Investor · San Francisco, CA · Member since 2016 · 314 posts · 153 votes
I realized that I dismissed Oakland / SF / the relatively close area out of hand -- thinking it can't possibly work because the buy ins are too high, and the cash ROI is too low, but I never actually seriously investigated how people who are here are making it work.
My constraints:
600k max price for a traditional mortgage. No "house hacking" outside of SF proper. No personal sweat-equity rehab projects; I'm busy with my day job and I don't have time to replace a roof or install a new furnace myself (not to mention that even if I did have the time I couldn't transport it). This can be hired out, but obviously that increases the cost.
So, given my constraints, can it work? How does it work? Do the people who make the area work do the work themselves on a run down property, or do a FHA loan on a primary residence? Or do they only make it work because they bought in 3 years ago when the prices were lower?
"I realized that I dismissed Oakland / SF / the relatively close area out of hand -- thinking it can't possibly work because the buy ins are too high, and the cash ROI is too low, but I never actually seriously investigated how people who are here are making it work"
I answered the email you sent to me about your question, but wanted to hop on here and try to help out. First, are you up for buying a duplex or triplex in Oakland or the East Bay, and renting out the other units? What are your goals exactly, and what do you want out of this property? Or are you just looking for a single family home?
There are still 4plexes in your price range in Richmond TODAY where you could hit around the "1% rule" after raising rents (don't have to take a time machine back 3 years...) Should produce about 10% cash on cash with a conventional loan. Just set up a search on redfin for whatever criteria you are looking for, under $600K, and start looking at everything. Do some research on the market rents. Oakland has the owner-occ exemption for duplexes and triplexes after 1 year of living there.
Regarding rehab and costs, if you plan well, you should be able to add more value to the property than it costs to pay someone to do the repairs, so as long as you have a little cash, you should be able to get a return on the rehab. That's what many of the rest of us are doing. I buy crappy buildings, but don't do any of the work myself, and it has worked well for me so far..
"Most of the investment property purchases that cross my desk these days aren't in Oakland/SF/Berkeley/SanJose proper, but in outlying communities. I can only assume that if there were more deals to be had in our core owner-occupant markets, more would cross my desk. YMMV and feel free to prove me wrong! It'll all come out if it's not a good deal when the appraisal comes back."
I can't speak to @Chris Mason and myself in Oakland, and you'll have a better idea of how investors are playing in this sandbox.. You may consider doing a JV deal if you don't have the right entry dollars, or you may have to venture up to more outlying areas like Richmond (which I like, since it still has BART).
Hope that helps!! Best of luck Wes! Meetup on April 7 in SF if you'd like to join us and see what others are up to..
@Ryder Meehan also hosts meetups around SF downtown if you're interested in out of state investing. J Martin's is also fantastic.
I haven't combed through all the comments here, but the last rental situation I saw was pretty grim and going for 500k in Berkeley. Grim enough for me to throw up my arms. I may just be a Bay Area pessimist.
Turns out I won't be able to make it to the meetup tonight - my 9-5 is looking like a 9-8 :( Anyway, I shot you a note about your Chestnut property. Would love to learn more about it! Let me know if you have some time to chat. Thanks!
@Wes Brand if you are looking to buy in the Bay Area I'd urge you to follow @J. Martin and his advice, his meetup is the biggest in SF with tons of smart REI.