Small Multi-Family market in Bay Area, CA
Member since 2022 · 7 posts · 2 votes
Small Multi-Family market in Bay Area, CA
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Realtor · Fresno, CA · Member since 2022 · 58 posts · 41 votes
3yHi Kushal!
Welcome to BP! The Bay Area is a very hard place to have cash flow. Even breaking even is a blessing there. Most investing strategy in the Bay is just appreciation.
If you're interested in appreciation and cash flow, the Central Valley will be a great bet. Especially with all the people that moved from the bay and LA into the valley during COVID. I have been doing really well investing here and I have a few clients from the bay area that I help invest here in the valley. Feel free to reach out if you want help investing here!
11 Replies
- Realtor · Fresno, CA · Member since 2022 · 58 posts · 41 votes3y
Hi Kushal!
Welcome to BP! The Bay Area is a very hard place to have cash flow. Even breaking even is a blessing there. Most investing strategy in the Bay is just appreciation.
If you're interested in appreciation and cash flow, the Central Valley will be a great bet. Especially with all the people that moved from the bay and LA into the valley during COVID. I have been doing really well investing here and I have a few clients from the bay area that I help invest here in the valley. Feel free to reach out if you want help investing here!
- Member since 2020 · 6 posts · 7 votes3y
I've run the numbers on a handful of multifamily properties in and around the Bay Area, and Gurbeer is right... breaking even is a win in the Bay Area. I'm in the same predicament right now. Looking to re-invest, and was hoping to snag something in the Bay Area because it's always been prime, and appreciation (in most areas in the peninsula) was almost guaranteed. But there is SO much going on right now, and with so many variables changing in ways that are really all over the board, it's really hard to make the same assumptions that we've been able to make in the past 5-10 years. In any case, it really depends on what your main objectives are. Higher cash flow was one of my primary objectives, but in today's turbulent economy, you also want to be a little cautious about focusing solely on one thing when you're narrowing down your property search. I'm now considering out-of-state options to see if that might be a better bet at this point. Tons of things to consider, and it helps to have a community to share thoughts and ideas.
- Member since 2022 · 7 posts · 2 votes3y
Quote from @Gurbeer Sangha:
Hi Kushal!
Welcome to BP! The Bay Area is a very hard place to have cash flow. Even breaking even is a blessing there. Most investing strategy in the Bay is just appreciation.
If you're interested in appreciation and cash flow, the Central Valley will be a great bet. Especially with all the people that moved from the bay and LA into the valley during COVID. I have been doing really well investing here and I have a few clients from the bay area that I help invest here in the valley. Feel free to reach out if you want help investing here!
Thanks for the response Gurbeer. Would be happy to connect to learn more about investing in the Central Valley, and pick your brain on Bay Area as well.
- Member since 2022 · 7 posts · 2 votes3y
Quote from @Liezel Pineda:
I've run the numbers on a handful of multifamily properties in and around the Bay Area, and Gurbeer is right... breaking even is a win in the Bay Area. I'm in the same predicament right now. Looking to re-invest, and was hoping to snag something in the Bay Area because it's always been prime, and appreciation (in most areas in the peninsula) was almost guaranteed. But there is SO much going on right now, and with so many variables changing in ways that are really all over the board, it's really hard to make the same assumptions that we've been able to make in the past 5-10 years. In any case, it really depends on what your main objectives are. Higher cash flow was one of my primary objectives, but in today's turbulent economy, you also want to be a little cautious about focusing solely on one thing when you're narrowing down your property search. I'm now considering out-of-state options to see if that might be a better bet at this point. Tons of things to consider, and it helps to have a community to share thoughts and ideas.
Thanks for your response. You mentioned about appreciation being the main component of returns. Do you know of a good resource where I can find price trends particularly for small multi-family?
- 3yStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 501 votes
@Kushal Shah, I'm a mortgage broker based in CA that does residential and investor loans. Are you planning to live in one unit and rent out the others or make them all rentals? You will have different financing options depending on that detail.
Bright Skyline518 Reviews - Realtor · Gilroy, CA · Member since 2016 · 255 posts · 72 votes3y
Hi Kushal, If you are trying to stay close to the bay area. I'd highly recommend you check out Gilroy and Hollister markets. With rates rising, sellers are willing to play ball, especially if the properties have been on the market for a little while.
If you are interested, I can recommend a few properties to you right now.
- Member since 2024 · 92 posts · 43 votes2y
Quote from @Kushal Shah:
Hi All,
I am new investor based in Bay Area CA, looking to invest in small multi-family (Duplex/Triplex). What I am noticing in the Bay Area is most small multi-family is really old construction around 70-80 years old. Do you think its worth investing in these older properties in the Bay Area from resale stand-point? Do people invest in them with particular strategies in mind (development project down the line)?
Other question - From a rental income stand-point, its not going to cover the mortgage payment entirely since the prices are so high. Is counting on appreciation the only strategy in a market like this, or are there points of view?
Thanks in advance for taking the time to respond.
Best,
Kushal
Hi Kushal,
Welcome to the forum! Investing in the Bay Area, especially in older multi-family properties, presents unique challenges and opportunities.
- Old Construction: It’s true that many of the small multi-family properties in the Bay Area are older. While older buildings can come with maintenance challenges, they also offer character and potential for value-add through renovations. Investors often buy these properties with a plan to gradually upgrade units and increase rents, or even redevelop them down the line if zoning laws permit. However, you’ll need to carefully assess the cost of repairs and ongoing maintenance to ensure it doesn’t eat into your returns.
- Appreciation vs. Cash Flow: Given the high prices in the Bay Area, it’s common for rental income alone not to cover the mortgage and other expenses. This often pushes investors to focus on appreciation rather than cash flow. Historically, the Bay Area has seen strong appreciation, but it’s not without risk. If you’re planning on banking on appreciation, it’s crucial to buy in a location with strong demand drivers like proximity to tech hubs or transportation.
On the flip side, if cash flow is a priority for you, you might want to consider looking outside the Bay Area, in markets where the rent-to-price ratio is more favorable.
- Exit Strategy: Always have a clear exit strategy. If you’re planning on holding the property for a long time and betting on appreciation, consider how you’ll manage market downturns or potential shifts in the local economy. If resale is your focus, think about the future desirability of the area and whether you can add value that will be recognized by future buyers.
Bay Area investing is tough, but it can be rewarding if approached with the right strategy and mindset. Best of luck with your investment journey!
Feel free to reach out if you have more questions or want to discuss further.
Best regards,
Ryan Cheek - Member since 2024 · 10 posts · 1 vote2y
Quote from @Kushal Shah:
Hi All,
I am new investor based in Bay Area CA, looking to invest in small multi-family (Duplex/Triplex). What I am noticing in the Bay Area is most small multi-family is really old construction around 70-80 years old. Do you think its worth investing in these older properties in the Bay Area from resale stand-point? Do people invest in them with particular strategies in mind (development project down the line)?
Other question - From a rental income stand-point, its not going to cover the mortgage payment entirely since the prices are so high. Is counting on appreciation the only strategy in a market like this, or are there points of view?
Thanks in advance for taking the time to respond.
Best,
Kushal
I wonder if at this time the appreciation will outweigh the interest rates. It's been two year hopefully you made a choice back then 2 years ago when the situation is much better.
- Investor · Miami, FL · Member since 2015 · 355 posts · 268 votes2y
It may not be possible, but if you're going to go the appreciation route (versus cashflow), then you're best off targeting 5+ unit properties where you can force the appreciation by driving NOI. With the 2 and 3-flats, you're at the mercy of comps, which is pretty much pure speculation.
- Member since 2022 · 119 posts · 52 votes2y
Is Bay area still appreciating in MF? I know SF is because my family owns a lot of homes there, but I wasn't aware of MF appreciation
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