You can thank California for boosting the nation’s real estate returns.
More and more investors, businesses, and individuals are looking outside of The Golden State. That is turning out to be a great thing for the national economy, and is helping West Coast residents and ex-pat Californians bolster their finances amidst the recession.
The Exodus of The Bears
Bull or bear, the numbers speak for themselves. California asset prices and living costs are sky high.
According to the San Francisco gate, that led to almost 700,000 residents leaving the state last year. About 30,000 of them moved cross-country to Florida.
Big tech and finance companies are increasingly relocating or are diversifying their assets and real estate holdings too. They are moving billions of dollars out of state. Often taking their employees and their dollars with them.
2020: A Record Setting Year For Leaving California?
There are many factors at play which could make 2020 a record setting year.
All previous fundamentals have been compounding. Then we have new rent controls, higher taxes, and the new freelancer law which threatens to send millions of workers and jobs out of state. Many industry veterans are also frustrated at the new dictatorship and ‘proclamation’ environment which has meant lawmakers setting new rules based on personal preferences and lobbying despite the majority of the public voting in opposition to them. This is all on top of California’s notorious and long running litigious, anti-investor and business climate.
The Search For Yields & Safety
Even the most pessimistic can’t deny that California will always be a good place to invest and will remain in demand for the wealthy over the long term. Yet, there is only so much flat yields and high prices individuals and businesses can stomach in their portfolios. At least without setting themselves up for financial disaster.
Compare this with the undervalued, affordable real estate investment options out of state. Those with room for capital growth and much higher yields. Places where prices are at common sense levels for annual rentals.
Adding this type of diversification to your investment portfolio is crucial for maintaining steady portfolio values and consistency in passive income. You can easily buy 6 units somewhere else, for less than the price of one in LA or San Fran. Whether the market goes up or down, these destinations can benefit.
In the past a lot of that capital has come back to CA. However, that could be changing too as more decide to move residence and business headquarters. Especially to destinations with no state tax, and low property taxes.
Hold onto your CA income producing properties if the numbers still make sense, and you are really generating strong returns based on your current equity. Keep diversifying to smarter, more stable and more profitable assets in better priced locations too.