Why I Quit Being a California Landlord (and Moved Elsewhere)

Written on February 10, 2015 by , updated on February 11, 2015

Quit Being a California LandlordBeing born and raised in the great state of California was a blessing, no doubt. But it also came with its own share of baggage.

No matter how dysfunctional the state became, I, like many California natives (particularly ones who live on or near a beach), couldn’t imagine ever leaving.

That is, until I did.

And still, even after years of being away, I consider myself a Californian and would probably go back if the right opportunity came along.

But therein lies the problem.

High Expense + Long Distance

California real estate is unpredictable for one and unaffordable for another.

I had no problems being a landlord there for single-family housing because there was always demand. I wouldn’t buy there today, though, because it’s just too expensive for my tastes. But every investor has his or her own strategy.

Like 164,000 other California-born residents, I moved to Georgia for personal reasons.

However, managing my property from across the country was difficult without the right tools, and I wasn’t able to monitor my property as much as I would have liked. Let’s just say a tenant who transformed my front lawn to a dirt floor, because he was using the area as an auto repair zone, was the least of my problems.

In 2013, when California became a seller’s market (and still is), I decided to stop being a California landlord to be one in a more affordable place, Hotlanta. Properties in metro Atlanta were more affordable, and the rental market was strong.

Where to Invest

If you want to invest in rental properties, pick a spot where you get your money’s worth. Use the interactive graphic that Freddie Mac created to show whether an area is affordable or not.

Source: Freddie Mac

Source: Freddie Mac

As of November 2014, 52 metro areas were listed as not affordable, and 112 areas were affordable. A sarcastic “Congratulations!” goes to California, which had four of the top five unaffordable metro areas in the country.

Florida had the most unaffordable metro areas overall at seven, and California had the second most at six. Florida, at least, had several metro areas that made the affordable list.

California had none. Zero. Zip. Nada.

The problem with basing your rental business in an unaffordable area is that people eventually leave. I’m not the only one who left California. The state is experiencing a regular exodus across the board. Many people don’t want to be renters forever, so they plan their exit strategy.

Source: The U.S. Census Bureau via the NYTimes

Source: The U.S. Census Bureau via the NYTimes

Related: Where We Came From and Where We Went, State by State (NY Times)

Profits Follow People

I want to be a landlord where people want to come to, not where people need to leave. When people leave a city, their money goes with them, then housing prices decline, and my equity disappears.

You can look at many lists to find the hot spots to live because the figures are based on different variables, such as livability in a small to mid-sized city, or a city’s VAM score (Value According to Millennials — yes that exists) for another.

But for now, let’s consider what Penske, the truck rental company has to say. Penske compiles a yearly list of the top moving destinations based on where its clients move to. Atlanta has topped the list every year for the past five years: 2010 until 2014.

Top Moving Destinations in 2014:

  1. Atlanta, GA
  2. Tampa/Sarasota, FL
  3. Dallas/Fort Worth, TX
  4. Phoenix, AZ
  5. Orlando, FL
  6. Seattle, WA
  7. Denver, CO
  8. Houston, TX
  9. Chicago, IL
  10. Las Vegas, NV

Owning rental property in an area where an influx of people are moving to, represents the type of scenario landlords should want. If you are familiar with or live in one of the “Penske” areas, you might want to invest in one.

Understanding which part of the city or which neighborhoods are most desirable gives you an edge that should help you find good potential rental properties to invest in, ideally gaining you above-average return rates.

Source: Penske

Penske Top Moving Destinations 2014

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