Finding properties in crazy hot Bay Area market

5 Replies

I wanted to see what strategies people have had success with in terms of buying properties in very competitive markets? I'm in the Bay Area which is arguably the hottest market in the entire country.

Even off-market deals are going at a price which produces very thin margins. I have been working with a few wholesalers and others to try to surface off-market deals. As for MLS listings, I've been writing a lot more offers realizing that only a fraction will work out.

What have you done to succeed in obtaining properties in crazy hot markets?

Work with an experienced investor with a lot of connections in your area, that's probably your best bet. That's what I do in my city. Going through the regular channels to find good deals in going to be tough in a very hot market. 

@Ashkon Jafari  ,

It is tough, but the deals are out there, even in the Bay!

In fact, I recently started a forum on it, and some other Bay Area folks chimed in with the deals they found, and where they found them.. Mine were foreclosure, regular sale/MLS, Foreclosure, Wholesale deal from networking. Here's mine:

1) Dec 2012. 4plex in Richmond $375K + 30K Rehab = $405K. Appraised value late 2014 = $510K. ~$55K in annual gross rents. (Already pulled all investment out in cash-out refi)
2) June 2013. 2 SFH on 1 lot in Richmond $245K + 15K Rehab = $260K. Estimated Value = ~$350K ~$28K gross rents.
3) May 2014. 4plex in East Oakland - $385K + $45K Rehab = $430K. Estimated Value ~$550K. ~$62K gross rents w/ $10K gross rents upside w/ rehab (but under rent control). Good built-in equity.
4) Sept 2014. duplex in West Oakland - $300K + $15K Rehab (so far) = $315K. Estimated Value ~$450K+? ~$35K gross rents. Market rents ~$75-80K. Amazing upside w/ tenant turnover & rehab.

You should come out this Saturday to @Johnson H. 's meetup at @Nhi Nguyen 's new build in San Jose.

MLS flip opportunities do exist. I recently got my best investor client into a fixer in the hot Glenview neighborhood of Oakland for $565k. Rehab nearing completion now. We're coming on market next week & expect a sale around $800k. This is the 10th transaction I've done with him, avg. ROI = 20%.

Just work with a good Realtor.

J. M. 

I know richmond and east oakland aren't the "ideal" places to live in the bay area. What helps you to differentiate a good vs bad home. Also screening tenats in a duplex can have issues have you experienced those in the oakland home or has it been all good?

Originally posted by @DJ Dawson :

@J. Martin 

I know richmond and east oakland aren't the "ideal" places to live in the bay area. What helps you to differentiate a good vs bad home. Also screening tenats in a duplex can have issues have you experienced those in the oakland home or has it been all good?

 You are correct. Far less than "ideal" places to live (like the states between here and NY! lol). But doesn't mean you can't make money there.. I feel like the financial compensation is adequate to take those risks. They are also the most affordable places with reasonable commutes to major employment centers around the SF/Oakland/Fremont/Walnut Creek corridors. So they get great "spillover" from more expensive areas.

Regarding what is a good home - I care more about the block and the street. Is it a dumping (trash) ground? Are there people slumming around on sidewalks and porches? Drinking 40's and smoking blunts? Playing dice? Sitting in parked cars? Playing "lookout" on the corner? Heavy traffic in and out? Most importantly, what do the neighbors think of the street? Ask them! Do they go out at night? Do they let their kids go out at night? Do they want to stay, or move? There are plenty of fine working-class streets that are OK, even in bad neighborhoods. I don't care about physical condition of property, as long as it's a good deal - I'll do the rehab..

Yes, you need to be more diligent (or at least as diligent as BP guide recommends) than you would if you were renting to high-income earners in a Palo Alto SFR. Absolutely! And will have more problems that that, for sure! But is the cash flow much higher? Yes also. While these areas may be less desirable, rental demand is still insatiable. Vacancy is next to nothing, and rents have been consistently and quickly increasing over the last 3 years. Adding all the vacancy, turnover costs, (non)credit loss over 10 units over a year, there would be less than 1 month's rent in all those expenses. At least, that has been my experience. But I got to pick most of my tenants..

There are lots of other ways to make money. See that link I posted above, and people are making money in high and low end, short term and long term, by day by night lol

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