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Against the Grain: The Case for Multifamily Investing in California

The Migration vs Growth

According to the Public Policy Institute of California, from 2010 to 2022, about 8.5 million people moved from California to other states, while only 6.3 million people moved to California from other parts of the country. The primary driver of this population loss has been California residents moving to other states, with the outflow remaining near record levels in recent years​​. This trend is not only due to high housing costs but also factors like employment opportunities and family reasons. The high cost of living, particularly housing, in California has been a significant driver of this migration, with 34% of Californians reportedly considering leaving the state due to these costs​​.

Despite the trend of people leaving California, certain regions within the state are experiencing population growth. The Central Valley is one such region that is attracting new residents. This migration is driven by factors such as affordability, job opportunities, and housing availability. The Central Valley is experiencing significant population growth, with projections indicating an increase of about 5 million people by 2060. Affordability plays a crucial role in motivating individuals to move from coastal and urban areas to the Central Valley, where housing prices are notably lower than in metropolitan regions. This trend is further supported by the fact that birth rates in Central Valley counties are higher than in more populous areas, contributing to the region’s growth. Additionally, the development of master-planned communities like Lathrop, offering more affordable housing options and proximity to major highways and the Bay Area, has attracted many residents from coastal California.

The Rent Control

California’s statewide rent control allows for a significant annual rent increase of up to CPI (Consumer Price Index) + 5%. Assuming an inflation rate of 2%, landlords can potentially raise rents by 7% each year, market conditions permitting. However, it’s important to note that some cities like Los Angeles, Oxnard, and Oakland have more stringent rent control measures. In these areas, investors may face stricter limitations on rent increases. As long as you can avoid these areas,  the statewide provision still offers a substantial opportunity for property investors to achieve a strong return on investment while adhering to regulatory guidelines​.

The Annual Property Tax Increase

For real estate investors, California presents a unique opportunity due to its stable property tax environment, primarily governed by Proposition 13. Enacted in 1978, Proposition 13 limits the property tax rate to 1% of assessed value at the time of purchase and restricts annual tax increases to no more than 2% until the property is sold. This means that, unlike states like Texas where property taxes can increase with market value, California property owners benefit from a predictable and capped tax growth, making long-term investment planning more feasible. This stability in property taxation is a significant advantage for investors looking for a more predictable cost structure in their real estate investments

Proposition 13, passed in 1978, remains a contentious issue in California. While it has faced challenges, such as the narrow defeat of Proposition 15 in 2020 and the ongoing debate over Assembly Constitutional Amendment 1 for the 2024 ballot, its long-standing support suggests that significant changes or repeal are unlikely in the near future.

The Weather

California’s moderate weather is a significant advantage for real estate investors, as it reduces the likelihood of weather-related issues such as pipes bursting in winter, which are common in colder regions. This makes property maintenance easier and potentially less costly. For example, in February 2021, Texas experienced severe winter storms that led to record low temperatures and widespread frozen pipes, resulting in a massive plumbing disaster. A survey found that 16% of respondents in Texas had their pipes freeze and burst, leading to extensive damage and insurance claims​​​​. In contrast, California’s milder climate helps to avoid such extreme weather-related challenges, supporting strong demand for properties.

The Appreciation

California’s real estate market has seen significant appreciation over the years, with some regions experiencing more pronounced growth. Since 2000, the state has seen a total appreciation of 255.98%, averaging an annual rate of 5.55%. This rate is higher than the national average, indicating that California’s real estate market has been more robust in terms of appreciation compared to many other states​​.

In the Central Valley, cities like Fresno and Bakersfield have shown remarkable growth. Fresno experienced a 19% price gain between 2021 and 2022, raising the median home price to $495,000. Over the past decade, Fresno real estate has appreciated nearly 127%, averaging an annual rate of 9%. This places Fresno in the top 10 percent of all U.S. markets for appreciation​​.

Bakersfield has also seen growth, with the average home value increasing by 4.0% over the past year, reaching $376,023 as of January 31, 2024. The Metropolitan Statistical Area (MSA) of Bakersfield is anticipated to see continued growth, with a forecasted increase of 5.2% by January 31, 2025​​.

California’s real estate market, particularly in the Central Valley, has seen strong appreciation, making it an appealing area for investment. While some moderation is anticipated, overall growth remains positive

The Distance

All partners of Old Money Capital are based in California, which strategically positions us to invest in properties within driving distance. This proximity is vital, as it allows us to personally visit our properties, ensuring they are well-maintained and that our property management companies are fulfilling their responsibilities effectively. This hands-on approach is crucial for maintaining the quality and value of our investments.


In conclusion, while California’s multifamily investment landscape may seem challenging due to stringent rent control and regulatory hurdles, savvy investors can find substantial opportunities by navigating the market intelligently. By focusing on areas with more favorable rent control regulations, leveraging the potential for annual rent increases, and capitalizing on the strong demand for housing, investors can achieve impressive returns. California’s multifamily sector, when approached with the right strategy, remains a compelling investment choice in the dynamic real estate market.

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