Pricing for real estate in Southern California has continued to rise as the market has gotten to a state that I can only describe as euphoric. Over the last several years when we were buying our cash flowing daisies in lieu of fancier roses, it was clear that we were buying far below the intrinsic values of the assets. The entire portfolio has benefited greatly from the lowered interest rates, our California tax laws (Proposition 13 which bases property taxes on the respective purchase prices), the large raises in rents, and from the comparatively low prices we paid to purchase our properties. We began selling some of the flowers out of our garden as they began getting priced as roses. Over the last year our daisies have traded on Tulip valuations and we are completing the last of our sales at the end of this month. The market may allow for some or all the buyers of our flowers to flip for profit if the frenzy continues but I'd rather sell a year early than a day late. We have refinanced the majority of the remaining portfolio in short-term fixed rate loans to give us flexibility to switch to longer term fixed rate debt or to sell as we have kept our options open.
Southern California isn't immune from bubbles and while it is a great place to live and invest, if one purchased a property in 1990, they wouldn't have been able to sell for profit until 1999. Therefore I am waiting for the market to correct while looking for contrarian opportunities in several cities throughout the Western United States.
