Sell triplex and buy 12 plex in Oakland good idea?
Member since 2023 · 40 posts · 10 votes
Hello,
A relocation to CA bay area seems imminent due to job and therefore selling an owner occupied triplex also seems imminent. I was initially considering selling my triplex and buying a single family in the bay area for the sake of aggressive future appreciation while also giving a comfortable living with family but being a single W2 earner the numbers are still not making any sense besides future appreciation is highly speculative.
So I was thinking if it would it make sense to buy a 12 plex in places like Oakland for around 2.2 mil using the sales proceeds of the triplex perhaps do a 1031 exchange. I am expecting to sell the triplex for around 1.2 - 1.3 mil and there is about 500k in loan balance so there is up to 800k in equity. Appreciate your inputs
Thanks
@Sateesh Kumar I have worked for clients in Oakland and Berkeley and lived near by for three years. I always avoided Oakland and a 12 plex for 2.2 mil is probably a really scary area.
It all depends on what your goals are but if I were I your shows I would buy probably 6+ SFR properties for cash right now, get about $8K in income/month, and when reates come down, I would put nonrecourse loans on them, use the remaining $400K and get another 3 SFR units. With 9 properties, 4 paid and 5 financed, you could clear a bunch of cash flow, pay for rent in SFo area or almost and if you buy something in SFO, you could do the home buyer jumbo loan thing and pay the mortgage with the passive income your tenants give you each month.
Keep in mind that a 12plex is a commercial real estate property that does not apply for traditional residential financing and the only way to increase value is by improving the rent roll. I would be very careful about that in Oakland.
One indication, just to give you something to ponder:
When I worked in Oakland in 202 they had the Warriors (basketball), A's (baseball), and Raiders (NFL football). For 20 years the teams tried to get new stadiums but the city refused.
The Raiders are in Vegas, The Warriors are in SFO, and the A's will be in Vegas soon as well. THat's not a place I suspect will appreciate much. The Bay area has also been the one area where property values are declining the last few years and work from home has driven a lot of people out of the overpriced Bay area markets.
I would work there, rent, and invest in much better-paying locations.
Happy to help you if you are interested.
@Sateesh Kumar I have worked for clients in Oakland and Berkeley and lived near by for three years. I always avoided Oakland and a 12 plex for 2.2 mil is probably a really scary area.
It all depends on what your goals are but if I were I your shows I would buy probably 6+ SFR properties for cash right now, get about $8K in income/month, and when reates come down, I would put nonrecourse loans on them, use the remaining $400K and get another 3 SFR units. With 9 properties, 4 paid and 5 financed, you could clear a bunch of cash flow, pay for rent in SFo area or almost and if you buy something in SFO, you could do the home buyer jumbo loan thing and pay the mortgage with the passive income your tenants give you each month.
Keep in mind that a 12plex is a commercial real estate property that does not apply for traditional residential financing and the only way to increase value is by improving the rent roll. I would be very careful about that in Oakland.
One indication, just to give you something to ponder:
When I worked in Oakland in 202 they had the Warriors (basketball), A's (baseball), and Raiders (NFL football). For 20 years the teams tried to get new stadiums but the city refused.
The Raiders are in Vegas, The Warriors are in SFO, and the A's will be in Vegas soon as well. THat's not a place I suspect will appreciate much. The Bay area has also been the one area where property values are declining the last few years and work from home has driven a lot of people out of the overpriced Bay area markets.
I would work there, rent, and invest in much better-paying locations.
Happy to help you if you are interested.
@Sateesh Kumar I have worked for clients in Oakland and Berkeley and lived near by for three years. I always avoided Oakland and a 12 plex for 2.2 mil is probably a really scary area.
It all depends on what your goals are but if I were I your shows I would buy probably 6+ SFR properties for cash right now, get about $8K in income/month, and when reates come down, I would put nonrecourse loans on them, use the remaining $400K and get another 3 SFR units. With 9 properties, 4 paid and 5 financed, you could clear a bunch of cash flow, pay for rent in SFo area or almost and if you buy something in SFO, you could do the home buyer jumbo loan thing and pay the mortgage with the passive income your tenants give you each month.
Keep in mind that a 12plex is a commercial real estate property that does not apply for traditional residential financing and the only way to increase value is by improving the rent roll. I would be very careful about that in Oakland.
One indication, just to give you something to ponder:
When I worked in Oakland in 202 they had the Warriors (basketball), A's (baseball), and Raiders (NFL football). For 20 years the teams tried to get new stadiums but the city refused.
The Raiders are in Vegas, The Warriors are in SFO, and the A's will be in Vegas soon as well. THat's not a place I suspect will appreciate much. The Bay area has also been the one area where property values are declining the last few years and work from home has driven a lot of people out of the overpriced Bay area markets.
I would work there, rent, and invest in much better-paying locations.
Happy to help you if you are interested.
@Sateesh Kumar, I second what Alex mentioned about being careful of shady areas in Oakland. And there are OK to really good parts of Oakland that provide you with a good CoC and Cap rate. I own triplexes in Oakland and have been doing great. All you need is a good realtor(s) who knows the East Bay well and every ok/good pockets of East Bay. Off-market deals with a little TLC are the way to go to hit the higher CoC.
Selling your Triplex-- I would recommend doing an a1031 it's a bunch of money for you and I'm certain that you will be able to find a property in East Bay ( Hayward, Oakland, Berkley, etc) to match what you're looking in terms of returns/cashflow. Happy to connect offline.
@Sateesh Kumar, I second what Alex mentioned about being careful of shady areas in Oakland. And there are OK to really good parts of Oakland that provide you with a good CoC and Cap rate. I own triplexes in Oakland and have been doing great. All you need is a good realtor(s) who knows the East Bay well and every ok/good pockets of East Bay. Off-market deals with a little TLC are the way to go to hit the higher CoC.
Selling your Triplex-- I would recommend doing an a1031 it's a bunch of money for you and I'm certain that you will be able to find a property in East Bay ( Hayward, Oakland, Berkley, etc) to match what you're looking in terms of returns/cashflow. Happy to connect offline.
I agree @Sateesh Kumar. Just can't imagine a 12-plex for 2.2 mil in a good area
Have you looked at any markets in the midwest? They tend to appreciate a bit less but cash flow well. It is all about your broker, pm, and the trust you have with that team that can really help. Of course I am partial to KC but help 1031 exchange investors all of them coming into the KC market for the first time and there is a good network here.
Hello,
A relocation to CA bay area seems imminent due to job and therefore selling an owner occupied triplex also seems imminent. I was initially considering selling my triplex and buying a single family in the bay area for the sake of aggressive future appreciation while also giving a comfortable living with family but being a single W2 earner the numbers are still not making any sense besides future appreciation is highly speculative.
So I was thinking if it would it make sense to buy a 12 plex in places like Oakland for around 2.2 mil using the sales proceeds of the triplex perhaps do a 1031 exchange. I am expecting to sell the triplex for around 1.2 - 1.3 mil and there is about 500k in loan balance so there is up to 800k in equity. Appreciate your inputs
Thanks
I don't invest in Oakland so I don't know if this is true. But I have read that with the rental moratorium, some renters haven't had to pay in 3 and a half years. A quick search says Oakland rents average $2,680 so 36 months equals $96,480 behind with no ability to evict.
That’s nearly $100,000 of lost revenue. Hard to imagine, but what would be the point of investing there?
I've not invested in CA, and I'd enter that market extremely cautionsly based on various rent control issues, eviction issues, and the political environment seems to be very unforgiving for landlords. Spend a great deal of time investigating and doing your homework before jumping in.
You could make a great deal there, do some value add and increase your appreciation velocity. BUT you probably would not want to live there.
You could make a great deal there, do some value add and increase your appreciation velocity. BUT you probably would not want to live there.
You could make a great deal there, do some value add and increase your appreciation velocity. BUT you probably would not want to live there.
Personally I like the Oakland idea with you being nearby. If you took out just an equity loan - think you could swing it? Buildings like that can be stabilized with careful screening, access control and surveillance systems and coordination with community policing. When you get one right the reward is huge.
Maybe, Oaklands an interesting market. I have several customers there.
@Tim Ryan
Hey Tim. What would gross rents/expenses look like on the 30 unit you’re referring too? Thx in advance
@Sateesh Kumar I have 11 doors in Oakland and will be closing on a 4 plex this week and I recently closed on a 5 plex in Berkeley. Oakland is not a hands off market, but done right can make money. It really is a neighborhood specific city. Some areas are as bad as people imagine and others are actually very nice.
Yes rent control is a pain in *** and there are tenants who haven't paid. I currently have one that is several months behind, but she is trying to catch up. Not everyone is trying to rob landlords, but they do exist. A 12 plex at $2.2 is not that crazy, but it will mean that it is "workforce" housing and the neighborhood will reflect that. If you like, let me know offline where is property is and I will tell you if the neighborhood is a no-go area.
Appreciation does also exist in Oakland, it just doesn't rise as fast as properties in hot markets like Mountain View or Palo Alto.
Good luck!
I have a duplex and have good cash flow. Oakland has higher returns due to more risk. I use a property management company and am umbrella policy to mitigate risk.
@Arlen Chou You are one brace sole buying units in Bay Area. The people aren't the issue it's the market and legal ramifications. Think COVID, non-payments. Who knows what could be coming next in terms of legislations. On that 12 unit $2.2m. What are the numbers in terms of Cap rate, down payment rental incomes? When they say they cap rate is 6. You can get that almost in a CD with no hassle's. I just don't get it. Apartment units very low appreciation rate if any. Now when talking about SFR appreciation that is and has always been Oaklands strong point.
That's great in regards to your 11 doors. However, I know a guy that bought 100 homes last yr! No landlord responsibilities. He expects to be earning $600 x 100/mth in mth 61. There are other ways to skin a cat! :)
I also listened to a guy flipping lots with no landlord responsibilities and is CRUSHING it!!!
Thank You this is helpful but would like to know if it's generally considered a good idea to sell a residential multifamily (up to 4 plex) and invest in commercial real estate ( not just Oakland) given the commercial multifamily has been seeing a decline recently
Thank You this is helpful but would like to know if it's generally considered a good idea to sell a residential multifamily (up to 4 plex) and invest in commercial real estate ( not just Oakland) given the commercial multifamily has been seeing a decline recently
I would not do it, partially because the rules are different but also because that decline has just started. There are predictions that we could see up to $800 Billion in commercial real estate defaults, meaning banks offer refi and the owners give the property to the bank rather than refi it. It's not a homogenous markets (none really is0 but if there is a growing glut of commercial real estate you might lose value if you are in that market. I would stay away the next 2-3 years
Thank You this is helpful but would like to know if it's generally considered a good idea to sell a residential multifamily (up to 4 plex) and invest in commercial real estate ( not just Oakland) given the commercial multifamily has been seeing a decline recently
I would not do it, partially because the rules are different but also because that decline has just started. There are predictions that we could see up to $800 Billion in commercial real estate defaults, meaning banks offer refi and the owners give the property to the bank rather than refi it. It's not a homogenous markets (none really is0 but if there is a growing glut of commercial real estate you might lose value if you are in that market. I would stay away the next 2-3 years
Thanks Axel and I am very interested to learn about other ways to skin....:) without the landlording responsibilities were you referring to Syndication investments? please note I need to relocate to another state due to my job and don't wish to be long distance landlord managing a triplex.
@Paul Merriwether it's all about finding the right deals. My North Oakland units, purchased 2015, are all condos in a single complex = no rent control. They were purchased at an average of $125,000 each. Currently they are rented to 2 different mid-term rental investors = basically no management cost to me + no turnover headaches for me. Needless to say, I am getting well over the 1% rule. As for value, I would conservatively say they have doubled.
My other building is in East Oakland, purchased 2016, within walking distance to Fruitvale BART. That was acquired at $678,000 for a 6-plex. Rents on those units + additional off street parking bring in $7000/month. As for value, a similar property down the street sold in the mid $800's in Q4 of 2023.
Closed in December on a 6-plex in Berkeley with an in place 9 CAP, with 3rd party property management in place.
I am in contract on a 4-plex in the Adams point area of Oakland, within walking distance to Whole Foods. This is a 100% vacant building of 1/1 units with 3 garages. Assuming we close, the purchase price will be $770,000. Comparables in the area all over $1M. Market rents are above $2k, per door. The units have had all electrical panels and water lines upgraded with permits and new kitchen cabinets installed in all units.
All of these deals were on Redfin.
I would argue that there is money to be made in every market. It depends on property, the negotiated deal and the business plan for that particular building. I would agree that in general, the Bay Area is tough. But there are deals that hit the 1% rule and also bring in appreciation.
I don't know anything about the 12 unit that the OP was referencing. But the nice thing about a commercial property is that you do have control over the value of the property. buy-out costs have to be baked into a business plan along with a clear understanding of what the property can produce over a given timeline.
$2.2M for 12 units could be a really good deal in a good location with the right plan or it could be money pit and the end of an investor if it is in the wrong place or a bad building. It is all in the details of the deal and person driving the plan.
That's EXCELLENT! Yet as I suspected very low appreciation. In the worst part of Oakland I can find homes in the $600k area. I was a landlord for 30 yr's in Oakland. I always had negative cashflow. But I didn't care because of write off's and appreciation. I was always pulling cash out.
1% rule is awesome. You can't do that with SFR in Oakland.
I'm now working with a group to learn Slow flips. That's where you buy a cheap home for $30k. Do no work on it at all then flip it to someone else on a contract for deed at 30-40k more. The home is paid off in 5 yr's. In mth 61 you start getting the that money for the next 25 yr's if they stay. Or they refi & cash you out. As I mentioned one guy bought 100 SFR's last yr. The biggest huddle finding buyers.
@Arlen Chou EX I bout a home at 7585 Blanding Dr Ferguson, MO. for $31,200 in 2022. I called to get ins they had me replace roof , cut grass total $7200. To clean it out was $3000. With closing cost I'm now up to approx $45k. I get tired of this area as I see the cost are as high as in CA in terms of labor. I try selling for 6 mth starting at $45k. I eventually sell at $23k just to get rid of it. The purchaser with a few days flips on Slowflip for $79k! A buyer that wants to own and is willing to do the work to clean the house up. Seller financed. The buyer used OPM to buy and the tenant owner will pay that note. The loan is paid off in 60 mths. In mth 61 the sell is now cash flowing until the buyer pays off the loan or refis. Now he'll pull in lets say $600 in mth 61 for the next 25 yrs. Just 10 home is $6,000 casgflow with no landlord issues. 100 homes is $60,000/mth!
I am in contract on a 4-plex in the Adams point area of Oakland, within walking distance to Whole Foods. This is a 100% vacant building of 1/1 units with 3 garages. Assuming we close, the purchase price will be $770,000. Comparables in the area all over $1M. Market rents are above $2k, per door. The units have had all electrical panels and water lines upgraded with permits and new kitchen cabinets installed in all units.
All of these deals were on Redfin.
@Arlen Chou That's an AMAZING DEAL in Oakland! How did you negotiate that building down to 770K? Does that building need a lot of work?
Thank You this is helpful but would like to know if it's generally considered a good idea to sell a residential multifamily (up to 4 plex) and invest in commercial real estate ( not just Oakland) given the commercial multifamily has been seeing a decline recently
I would not do it, partially because the rules are different but also because that decline has just started. There are predictions that we could see up to $800 Billion in commercial real estate defaults, meaning banks offer refi and the owners give the property to the bank rather than refi it. It's not a homogenous markets (none really is0 but if there is a growing glut of commercial real estate you might lose value if you are in that market. I would stay away the next 2-3 years
Thanks Axel and I am very interested to learn about other ways to skin....:) without the landlording responsibilities were you referring to Syndication investments? please note I need to relocate to another state due to my job and don't wish to be long distance landlord managing a triplex.
I had to chuckle a little when you said: "...without the landlording responsibilities."
I guess if I had to define "landlording" I would say: It's the combination of owning and self-managing an investment property.
I did that once for 2 years and new it's not for me.
What I am into is entrepreneurship. I define that as being the founder/owner of a company. IN my case the company owns properties and has contracted with service providers that provide property management services, funding services, banking services, insurance services. I, as the founder/owner spend about 2 hours/months conducting performance reviews with these service providers. The majority is with property management, the rest if online looking at statement and reports.
People often ask me what I actually provide to them in my mentoring and coaching program. I always tell them: I teach you to be the founder and person in charge who pays those you hire to provide what they promised at high quality with minimal effort.
You can be that founder anywhere in the world that has an internet connection and when Starlink is fully build out, literally anywhere in the world.
Happy to tell you in a chat how I do that