Study Confirms San Diego Fairs Poorly For Wealth Building (Nice: fit in, real estate market)

[snpdragr]

@USDefault -- First, do you have a link to the actual study? The article you linked stupidly doesn't link to the original study so all we have is their summary to go on.

Originally Posted by USDefault

And the study says otherwise. They looked at three major employment areas, healthcare, tech, and finance.

Actually the study/summary article doesn't contradict what I said at all.

The study is making a general statement about the average outcome for a huge range of jobs. I'm saying that for certain specialized areas, these broad averages don't apply at all.

An area like "Tech" covers a huge range of jobs and the conclusion in the study just doesn't apply for lots of people within that category. Similarly "Finance" and "healthcare" are enormously broad.

To put it in concrete terms, if you're a generic web developer then sure going to a LCOL of living area like texas might be your best bet. But if your specialty is search algorithms, you're better off going to a HCOL living area -- either the SF Bay or Seattle.

And the results are, Los Angeles ranks the worst, and San Diego doesn't fare well at all. People in other locales are getting paid as much (and usually more), and the killer fact is, they are pocketing a lot more of their money.

Yeah San Diego doesn't have much in the way of tech, at least compared to other centers. But even so, it still might be the best place if say, your focus is on cellphone modem design. I'm sure there are other specialties where san diego is the place to make your money, even if in general its not great. Maybe working on military drones, etc.

That's exactly what the study examined -- what are you pocketing after it's all said and done. Further, salaries in San Diego are not great, especially when compared with the monstrous cost of living.

It may have looked at taxes but I doubt it looked at advancement opportunities. It's much harder to move up career wise when you are in a LCOL satellite campus of a company then when you are at the main headquarters in the HCOL area.

This isn't San Diego bashing. It's a great place to live, weather can't be beat. But if one of your goals is financial independence, the message is clear: you stand a much better chance of achieving it if you start out elsewhere.

I'm not taking issue with your claim that San Diego is generally poor for earning money. Just the over-generalization and lumping in other areas in CA like SF.

[LagunaMom]

Phoenix???
They pay you in sunshine.

[sfosyd]

I agree that San Diego is not a great place to build wealth. But it could change, the bones are there for a decent knowledge based economy with the universities and desireability.

I think the rest of your hypothesis blaming California and high costs is ludicrous. The only study that stupid article links to is from Bankrate which indicates that both D.C. and San Francisco are tops for wealth building. Both of these areas are extremely high cost and high tax.

The Best Cities For Building Wealth | Bankrate.com

[GuyInSD]

The flaw I see in this is assuming that high housing cost = can't build wealth.

Many folks turn that around to high housing cost = build wealth.

This may be a revelation, but it IS possible to rent property to others, and have THEIR money end up in YOUR pocket.
If you do this in a place where housing appreciates substantially (like San Diego), then you get the added bonus of building substantial equity which you can later turn into $$ if you so choose.

[tomadwood86]

fares poorly.

[someguy10]

Originally Posted by payutenyodagimas

good on paper but the reality is, when Californians moved to other states to cash in on their over inflated houses, they pay cash on their new homes with plenty to spare to buy new toys. don't know if a Texan can cash in his savings and buy cash a new house when he decide to move to Boise

Note that in my example the $2.2mm was only what came out of the differential between expensive CA and somewhere less expensive. One would assume/hope that some (really almost all) of the base surplus should have been saved for retirement.

And the CA person cashing out upon retirement now finally has lots of time on their hands to enjoy hobbies, being outside and all that, but they've just left the best weather in the country.

Most of the CA first and cash out scenarios I know of only work because too many people don't have the discipline to save and invest properly and an expensive CA home is a forced savings vehicle, albeit at a lower rate of return.

[GuyInSD]

Originally Posted by someguy10

...an expensive CA home is a forced savings vehicle, albeit at a lower rate of return.

Hmmm...let me see - rental properties require 25% downpayment; assuming real estate appreciation in decent parts of San Diego (over the long run) averages even a paltry 3%-4%; that equates to a 12%-16% rate of return on the cash invested. That's just for equity - factor in your tenants paying all of your expenses, plus the cash flow (assuming even a low 2% of property value/year = another 8% annual return on the actual cash invested), for a steady 20%-24% return. I'm pretty sure that kind of return would be very hard to beat.

background: the above is not just idle speculation.
My original $25K downpayment in 1991 on one property now equates to around $950K in equity (split among three properties, with the other two bought in 2002 and 2008), and the annual cashflow (not even taking the tax benefits into account) is around a third of my original downpayment. With the increase in rents lately, when my current tenants move out, I plan to raise rent closer to market rate and can easily expect to be making 60% of my original downpayment annually in cashflow alone.

But - back to the original topic - if it were me starting out, I would take the highest paying job I could, with the lowest cost of living possible (this might mean living in a dumpy apartment with roommates); save the $ for downpayment - and then purchase real estate in whatever place has good appreciation in real estate values over the long term. Also, if you enjoy decent weather, you can't put a price on NOT having to live in hurricane, snowstorm, or tornado country

[expatCA]

Originally Posted by GuyInSD

The flaw I see in this is assuming that high housing cost = can't build wealth.

Many folks turn that around to high housing cost = build wealth.

This may be a revelation, but it IS possible to rent property to others, and have THEIR money end up in YOUR pocket.
If you do this in a place where housing appreciates substantially (like San Diego), then you get the added bonus of building substantial equity which you can later turn into $$ if you so choose.

But you have to be able to buy and rent a house plus have a place for you to live and in SoCal that is not easy at all, and while SD is a bit lower than the rest of coastal SoCal being a landlord takes money now and is only for a few, not a lot of people.

[expatCA]

Originally Posted by GuyInSD

Hmmm...let me see - rental properties require 25% downpayment; assuming real estate appreciation in decent parts of San Diego (over the long run) averages even a paltry 3%-4%; that equates to a 12%-16% rate of return on the cash invested. That's just for equity - factor in your tenants paying all of your expenses, plus the cash flow (assuming even a low 2% of property value/year = another 8% annual return on the actual cash invested), for a steady 20%-24% return. I'm pretty sure that kind of return would be very hard to beat.

background: the above is not just idle speculation.
My original $25K downpayment in 1991 on one property now equates to around $950K in equity (split among three properties, with the other two bought in 2002 and 2008), and the annual cashflow (not even taking the tax benefits into account) is around a third of my original downpayment. With the increase in rents lately, when my current tenants move out, I plan to raise rent closer to market rate and can easily expect to be making 60% of my original downpayment annually in cashflow alone.

But - back to the original topic - if it were me starting out, I would take the highest paying job I could, with the lowest cost of living possible (this might mean living in a dumpy apartment with roommates); save the $ for downpayment - and then purchase real estate in whatever place has good appreciation in real estate values over the long term. Also, if you enjoy decent weather, you can't put a price on NOT having to live in hurricane, snowstorm, or tornado country

That is the key, 1991, 2002 and 2008, low price times, not now.

Your last paragraph is spot on.

[USDefault]

Originally Posted by snpdragr

It may have looked at taxes but I doubt it looked at advancement opportunities. It's much harder to move up career wise when you are in a LCOL satellite campus of a company then when you are at the main headquarters in the HCOL area.

Of course there are exceptions. But how many big companies have their "main headquarters" in San Diego? Answer: not many.

Most big companies are smart -- they're not headquartering in California, because they're not stupid enough to pay the ridiculous highest-in-the-nation income taxes and unemployment taxes, also out-of-control. According to this VOSD article, only two Fortune 500s are headquartered here, Qualcomm and SDG&E. And out of the top ten employers, six are directly tied to government (i.e. the Navy, universities, county government, etc.). And there's this: "Census data shows small businesses dominate in San Diego County. Less than 1 percent of the region's companies have more than 250 workers."

I agree, there are exceptions. Nothing is absolute. But the overarching trend, and conclusion, cannot be disputed. And the argument about low-cost satellite campuses versus high-cost-of-living headquarters cuts strongly against your argument, as very few large businesses are headquartered here. You want to rise through the ranks at a Fortune 500's headquarters location? Get out of San Diego.