Blue Chip Realty (BCR) can help you purchase residential income property anywhere in California. If you want to take advantage of the thriving market in the world's 5th largest economy, BCR can make it happen in several ways:
In all 3 instances below, BCR can act as your buyer's real estate broker at no charge to you, and guide you to fulfill all IRS regulations on the self-directed IRA purchase:
If you already have your eye on a juicy investment idea and want a real estate broker familiar with the self-directed IRA rules.
You may choose to invest in your own town or maybe a city you'd like to visit more often. You might also prefer to rent to families or single professionals versus students. The economics might not be as favorable, but your heart will be happy.
If finding a lucrative investment is a priority, below are three examples of areas that might be of interest due to their low home prices, high rents, and a recent jump in demand. These university towns will likely provide the greatest ROI in the shortest amount of time because of the reasons discussed in The Blue Chip Model.
San Luis Obispo (near Cal Poly University)
Located in San Luis Obispo on California’s sunny Central Coast, Cal Poly has recently spiraled-up as one of the best collegiate values in the United States. Its motto is "Learn by Doing" and its graduates often get hired ahead of those from the Ivy League schools because hiring managers say "the Cal Poly kids are smart, and productive on Day 1." These success stories have spread and more high school seniors from around the country are applying for admission. Over the past 7 years, enrollment has jumped by almost 5000 students from 17,680 in 2012 to 22,500 in 2019. In fact, two years ago (2017-18) an "extra" 1000 students accepted offers beyond what the administrators anticipated. Whoops, a victim of their own success!
The problem is, the number of "beds" available to these extra 5000 students has only risen by 1475 (with the new dorm that opened Sep 2018). Thus, the surge of students looking for rental housing in town continues to accelerate, pushing up rents by 5% to 10% each year. For instance, one client charged $4,500/month in the 2017-18 school year and had a dozen offers to rent it in 2018-19 for $5K per month and $5,200 for the 2019-20 school year. Though adults paying for their kid’s housing in SLO might wince, they still smile at the low college tuition (< $10K/yr).
NOTE: There have been several professional investors buying up lucrative SLO rental properties in the past 12 months, but its not too late for parents to do the same. Investors smile at the combo of these three facts:
> Home prices range between $850K to $950K for a decent 4BR-2BA (sleeps 5)
> Monthly Rents range from $825 to $925/student. $4,420 for five ($53K/year)
> Price-to-Rent (P2R) ratio is 16.9 ($900K/$53K) which is a good ratio for owners, often allowing them to pay off the property in under 15 years.
As a bonus, SLO is a lovely place to visit, has a vibrant downtown with a 246 year old mission, gorgeous beaches, and world-class wineries nearby. Oh yeah, and it would be a great place to retire to, so you can “keep an eye” on you rental ;-)
Davis (near University of California - Davis)
Between the SF Bay Area and Sacramento, the University of California, Davis (UCD), is known as one of the Top-50 "most prestigious" universities in the world. Money magazine ranked it as the 9th best college for the money. The city of Davis is a college town with the ratio of students to long-term residents estimated at 1:4. There are over 37,000 undergrads and graduate students with roughly 15,000 living on campus, while the remaining 22,000 live in the apartments and rentals in town.
The strong desire to live in Davis can be attributed to its excellent quality of life, low crime rate, great restaurants & bars along with a convenient location on the I-80 corridor between Sacramento and the Bay Area.
Davis has not seen significant new home development during the past twenty years nor does it project much, as no new land has been annexed to the city. This limited potential for new development will continue to affect the Davis housing market making it a strong option for investors. This will add upward pressure on rents due to the additional 7,000 UCD students projected over the next ten years. Also, the projections show a 50% increase in residents in Yolo County (home to UCD) over the next few decades, growing from 213,000 residents today to 366,000, which would make it the fastest growing county in California.
All of these factors make it an good choice for investors. Average price of an 4BR-2BA (sleeps 5) rental in Q3 2019 is $850,000 while average rent per student is $850, thus 5 students would be paying $51,000/yr. That leads to a price-to-rent (P2R) ratio of 16.7 - another favorable ratio for investors.
#3: Rohnert Park (near Sonoma State University, CA)
Sonoma State University (SSU) is a hidden gem that's part of the California State University (CSU) system with its main campus 50 miles north of San Fran and a few miles south of Sonoma Wine County. Sonoma State offers 92 Bachelor's degrees, 19 Master's degrees and a Doctoral in Education. One of its biggest benefactors is Charles Schulz, cartoonist and author of the popular Peanuts comic series. Sonoma State occupies approximately 269 acres next to the city of Rohnert Park & Condati.
Besides the usual courses in Humanities, Business, Science, Technology and Engineering, Sonoma State also offers a program in Viticulture and the Wine Business, such as wine marketing, wine finance, wine business strategies, production, operations, and distribution. Cool!
Roughly one-third of its 7,000 students live on campus in dorms named after wine varietals, such as Sauvignon, Cabernet, Zinfandel and Verdot. Another third of the students commute to school while a third (>2,300) rent in town.
Unlike the high-priced neighboring areas of San Fran and Sonoma where a 4BR, 2BA home goes for $2.5 to $4 million, 4BR, 2BA houses near SSU can be fetched in the $680K to $750K range, while still generating strong rents. A recent 2019 client purchased a 5 BR, 3BA house for $795K and was able to rent it for over $65K. Rohnert Park is filled 80% with friendly families and single professionals that work in SF or wine country, with the remaining 20% rented by students attending Sonoma State.
In Rohnert Park, the average 4BR, 2 BA (sleeps 5) price in 2019 is $725,000 while yearly rent averages $48,000 ($800/month per student x 5 students x 12 months). This generates a P2R ratio of 15.1, currently the lowest (and best) in the state. We are very bullish on this area that no professional investors have their eye on. We do. This is the town we would invest in if the decision is purely financially-based.