OPM is the key element that makes RE investment so power. OPM == Other People’s Money. The key for RE investment is leveraging OPM to make money for you. It’s kind of like setting up a stock option position but with much less risks and basically has no expiration risks like that inherently associated with stock option. The key is to spend about 10-20% down payment, and borrow 80-90% OPM (bank’s money). When the market is good, like you said, the magnitude and speed of return is huge. However, what makes it hard is the 7-9 years down curve. Like Donald Trump said it clearly, the real successful investor is who he can survive the down turn. However, if you have the commitment to rent the house out during bad times and maintain positive cashflow, you would be able to minimize the risk. In so doing, you not only setup a option-like position using OPM (mortgage loan), but also digesting this loan using a second form of OPM (rental income). Thus, doubling dosage of the powerful OPM scheme. Carrying it out can be harder than said, but definitely doable if you planned it well.

North CA has not been a good investment area for many years

Northern CA is a very good price appreciation area, but not a good investment rental area. So, the same strategy that va_landlord used cannot be directly ported to Northern CA. In Northern Ca, you are lucky to own one house, a new town house will now cost you 750K. Condos may cost you 500K. You can’t reasonably rent them out to break even. I don’t know what best investment strategy for North CA people. I heard many of them went out of state, like going to Arizona or even went to Texas.