being in a less desirable part of town. I live in a city where over half the residents are either students or employees of the university. Since most university folks live on the west side of town, there’s certainly more traffic during morning and evening commutes. It feels like we live in the country since the main road in front of our property is lined with undeveloped land full of dense trees where deer are often seen prancing through the woods but I’m only 5 miles away from the university. My 15-minute drive is a much shorter commute than any of my co-workers. I was complaining to my husband a few years ago how I wished there was a safe place for me to jog around our neighborhood since our roads don’t include sidewalks and cars are traveling 50 mph typically. This is when my husband shared the fact that there is a neighborhood on the back side of our property with upper-middle class homes with at least 2 acres of land each, all with nice manicured lawns, where I could go running safely. This revelation threw out my belief that we were living on the poor side of town. East side homes have more land and it’s cheaper. We live on 5 acres. Our neighbors are friendly folks who appreciate nature. One of them has a couple of horses and it’s always nice to be able to take any visiting kids over to pet the horses and feed them carrots. Homes on the east side of town cost about 20% less than on the west side. If you’re able to find a foreclosed property that needs a little work then it’s an even better deal. My husband was able to pay the mortgage off in two years. I agree that being open minded to living in less desirable areas of town can allow for better commutes and significant financial savings.
Great! We totally get snooty and so focus on our existing neighborhood or think we can only do XYZ neighborhood.
It’s like thinking there’s no other great parts in America except our own city. Not true! America has so many wonderful areas. Just got to go out there an explore.
Nice analysis; I love fundrise as well!
One question – Personal Capital appears to provide the same insight about Mint! What am I missing? What is value added in personal capital that Mint can’t provide?
I would prefer Mint since it’s backed by Intuit – a solid company!
Please advise.
Mint is great for budgeting, Personal Capital is great for cash flow analysis, investment portfolio analysis, and retirement planning.
Go with what you are most comfortable and most suitable for your needs!
The co-founder of Personal Capital, Bill Harris, was the CEO of Intuit at one time I believe. And Mark Goines, on the Board was also at Intuit.
If people are concerned about cash flowing look into adding or renovating a place with an ADU option (Additional Dwelling Unit). In my county (Sonoma) the building department is making it less expensive with lower building permit fees etc and the ability to convert garages etc that 5 years ago might have been a no no. Adding a second unit can improve cash flow dramatically.
Sam, we need a shout out for Sonoma, city of, not just Napa. We’ve got great wineries, restaurants, hiking, and close in access to West County all with a nice relaxed feel just 1 hour from SF!
We moved here from Marin 14 years ago and haven’t looked back. This town has been really good to us.
Be well,
OK! Shoutout to Sonoma!
I agree on the ADU, and was gonna build one until the shutdown happened.
Do you find it possible to get cash flow positive properties in California with 20 percent down?
For me, it hasn’t been possible with only 20-25% down. It would take about 2 years to get to cash flow positive.
Cap rates are low, valuations are high, hence why I have diversified into the heartland and am actively looking for better opportunities besides just SF.
But man, the jobs and the pay are here, hence the continued strength in prices.
Honolulu may be 30% cheaper, but the pay is 70% lower!
You and i are so alike in so many ways that unknowingly we know each other. Family from Hawaii, went to school and lived in sf. I currently live in los Angeles but doing the same thing you did. Only difference was you worked in finance and i did tech. I didn’t retire i kept my job but it’s fully remote, and on different time zones so i still get to spend time with my 3 year old son and baby daughter. Wife also doesn’t work so we save on day care. Needed to stay employed for health care and also i like what i do.
What are your thoughts on finding cash flow positive properties in California? Seems like they don’t exist assuming 25% down. The tenant laws are incredibly one sided for the tenants. Imo
Wow! So similar, especially with the 3 yo son and baby daughter.
Hard for me to find cash flow properties in CA. If you want trophy properties, that’s another thing.
I’m all about cash flow properties outside of CA, hence my foray into real estate crowdfunding. I want property in Charleston, SC!
Also not not mention we are the same age, you grew up in va apparently and i was in Columbia Maryland! Would love to connect sometime! You have my email :)
Do you do your own taxes? After doing my own i learned so much and opened doors on my investing strategies.
Why of course! I’ve been doing my own taxes for at least 15 years now and will do mine again this year by July 15!
We are moving to a new city in 2 days (13 hour drive from our home city or a 1.5 hour flight). It feels bittersweet. We made this plan 2.5 years ago as part of FIRE and renovated our dream home in the new city. Now that the house is ready, it’s time to go.
When I looked at your list of reasons for moving I’d say we most closely identified with boredom and having enough retirement income. We decided we were still young enough to embark on a new adventure. We were also attracted to the parks/beaches, weather, demographic, and emptier public schools in the new city. My husband and I lived in the city we are leaving for 15, and 8 years respectively, during successful working careers. We had solid relationships with many people we will miss, but after oil prices dropped in 2014 the pulse of the city started to change. Moving back to our home city was never on the radar, although we love visiting.
I’m worried a bit about the social aspect and am considered getting a casual job for this reason. I’m also hoping I can meet other parents in the area, but understand it will probably take at least 1-2 years to redevelop socially.
If doesn’t work out, we can always come back :)
Awesome! please keep us posted how you enjoy the new move, 3 months, 6 months, and a year in!
I’m sure you’ll meet new people. Maybe more slowly now than before.
But pls keep me updated. Losing my social network is the biggest bummer.
you mention preference for single family over condominiums. How do townhouses factor into your order of preference?
In between the two. In SF, many single family homes look like town homes since they are right next to each other with zero or a 1 inch gap.
The point is, more people will naturally want more space. So a free standing home that doesn’t share a wall on any sides will likely command a bigger premium than a house that does.
You and i are so alike in so many ways that unknowingly we know each other. Family from Hawaii, went to school and lived in sf. I currently live in los Angeles but doing the same thing you did. Only difference was you worked in finance and i did tech. I didn’t retire i kept my job but it’s fully remote, and on different time zones so i still get to spend time with my 3 year old son and baby daughter. Wife also doesn’t work so we save on day care. Needed to stay employed for health care and also i like what i do.
What are your thoughts on finding cash flow positive properties in California? Seems like they don’t exist assuming 25% down. The tenant laws are incredibly one sided for the tenants. Imo
I’m embarassed to say I’ve lived the same house for 28 years! Over the years every time I thought I wanted to “upgrade”, I just couldn’t justify paying 2-2.5x more just for a newer home with larger garage and a basement. It just wasn’t worth it and would have prevented being mortgage-less at age 39. So my circumstance was the opposite (staying put rather than moving), but the objective is the same… minimizing expenses, yet still being comfortable.
No shame in that! That is awesome. Hopes keep your property tax is low if you live in California.
Tell me you have owned your home for that amount of time and didn’t rent!
Yep! Bought my house fresh out of college. Now I just need to get FIRE’d… 332 days and a vaccine to go!
I live on the other side of the world in OH. The weather sucks compared to yours, but at least rioting is unlikely in my small lakeside city. I always say… we can’t have everything.
I lived 35 years in the same apartment, my folks bought it back in 1963, so my father lived there for all this time, which is more than 50 years. No shame in this.
As far as relocating … we moved on the other side of the world, at 40, respectively 50. The reason was that we got the chance to move legally to the US and, since everything is better than back home, we thought our daughter will stand a better chance to become ‘somebody’ with better schools, better tennis etc.
It is hard to leave everything behind and last year there was no pandemic either. I totally understand why Sam is not too pleased with the idea of moving now to Hawaii. Anyway, it’s not leaving anywhere, you’ll find Hawaii still there when it’s more comfortable for all of you to move :)
Makes so much sense. I think the savvy will do just that if they feel the need, relocate to a new neighborhood to save money and keep the same pay. It’s much easier to do local moves versus long distance for sure! SF is an expensive city, but there certainly are enough lower cost and safe neighborhoods than areas like Pacific Heights and the Marina.
I’ve only done one long distance move and that was from the east coast to SF. It was easy for me at the time because I was right out of college and only really had one big suitcase and carry ons worth of stuff. Fast forward to now and I’ve got a big truckload of stuff especially with kids, so much more to figure out with logistics too. But the positive of a long distance move if we ever do one is purging/donating a ton of stuff and starting fresh.
I do think long term people are going to move around a city first before venturing to another town or state. If you are social person your network of friends and family are important. We moved 4 years ago to be closer to work, and our kids activities(soccer, swimming) and school. The constant driving to all the different activities was making our lives miserable, and the new house saved 5 hours plus of driving a week. It also doesn’t hurt the new house is across from a park. and close to lots or restaurants and shopping. We wouldn’t even think of moving while the kids are in school, but might after the youngest goes off to college.
As long as good schools and overall quality of life (e.g., less crime and better customer service) is there, it’s a no brainer. I wish I could do this but I have a LOT of family close by so it would be hard realistically.
Hmmm.
I would think you would easily be able to move 15-45 minutes farther away from the main work area of your city.
Not being able to relocate to a lower cost area WITHIN YOUR OWN CITY b/c family is close by makes no sense.
Nice Thought & points. In addition to the commute though , what if the lower cost area isn’t safe?
Then there will be a discount that prices in the lack of safety.
Commutes don’t matter as much anymore. Cheap ridesharing options and more work from opportunities means being centrally located doesn’t carry as much weight anymore.
“Please don’t get into a bidding war.”
Not sure how this is possible to avoid in San Francisco.
Also, if SARS-CoV-2 is with us for at least the next couple years, do you think people will increasingly want to leave cities for suburbs or other areas (Tahoe, Marin, Sonoma, etc.)?
Yes. We moved from the Peninsula to Truckee last month and our new home has increased in value by $150k according to our realtor, and we’ve seen many more people looking at the nearby homes and lots in the last 2 weeks! Prices are being driven up here.