Multi-unit investing:. Oakland vs Vallejo

3 Replies

Hi all,

I am new to bp. I am looking to invest in  2-4 unit soon and house hack in the Bay Area.  What do you think about West Oakland vs Vallejo vs SF? I can see good opportunity in Oakland (looking specifically at opps in West Oakland and Maxwell Park) but am worried about rent control. The properties I am looking at will cash flow a teeny bit, enough to cover mortgage, interest, insurance, and 20-30% for repairs and vacancy. Is 20-30% enough to budget for repairs and vacancy, if the buildings are in great condition? If 20% is enough, my next concern is how to sell the property in the future. I see multi unit sitting on the market that are hard to sell because they're occupied, and the mortgage price is too high for any cash flow.

Given these obstacles, is it better to buy in Vallejo now, where there is no rent control currently (although that can always change)? I would buy close to the ferry, and only pick a building that is cash flowing at least enough to cover expenses.

Oh, and I might have found a 'deal" in San Francisco, but it's a single-family home which would require me to Airbnb out two rooms continually to help with mortgage. That seems stressful, but the property is likely to appreciate well...

I will probably be putting 10% down in any of these opportunities, since I don't get cash flow on the multi units if I put down less than 10%.

What are your thoughts? Please let me know if I'm off the mark! Thank you.

Yvonne.

20% is plenty for repairs and vacancy.

I think that the city with no rent control is going to be best so I would choose Vallejo. Except that with the market being so hot right now and with the way that Vallejo and all of the East Bay crashed in 2008 I would be a little bit worried about buying right now. 

Have you thought about investing out of state where your real estate will actually cash flow and make you money every month?

Yvonne,

A couple things to note on rent control and AirBnB in San Francisco you might already be aware of.

  1. Note that Prop 10 is on the California ballot for November. If passed, the law would repeal the Costa-Hawkins Act and expand local governments' authority to enact rent control on residential property. In other words, if this passes, there is a chance that we could see many more cities allowing rent control. See https://noprop10.org/
  2. On AirBnB in San Francisco - The City of San Francisco has strict regulations on AirBnB in the city. The regulations are basically 1) You must be the permanent resident of the unit you wish to rent, 2) You must be registered with the City as a business and as a short-term rental, and 3) You may only rent 90 unhosted nights per year. The penalty for not doing so is at least $484 per day for each dwelling unit in violation. See the official San Francisco Office of Short Term Rentals website here: https://shorttermrentals.sfgov.org/

Best,

Michael Young

Hi Yvonne.  At this time I think Vallejo is the better option. I think Oakland is at or close to its peak as far as appreciation and max rent. People are still being pushed out of Oakland and the East Bay towards Vallejo, Sac etc. 

Also, I think Vallejo is a little more affordable for multifamily properties. There are some duplexes and triplex on the MLS for under $500K which o think leaves some room for cash flow.