Buy and Hold property advise!!!

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Buy and Hold property advise!!!

Bhavna Chopra
Dublin, CA · Member since 2014 · 4 posts · 2 votes

Hi Everyone,

   I am a new member from Dublin CA. My husband and I are planning to buy our 1st investment/ rental property in the East Bay area and are looking for some advise.  Our budget is around $500K ( Looking for town homes/condos) with 25% down. We had some basic questions as we have no experience in this domain. 

1) Can you please suggest good areas for investment around Dublin CA within the 50 mile radius?

2) How do you calculate the monthly cash flow earned from the property?

3) How we calculate/ estimate the long-term return on investment on the property?

4) Debating whether it is better to buy 1b/1b v/s 2b/2b from an investment standpoint?

Appreciate the advise.

Thanks,

Bhavna Chopra

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J. MartinPro Member
Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
12y
Originally posted by @Bhavna Chopra:

Hi Everyone,

   I am a new member from Dublin CA. My husband and I are planning to buy our 1st investment/ rental property in the East Bay area and are looking for some advise.  Our budget is around $500K ( Looking for town homes/condos) with 25% down. We had some basic questions as we have no experience in this domain. 

1) Can you please suggest good areas for investment around Dublin CA within the 50 mile radius?

2) How do you calculate the monthly cash flow earned from the property?

3) How we calculate/ estimate the long-term return on investment on the property?

4) Debating whether it is better to buy 1b/1b v/s 2b/2b from an investment standpoint?

Appreciate the advise.

Thanks,

Bhavna Chopra

Bhavna, I will already tell you you're going to get two wildly different styles of answers here. A bunch of people that tell you that you need to take your cash out of state and buy 100 single family homes, and many locals who will tell you not to touch those with a 10 foot pole. 

Typically, most investors do not buy condos and townhouses as investment properties. This was quite an exception during the downturn, as condos were beat down low. They have a lot of price volatility. Maybe @Sandeep S. or @David C. will tell you 10% appreciation or so.. ?

4) 1/1 will typically have more turnover as people "grow out" of it due to life changes, etc. Check out citydata.com to see the distribution of household sizes and unit sizes (bedrooms, etc) in Dublin. This might give you some insight..

5) You didn't ask but you MUST MUST MUST check the CC&R's (Conditions, Covenants & Restrictions) before buying a condo - especially to rent out. There will often be a restriction regarding if you can rent at all, the % of units in the complex that can be rented, or HOA approval of renter, or none at all.. Know before you buy!!!

Good luck!

PS. A few months ago, I bought a 4plex in Oakland that produces over $5k+/mo in rents ($60K+yr). Guess how much I paid for it..?

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  • Steven J.
    Urbana, IL · Member since 2012 · 1k+ posts · 425 votes
    12y

    Stay away from a 1/1. 1 bedrooms are very limiting. The bread and butter homes are the 3/2s. 

    Do some research on this site into how to calculate cash flow. There is plenty of information. 

    Youre long term investment can probably be est calculated after your cash flow is figured out.

    1Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y
    Originally posted by @Bhavna Chopra:

    Hi Everyone,

       I am a new member from Dublin CA. My husband and I are planning to buy our 1st investment/ rental property in the East Bay area and are looking for some advise.  Our budget is around $500K ( Looking for town homes/condos) with 25% down. We had some basic questions as we have no experience in this domain. 

    1) Can you please suggest good areas for investment around Dublin CA within the 50 mile radius?

    2) How do you calculate the monthly cash flow earned from the property?

    3) How we calculate/ estimate the long-term return on investment on the property?

    4) Debating whether it is better to buy 1b/1b v/s 2b/2b from an investment standpoint?

    Appreciate the advise.

    Thanks,

    Bhavna Chopra

    Bhavna, I will already tell you you're going to get two wildly different styles of answers here. A bunch of people that tell you that you need to take your cash out of state and buy 100 single family homes, and many locals who will tell you not to touch those with a 10 foot pole. 

    Typically, most investors do not buy condos and townhouses as investment properties. This was quite an exception during the downturn, as condos were beat down low. They have a lot of price volatility. Maybe @Sandeep S. or @David C. will tell you 10% appreciation or so.. ?

    4) 1/1 will typically have more turnover as people "grow out" of it due to life changes, etc. Check out citydata.com to see the distribution of household sizes and unit sizes (bedrooms, etc) in Dublin. This might give you some insight..

    5) You didn't ask but you MUST MUST MUST check the CC&R's (Conditions, Covenants & Restrictions) before buying a condo - especially to rent out. There will often be a restriction regarding if you can rent at all, the % of units in the complex that can be rented, or HOA approval of renter, or none at all.. Know before you buy!!!

    Good luck!

    PS. A few months ago, I bought a 4plex in Oakland that produces over $5k+/mo in rents ($60K+yr). Guess how much I paid for it..?

    4Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    We'll get some locals from San Francisco, Oakland, San Jose, Fremont on this too w/ some keywords..

    1Reply
  • David C.
    Investor · Bay Area, CA · Member since 2014 · 207 posts · 190 votes
    12y

    @Bhavna Chopra    

    Welcome to BP.  This is a great place to network and learn.  Here is my thought on your questions.

    1) Can you please suggest good areas for investment around Dublin CA within the 50 mile radius?

    I try to find properties close to mass transit like BART, or close to high paying jobs.  I personally like Richmond, Oakland & San Jose's Berryessa & North Valley area

    4) Debating whether it is better to buy 1b/1b v/s 2b/2b from an investment standpoint?

    With your budget, you should be able to buy 2b/2b & up.  I personally don't care if it is 1/1 or 2/2 as long I am getting a good deal.

    Hope this help.

    2Reply
  • Sandeep S.
    Investor · Cupertino, CA · Member since 2012 · 118 posts · 121 votes
    12y

    Thanks @J. Martin .

    I have been investing in East Bay since 2008, specifically Hayward.  Here are my thoughts:

    1.  I am in south bay and don't know too much about east bay EXCEPT Hayward. Needless to say - I love Hayward.  It is in the center of bay area and commute friendly.  And it is much lesser expensive than south bay or peninsula or some of the east bay cities (e.g. Fremont, Union City).  And the rents are generally good - so the rent to buy ratio (very important metric for investing anywhere) is better than most cities.   I am sure there must be other towns with similar rent-to-buy ratio, but I am not aware of those.  Of course, Hayward also has some rough areas that I would avoid.

    2. I am sure BP has detailed guides on calculating cash flow. For the first property purchase, it is less critical in my mind to get it perfectly right compared to using the "same method" to compare all of your prospects. And ensuring to not miss at least any of these: property taxes, insurance and HOA dues. Other expenses like property management, mortgage, vacancy and repairs are "generally" don't vary too much between one property and the other (as a % of rent or purchase price).

    3. I don't have much to add except that you focus on the #2 above and the rest is taken care by the market.  Don't get hung up on what % the property will appreciate. It is safe to assume that it will appreciate if you hold it for long term.

    4. I would suggest to consider 2/2 and 3/2.  I have never purchased 1/1. If it is great deal, 1/1 should also be ok - but there is much less supply as well as much less demand for 1/1. 

    Between Condos/Townhomes and SFR - I don't think you should limit yourself to any single category. Buy wherever numbers make sense and you get a better deal. I have exclusively purchased condos/TH and that is just because there were more deals to be had in those days in that category.

    Good luck!

    1Reply
  • Account Closed
    Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
    12y

    Hi Bhavna,

    Welcome to Biggerpockets.  You have found a great real estate resource to bounce ideas.  You have received great advice above from fellow BP members.

    I just posted this info on another thread.  Basically, I just want to put things in perspective for our market.

    - At the top of the market in 1989, the housing affordability index (HAI) hit 13% for our Santa Clara County.

    - At the bottom in 1994, the HAI reached 45%.

    - At the top in 2007, the HAI hit 11%.

    - At the bottom in 2011, the HAI reached 56%.

    We are currently at 19%.  Definitely we are closer to the top than the bottom. So tread lightly.  We are potentially on thin ice.  However, like the old saying...."The best time to plant a tree is 30 years ago.  The next best time is now."  Like Warren Buffett said "The only thing you can control is the purchase price."  So be sure you make money when you buy.  

    Good luck.


    2Reply
  • Sandeep S.
    Investor · Cupertino, CA · Member since 2012 · 118 posts · 121 votes
    12y

    Excellent advice @Account Closed !  

    Where do you find HAI for our (or any) market from?  I agree with you that HAI is a good indicator of where market "could" be headed.

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    12y

    You should definitely know how to calculate cash flow before you go any further! Especially in CA, you really need to know it because most properties don't positive cash flow.

    I wrote an article a long time ago that breaks it down fairly simple-

    http://www.biggerpockets.com/renewsblog/2013/01/19...

    Hopefully that helps.

    0Reply
  • James P.
    New to Real Estate · NYC · Member since 2014 · 37 posts · 9 votes
    12y

    @Account Closed 

    Could you share your source of where you got the figures from? Thanks.

    0Reply
  • Account Closed
    Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
    12y

    @Sandeep S. and @James P. 

    Source is car.org. 

    0Reply
  • James P.
    New to Real Estate · NYC · Member since 2014 · 37 posts · 9 votes
    12y

    LOL, that was pretty funny when I first contacted him. What are the chances that we're in the same county as well.

    Thanks Minh. BTW, if your last name was Nguyen, we can talk way beyond twins with you, lol.

    1Reply
  • James Park
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    12y
    1Reply
  • Bhavna Chopra
    OP
    Dublin, CA · Member since 2014 · 4 posts · 2 votes
    12y

    Thanks @J Martin for the advise.

    To answer your question, we are looking at condos/twnhomes purely from an investment standpoint. Yes, easy/hassle free tenants and long term growth are important factors. 

    I am not sure about the cash flow though ...would be great if someone can point me to an online calculator. 

    Open to looking at other areas outside the East Bay (not sure though what $500K can buy :) especially in the South Bay (San Jose/Milpitas) as we are trying to avoide very old properties being our very 1st time in rental property. 

    I know Oakland has a mix of good/bad areas and dont know much but am open to explore and learn more :-)

    1Reply
  • J. MartinPro Member
    Rental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
    12y

    @Bhavna Chopra ,

    What you're saying makes sense for a lower-hassle investment. The tradeoff is that there's typically less cash flow in them. There are definitely some great areas in Oakland, and condos aren't subject to rent control, unlike an apartment building.

    I think that at the price points you are looking at, you might want to look at Lake Merritt. I think there are some 1/1 & 2/1 apartments you can buy for $300Kish, and probably rent for $2-2500 ish with a little work.. The area is blowing up, you can walk and bike everywhere, close to public transit, downtown Oak, SF, Walnut Creek, drive down to South Bay if necessary. Sort hub in the middle. And lots of good-quality tenants (and increasing.. in the way of good quality tenants, rents, prices, etc..)

    Then there's the other side of town.. East Oakland, where I recently bought and the tenants are not as high-quality, but you just farm that out to a property manager. I paid $430K after rehab for a 4plex yielding over $60K/yr gross rents + upside.. But this area will not blow up like Lake Merritt will IMHO..

    1Reply
  • Jeff Weissman
    Involved In Real Estate · Oakland, CA · Member since 2008 · 141 posts · 25 votes
    12y

    Bhavna,

    I would be happy to help you & your husband. We can find you a great investment property! 

    I have 76 condo listings that match your search criteria. PM me your email address & I'll send them to you. 

    In fact, any of you BP'ers who'd like direct access to the MLS, just ask!

    0Reply
  • Ricardo S.
    Flipper/Rehabber · Atlanta, GA · Member since 2014 · 166 posts · 88 votes
    12y

    @Bhavna Chopra 

    Honestly with a budget like 500k you should buy a small apartment building 20+ units out of state somewhere or invest in 10 50k properties that would together generate a large monthly cash flow that you can use later on the fund more deals.

    0Reply
  • Sandeep S.
    Investor · Cupertino, CA · Member since 2012 · 118 posts · 121 votes
    12y

    @Ricardo Sandro - I don' think they are planning to invest $500K.  Their budget was $500K purchase with 25% down:  i.e. $125K investment.  

    1Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    12y

    @Bhavna Chopra 

      Check out mortgage-investments,com   Under resources they have a good 10 year analysis for income property.  Unless your holding period is only one year you need to look at cash flow over time.  My experience is 6%+ annual rent increases ad 9%+ appreciation.  There's your cash flow and your profit.  Unless you plan to work the property I suggest get the best property you can get whether it is 1 or 2bedroom.

    I'm looking to trade a SFR for a condo in the next year or two and would go to SF in a heartbeat if they'd take my low tax base. I'll probably go to the Peninsula or maybe the Rockridge area of Oakland.

    1Reply
  • Bhavna Chopra
    OP
    Dublin, CA · Member since 2014 · 4 posts · 2 votes
    12y

    Thanks @J Martin for the advise. I know we calculated the cash flow on other bay area properties and they turn out to barely break even or negative. So Oakland would be a good area we can start looking at. I am reading online and trying to find out more about Lake Meritt. And as you mentioned that area is really coming up.

    Congratulations on your investment in Oakland!! I will ping you soon and we can talk more offline :-)

    1Reply
  • Bhavna Chopra
    OP
    Dublin, CA · Member since 2014 · 4 posts · 2 votes
    12y

    Thanks @Jeff Weissman for the offer. I will send you my email address shortly

    0Reply
  • David C.
    Investor · Bay Area, CA · Member since 2014 · 207 posts · 190 votes
    12y

    Bhavna, don't under estimate what you can do will with your $125K downpayment.  I was able to buy a nice 2/2.5 townhouse in San Jose Berryassa area & a 4/2.5 townhouse in Dublin with about the same budget you have.   They were both less than 10 years old.  That was just 2 to 4 months ago.   There were buyers in front of me, but they spent 2 hours hanging around the house & complain about every little things they would find to the listing agent.  I gave them an offer with zero contingencies & quick close.   In fact, I saw a nice Dublin condo in short sale that fell out of escrow few months ago & no taker.   Maybe your best deal is right in your backyard :)   PM me if you want to chat about those deals.

    1Reply
  • Amit M.
    Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
    12y

    @Account Closed  what's the issue with the trade?  Is this a 1031 exch for like kind?  

    You mentioned in the past something about this, that it is only an issue in SF, and not other bay cities, so I'm curious as to the details?  Thx. 

    0Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    12y
    Originally posted by @Amit M.:

    @Account Closed  what's the issue with the trade?  Is this a 1031 exch for like kind?  

    You mentioned in the past something about this, that it is only an issue in SF, and not other bay cities, so I'm curious as to the details?  Thx. 

    @Amit M  I want to take my low Prop 13 tax base with me.  I pay about $5,000+ less a year in property taxes.  I can transfer anywhere in my county under Prop 60 but Prop 90 allows me to take it ONLY to the Counties that participate.  SF does not.  It started with 25 of the 58 counties participating but is down to about 7 now.  Alameda, San Mateo and Santa Clara are local ones that participate.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    12y

    @Account Closed 

      Bob good catch I remember that from my days in the Bay Area.. folks would sell in San Jose and relocate to Nevada county and transfer their tax base.. So see CA can get it right sometimes !!!

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    0Reply
  • Manch Hon
    San Jose, CA · Member since 2011 · 160 posts · 167 votes
    12y

    @Sandeep S. Where in Hayward? Up in the hills? Near the Cal State campus?

    @David C. I like Berryessa as well. Bart is coming to town and I think that area will do quite well. 

    0Reply
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