San Francisco, CA · Member since 2018 · 62 posts · 20 votes
Hi BP communites,
I think I going to refinancing my home equity to take out roughly 500k for 30 year loAN and buy property for passive income.
Can I some oF your input on which city to start locally in the Bay Area? Sacramento or Stockton? Single house or multi-family(duplex, triplex)?
I wanted get into property that have tenants already have a good contract with them. Please let me know if you have any properties that fits my vision
Thanks in advance
Kevin
Real Estate Coach · Austin, TX · Member since 2018 · 56 posts · 52 votes
8y
@Kevin Zhang - Posts about leveraging HELOCs and home equity are incredibly exciting. This is the moment to become a bigtime player or simply build a safe portfolio of passive income. $500K gives you so many options.
I'd really avoid the primary markets that you mention as you're really too late unless you network and find a stellar off-market deal. Also, what is your strategy? You'd make a good deal of money by buying a distressed multi-unit 12+ units, in a B class neighborhood or a neighborhood that is up and coming, hopefully its more than 30% vacant. You go in there buy it at substantially above market average cap rate, likely around 9-10% at least, dump 10%-20% of the purchase price as capital so if you bought it for $1M, you'd put $100K to $200K into it, rehab it, stabilize new rents and tenants, hold for 12-18 months and either sell or hold and yield serious cash flow.
A $200 to $300 plane ticket every two weeks gets you access to many other markets. We have partners making a lot of money in secondary and tertiary markets doing just this. Fly there, meet and greet with rehabbers and one local boots on the ground, then fly out every two weeks to see it thru, you could make a lot of money.
You truly have so many options but the one that excites me the most is finding yourself a apartment complex in a distressed state and revitalizing it. You could also do a wholesale campaign to target motivated sellers for apartment complexes which gives you first access to offmarket deals.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
8y
Incomes in Sacramento are rising faster than inflation, but not in Stockton.
Prices will of course be much cheaper in Stockton.
That's just a first glance, but that might lead one to lean towards Sacramento as a play for appreciation and rent increases over time, but lean towards Stockton for cashflow today since the prices are lower.... up to you what your goals are.
Anecdotally, you hear a lot more people saying "I'm taking my high income job working from home, and moving my 'home' to Sacramento, and just driving to the Bay Area once a month for the monthly work meeting!" than you hear them say that about Stockton, so that lines up with the above decade and a half income trend data.
The assumption of course being that inflation adjusted upward income trends are the only places that inflation adjusted rent increases and real estate appreciation can come from.
Of course all this goes out the window if you find an amazing non-MLS deal through your own methods.
After @Anna Myers last meetup, I did the above for like half the cities in the Bay Area and where people in the Bay Area invest. :P
Real Estate Coach · Austin, TX · Member since 2018 · 56 posts · 52 votes
8y
@Kevin Zhang - Posts about leveraging HELOCs and home equity are incredibly exciting. This is the moment to become a bigtime player or simply build a safe portfolio of passive income. $500K gives you so many options.
I'd really avoid the primary markets that you mention as you're really too late unless you network and find a stellar off-market deal. Also, what is your strategy? You'd make a good deal of money by buying a distressed multi-unit 12+ units, in a B class neighborhood or a neighborhood that is up and coming, hopefully its more than 30% vacant. You go in there buy it at substantially above market average cap rate, likely around 9-10% at least, dump 10%-20% of the purchase price as capital so if you bought it for $1M, you'd put $100K to $200K into it, rehab it, stabilize new rents and tenants, hold for 12-18 months and either sell or hold and yield serious cash flow.
A $200 to $300 plane ticket every two weeks gets you access to many other markets. We have partners making a lot of money in secondary and tertiary markets doing just this. Fly there, meet and greet with rehabbers and one local boots on the ground, then fly out every two weeks to see it thru, you could make a lot of money.
You truly have so many options but the one that excites me the most is finding yourself a apartment complex in a distressed state and revitalizing it. You could also do a wholesale campaign to target motivated sellers for apartment complexes which gives you first access to offmarket deals.
If you want to manage the property yourself, I would look towards buying a duplex. This is only because most triplexes or quadplexes are not in the nicer parts of town. Duplexes give you the additional tenant while still being in nice neighborhoods.
It is even more critical to screen your tenants effectively for smaller properties as even one vacancy can create a huge headache.
Rental Property Investor · Nevada City, CA · Member since 2017 · 74 posts · 70 votes
8y
I looked at doing the same, a 30 year refi, but decided on a 20 yr heloc instead because the interest rate I'm paying now is ridiculously low and I don't want to lose that. Running my numbers just didn't justify refinancing for 30 years since the rates have jumped so much.