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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15 CommentsLeave a Comment

  • Sherlock

    Not to make this political, but owning a rental in any blue state is not advised. Seems like most of the laws are in favor of the tenant and not the landlord — especially in CA.

    • Laura Agadoni

      Yes, sometimes the landlord-tenant laws make a difference in where you decide to do business.

      • Dan Hunter

        Amen Laura !!! I had to quit landlording in the Detroit suburbs because the landlord/tenant laws became so weighted in favor of the tenants.
        Example: If you need to evict a month to month tenant for any reason, even illegal usage such as prostitution or drug dealing, the tenant can get a free attorney, (paid for by taxpayers of coarse). Tenant can then demand a jury trial. Your attorney will demand up to $500.00 per hour. Of coarse he keeps track of his own time.
        Example : One of the members of our landlord club was fined $25,000.00 because his caretaker told a mother he could not rent a one BR unit to her because one of her kids was male and the other was female.
        These examples plus too many more to list, are why Detroit is a giant slum.

    • Brian Todd Paster

      You are right liberal California ia about supporting the legal system not business. We font reward great work which hear . We tend to destroy that

  • Portlander

    Managing a rental property outside one’s own local geography requires oversight, which costs money — either a property mgmt company or regular air flights, which takes away from profits available in a ‘hot’ area. Most landlords prefer to invest where they can easily drive.

    Metro areas that are growing offer affordable homes outside the metro core. As the metro area grows so too will your investment value, if you plan to hold your property for a few years.

    If you want to keep operating costs low, you’ll manage the property yourself so you’ll want to keep to investments nearby.

  • Whitehouse Rentals

    Amen Portlander! Don’t go where you don’t know! After forty years of land lording we still use the KISS method and this important rule: 1% of the purchase price for monthly rent is break even. 1 and 1/2% is good but you need to keep your regular job. 2% you are making money and your future is bright! (this is based on a 15 year mortgage)

  • Linda

    I appreciate your perspective! On the other hand, as property becomes less affordable in San Francisco/San Diego/Fresno (you name it), only those who can afford it will stay, and only those who can afford it will come. If I am going to be a landlord, it makes sense to do so where my tenants give me the biggest bang for my buck and ideally, where rental housing is scarce (San Francisco). You’ll have to pry my California properties from my cold, dead fingers and I’m staying here too.

    • Laura Agadoni

      Thanks Linda! I hear you. If I hadn’t left California, it would probably have been a different story for me. Even after leaving, I didn’t want to let go of my California property for years. Do you have to deal with rent control in your San Francisco rental property?

  • No Nonsense Landlord

    I always wonder how places such as San Francisco can keep home prices rising. If the average population cannot afford it, I think it is only a matter of time before there is a major price collapse.

    CA has high taxes, high prices, and warm weather. And a bad state budget situation, taxes will only go up from here. I think investors who think prices will continue to go up are dreaming.

    • Linda

      NNL, have you been to San Francisco? People have always loved its natural beauty and many other attributes, including the lack of truly warm weather. What I have observed is that the “draw” of San Francisco is universal and prices will continue to rise as people come from all over the world to live there. A very few will own property there. People will form new and creative ways to buy high priced real estate.

      Google and its ilk pay their employees supremely well. Well enough that they can rent, or buy, in the Bay Area. More than the “average” salary. Quite simply, people are willing to pay the price to achieve the California homeownership dream, especially at the ocean and most especially in San Francisco, IMHO.

    • Laura Agadoni

      Most people rent in San Francisco, but most rental units, around 70 percent or so, are rent-controlled. Rent control in San Francisco applies to buildings built before 1979. And that makes it difficult for small-time landlords. There are empty units in San Francisco because many landlords prefer that to dealing with a rent control situation where they can’t make a decent profit. And that makes the housing situation even worse. San Francisco is a great city, but I don’t know about being a landlord there.

      • Linda

        Laura, I think your comment about 70% of so of rental units being rent-controlled in San Francisco, is mistaken. Even if it were correct, I believe the picture you paint of empty apartments and struggling small-time landlords is inaccurate…sounds like you are reading sfgate. The median rent for a one bedroom apartment in the City today is about $3,600 with no shortage of qualified tenants. San Francisco is a superb city to visit, to live in and to own in. (Just don’t ask me to help you find parking!) I hope things are going well for you in Atlanta (Hotlanta) as well.

        • Laura Agadoni

          That’s good to hear, Linda! And I do read San Francisco Gate. :) I love going to San Francisco. It’s one of my favorite cities to visit.

  • Sharron

    Yea right. I am a renter, and no one holds landlords responsible for anything. They walk around with this God complex, and shitty rentals. I had the biggest leak in my roof for a year. Health department didnt do anything, you know the landlord didnt care, but the people who kicked my door and stole every electronic sure did something. My door was kicked in for a month. They need to come down on you guys harder. Lets not get started with the psuedo idea of equal housing.

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