NO GOOD DEALS IN SF BAY AREA /NYC/SD/MIA :( BS!!!

53 Replies

I'M TIRED OF HEARING PEOPLE SAY THERE ARE NO GOOD DEALS WHEREVER THEY ARE AT!!!! BULLSH*T!!!! (You hear me @Aaron Mazzrillo azrillo?!)

We're in the San Francisco Bay - allegedly one of the most expensive/overpriced markets with no cash flow - no money to be made.

I'd like to call out some other investors who also know this is BS, and hopefully they will be kind enough to tell or give some hints at to what kind of deals they've found, where they found them, and some numbers.. Below are properties I found, locked up in contract, and purchased by myself or am 50/50 with partners. My two best deals have been in 2014, when there was allegedly the least number of deals out there! I average around the 1% rule with my "fix and hold" deals, and I know others killing it with condo conversions, flips, new builds, high-end rentals, AirBnb & short term rentals, etc. New York City, Los Angeles, San Diego, Miami, join in!

I'll kick it off:
1) Dec 2012. 4plex in Richmond $375K + 30K Rehab - foreclosed Homepath in "First Look" period. Used FHA. Vacant & in need of cosmetic & some other work. ~$55K in annual gross rents. Good built-in equity. Used buyer's agent. ~$115/sq ft.
2) June 2013. 2 SFH on 1 lot in Richmond $245K + 15K Rehab - on-market property. Negotiated $20K seller's credit. ~$28K gross rents. ~$5k gross rents upside w/ remodel & new tenant. Let listing agent double-end. ~ $140/sq ft.
3) May 2014. 4plex in East Oakland - $385K + $45K Rehab - on-market property (over 200 days). Listing agent said cash only, and negotiated to use loan. Let listing agent double-end. ~$120/sq ft. ~$62K gross rents w/ $10K gross rents upside w/ rehab (but under rent control). Good built-in equity.
4) Sept 2014. duplex in West Oakland - $300K + $15K Rehab (so far) - off-market wholesale deal (from networking). ~$35K gross rents. Market rents ~$75-80K. Good built-in equity. ~$120/sq ft.

All have built-in equity from rehab, cash flow well, have increased in value and rents since purchase, and are on 15 or 30yr fixed rates. I also have a few units I do not have an ownership interest in, but capitalize on. And one of them I rent out on Airbnb.. Signed last of these Dec 2014.

Can some other investors share some more recent experiences of never being able to find any deals in the Bay or other high-priced areas? @David Cheung g , @Arlen Chou  , @Minh Le  , @Amit M.  , @Danny Shepstone, @Benjamin S.  ,

Medium logoJ. Martin, SF Bay Summit | [email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

We spent about ~$100,000 for a broken down 473 sq ft house that was formerly a chicken coop near downtown Royal Oak, Michigan. We put it out of its misery and into a landfill, spent ~$270K to build a 2,500+ sq ft home and sold it for ~$480K. There is opportunity everywhere if you learn to see it.

3) May 2014. 4plex in East Oakland - $385K + $45K Rehab - on-market property (over 200 days). Listing agent said cash only, and negotiated to use loan. Let listing agent double-end. ~$120/sq ft. ~$62K gross rents w/ $10K gross rents upside w/ rehab (but under rent control). Good built-in equity.

 J. M. 

Newbie here.

1. This is inspiring from someone semi local

2. Can you explain the rent portion of above. $62k gross rents w/ $10k gross rents upside with rehab but under rent control

What exactly did all of that mean as a whole...was it $52k in rents prior to rehab now $62k? What did rent control have to do with the movement?  All new to me.

I appreciate the explanation.

Originally posted by @Kelly Foydl :

3) May 2014. 4plex in East Oakland - $385K + $45K Rehab - on-market property (over 200 days). Listing agent said cash only, and negotiated to use loan. Let listing agent double-end. ~$120/sq ft. ~$62K gross rents w/ $10K gross rents upside w/ rehab (but under rent control). Good built-in equity.

 @J. Martin 

Newbie here.

1. This is inspiring from someone semi local

2. Can you explain the rent portion of above. $62k gross rents w/ $10k gross rents upside with rehab but under rent control

What exactly did all of that mean as a whole...was it $52k in rents prior to rehab now $62k? What did rent control have to do with the movement?  All new to me.

I appreciate the explanation.

 Kelly, there were 3 units vacant, and a 3br/2ba apt at $960 rents when I purchased. $62K today. $72K if the last unit was at market. The $960 rent should be between $1,700 & 1,800 after remodeled. But they are under rent control. The below-market rent will be up about 30% over 3 years with banked rents and capital pass-throughs, if they do not move.. I was just saying there is additional upside..

Medium logoJ. Martin, SF Bay Summit | [email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

J. M. said, you don't invest in CA only for cash flow, you must look at the appreciation upside, else it will never make sense, especially in the bay area. Therefore, I tend to do flips and take advantage of the market momentum. All those were bought in the open market (MLS, auction, short sales).

Recent flip deals:

https://www.redfin.com/CA/Hercules/2051-Lewis-St-9...

https://www.redfin.com/CA/Hercules/151-Crabapple-C...

https://www.redfin.com/CA/Oakland/398-Adams-St-946...

https://www.redfin.com/CA/Oakland/3147-62nd-Ave-94...

https://www.redfin.com/CA/Oakland/6330-Camden-St-9...

Rental deal - bought a 4/3 townhouse in Dublin last year at a discount. Cash flow NEGATIVE and I am feeding it.

Current deals:

- SFR rehab in North San Jose

- In contract to buy couple houses to flip in Stockton

- bought one SFR from courthouse auction in the Modesto area this week.

- Possible SFR deal in the Vallejo area. Sellers said Yes, than No, than Yes.

Want to have:

- partnering up with you guys on a multi-family rental, really want this to happen!  I am working hard to flips & saving $$ for it.

- A great deal from a wholesaler, especially in Oakland or Richmond area.

But some people don't consider 1% a good deal, in particular in an equity market that is near peak, and where that occasional deal is so hard to find that it is a celebratory occasion when it is found.

I love your enthusiasm though J.Scott! 

wow @J. Martin great cash flow on those units you got!  

1) May 2013 purchased two 4 plexes in Mountain View $840k each.  I treat them as a single 8 plex because they are next to each other and share a courtyard. Total purchase $1,680,000. Total rehab, $102,670.07: including new roofs, tenting, kitchens, bathrooms, flooring, etc. Rent per month at purchase $7450. Current per month rent $13,100.  Rents are still under market, 2 units will have increases Q3 and 1 unit in Q4.  Current appraised value $1,175,000 x 2 = $2,350,000.

2) February 2015 5 units Santa Fe area of Oakland $600k with 50% seller financing @ 4%, amortized for 30 years, balloon in 5 years, seller did sewer lateral.  Started rehab on two units 2/21/15.  Current rents on remain 3 units, $1900.  60 Day notice given with m2m rents at $4050 for the 3 units. TBD if the current renters will stay or move out.

People will always find exactly what they are looking for. If they say there are no deals out there, well, for them there probably isn't. I don't mind. It keeps them scratching their heads while I'm cashing checks. 

Yes Sir J. M. 

Bought a 1/1 SFR with a detached one car garage and a bonus storage room in east oakland at $100k in April 2014. Rehabbed $15k. Rent $1350. The current value is around $180k ,may be $200k. Changed my mind no to flip it.

Bought a 3/1 SFR in east Oakland at $150k in 2014, rehab $50k, rent $2100. Next door house 4/2 same size asking $385k.

Bought a 3/2 condo in Stockton in 2014 at $70k. Only cleaning was needed. Rent $950, current value $100k.

Bought a 4/2 SFR at Martinez for my sister to live in it at $380k in end of 2013. Pulled the carpet and hired cleaning people. The house was fully remodeled before we bought it. Current value is north of $550k.

@David C.  ,

You've been killing it! So thanks for jumping in! I like especially that they have all been through publicly available sources like auctions, MLS short sales, etc. Proves my point EXACTLY! *There are no deals around in the Bay Area!* And keep in mind BPer's, these are David's RECENT flips and in process ;)

I don't necessarily need appreciation on mine, but I love it! I didn't put my current values in, so I'll share those too..

With Value Changes..

1) Dec 2012. 4plex in Richmond $375K + 30K Rehab = $405K. Appraised value late 2014 = $510K. ~$55K in annual gross rents. (Already pulled all investment out in cash-out refi)
2) June 2013. 2 SFH on 1 lot in Richmond $245K + 15K Rehab = $260K. Estimated Value = ~$350K ~$28K gross rents.
3) May 2014. 4plex in East Oakland - $385K + $45K Rehab = $430K. Estimated Value ~$550K. ~$62K gross rents w/ $10K gross rents upside w/ rehab (but under rent control). Good built-in equity.
4) Sept 2014. duplex in West Oakland - $300K + $15K Rehab (so far) = $315K. Estimated Value ~$450K+? ~$35K gross rents. Market rents ~$75-80K. Amazing upside w/ tenant turnover & rehab.

That's almost a $half million of equity created on all deals (some of which I'm 50% on) over a less than 2 year period with about $180K/yr in gross rents (not counting non-owned deals). I think the first 2 deals have about half the equity returns from market increases, and about half from rehab. The increases in value from the latter 2 are primarily a combination of buying at a discount, and value created by rehab, IMHO. I started with slightly negative net worth, no cash, and a pocket full of dreams ;) So not too shabby I think..

Some other like David, Bebe, Minh, Ben, etc. have crushed it even more ;) 

I think my biggest mistake in investing was completely ignoring flips while I was building my rental portfolio..

Medium logoJ. Martin, SF Bay Summit | [email protected] | 510‑863‑1190 | http://www.sfbaysummit.com

J. M. 

I agree with you 100%.

It seems the abiding tenet in life and subsequently in real estate is to see what can't be obviously seen. Translation: opportunity rarely presents itself in an obvious form. 

Seeing what can be (eventually and in the future), as opposed to what can be seen (now).

Love the post!!!  Thank you J. Martin, you are a true inspiration.  

BTW, I'm looking for a start home/condo/townhome that offers good cash flow in the East Bay (specifically in or around Oakland) ... priced under 200k.  Wishful thinking? No.  I know it's possible, I am just currently out of the country.  Any leads/advise would be greatly appreciated.  

J. M. 

You are killing it sir! I'm just a small potato but got back into investing into the Bay Area summer of last year, well after many were saying cash flow was done and there was little reason to continue buying in the Bay Area.

Those two stadium deals we won are doing very well... No, I don't get the 1% rule, and I don't care. Rents have continued going up, tenants ALWAYS pay on time, and a nearby comp is currently in contract for about $40k more than what we paid, and it's only been six months...

In regards to cash flow, we are positive and collecting $400+ each month. Units are rented out to high-tech professionals all making $100k+, so no worries there.

Just recently closed on another property and yup, still think I can find cash flow there! In a great location as well. I went shopping during the holiday season when there was a lot less competition. It's a 3 bedroom townhouse for under $500k. That's been my bread and butter play for awhile now. The 2 bedrooms are now being listed for the same price... most likely they will sell for even higher. A  4 bedroom nearby comp is now a "hot home" on redfin and coincidentally a buddy's friend of mine is trying to win it... His offer? $80k more that what I paid... 

Instant equity.

Cash flow + appreciation + wonderful low maintenance and super high income tenants? I'll take that any day of the week. 1% Rule, 2% Rule, etc. never were a factor in my decision to buy in the Bay Area; they don't apply here. Then again, if I just wanted to play by the rules, I never would have even tried for those stadium deals...

Also this year I loaned all my fund to my flipper. They are killing it in J. Martin's words. $580k in San jose may sell $850k, $890k may sell $1.25mil in Berkeley. They also have a deal in hayward from last year in at $850k expecting to be out at 1.2 mil to 1.3 mil depending on their luck.

There are some excellent deals in stockton, manteca, Tracy for entry level, new or very experienced investor willing to drive a little extra and have a bigger wallet, for what you can buy in bay area, you may buy an entire apartment complex or multi-family.  I personally a house in tracy, CA. It is very easy to rent.  Stockton is like the Detroit of West Coast, cheap deals. 

J. M. does make a good point in that if your mindset is there aren't a lot of good deals well you've already lost the game mentally.  I fell into a bit of that trap where nothing was working and I just gave up.

That being said, the market was just too high in terms of entry for me since I had no access to financing, couple that with being a bit impatient and yeah I took my cash out of state.  However I love the high cash flow I get out in the midwest, and the people i've linked up with are quality, quality folks who put me in good neighborhoods.  I actually think this is a good chance to remind everyone there's a lot of misconceptions about markets.  

Some say the bay area is overpriced, cash flow is impossible, no deals to be found, in a bubble, etc.  Now I will say it can be difficult and competitive.   However if you work really hard enough yes there are deals to be found.  I mean this thread is full of great deals where people just made a killing.  With the market rent increases, stability, appreciation, and constant supply of tenants, long term it's really a great play (hell, even short term in many cases, as J's properties are a great example of).  

That being said, the midwest ain't all full of decaying crap either in war zones.  I am up to almost half a dozen places out there where my cost of entry is around 30-50K and rents are 700-1000.  Good neighborhoods.  If that isn't enough, i'm starting to get houses now where I am getting in with tons of built in equity.   Example, just bought a place out in a middle class safe suburb in Michigan with probably 50K built in equity.  44K purchase all cash, worth nearly 100K, renting for 875. Got another one lined up too around the corner with similar numbers.    So basically what i'm getting at is nothing is black and white.  The bay area has deals to be found if you work at it, and the midwest isn't just a ruse for desperate CA investors who only get burned.  

I never thought i'd say this, but reading this thread has got me itching to do something around here soon!  Like today!  You never know maybe i'll start my own thread soon with news that i've come home again so to speak.  Rent control scares the crap out of me though, you have a lot more guts than I do J.

@Andrew Fingado  

Different strokes for different folks. Would you mind sharing your out-of-state investing story in another thread.  I would loveeeeeeeeeee to hear about it  -- and I'm sure others would too.  ;) 

When people say there are no deals left in the Bay Area, we usually mean without going into the lower income area. There are always deals if you have the risk tolerance of being in Oakland or Richmond. I personally won't risk my health or life to make a buck on a deal. So, I'm one of those that says there are no good deals left in "nicer" areas.

Originally posted by @Andrew Martin :

When people say there are no deals left in the Bay Area, we usually mean without going into the "ghetto". There are always deals if you have the risk tolerance of being in Oakland or Richmond. I personally won't risk my health or life to make a buck on a deal. So, I'm one of those that says there are no good deals left in "nicer" areas I won't drive to Richmond, let alone buy property there

I agree with some of your points but I have to represent my hometown here.  There are LOTS of decent areas in Richmond.  I grew up in neighboring El Cerrito, moved to Richmond two years ago so i've spent all my life in this area.  There a lot of misconceptions about Richmond if you aren't from around here.  

I live in the hills, and I walk around my neighborhood at night no problem.  Point Richmond, East Richmond Heights, Marina Bay, parts of Hilltop mall, Richmond Annex, and North and East range from perfectly safe to high end.  Up near where I live houses can sell for up to 750K -1 million + with a nice view sitting above Arlington Blvd.  

That being said, I do agree with you in some ways and hence the reason I invest out of state, for now.  Maybe that might change if I can find a property in the right location.  The prices in the "average/nice" neighborhoods don't make any sense from an income property standpoint.  Maybe from a buy and hold for appreciation one, but there's going to be a lot of negative cash flow from the get go.

It seems most successful deals are being made via high end flips, fix and holds/multi family holds in low income areas, or those getting into gentrifying neighborhoods like West Oakland/Emeryville border area.  There are exceptions to the rule but this is just what I've been witnessing based on who I talk to.   

I should re-word what I said and be more specific than labeling a whole city as bad.  I apologize. There are high end areas in both Richmond and Oakland that I would love to own property in, but can't make the investing numbers work. For the areas that do cash flow, there is some risk in owning there, and if you have the risk tolerance, then there are deals to be had. That's more what I meant to say.

Originally posted by @Sandra Roddy :

@Andrew Fingado 

Different strokes for different folks. Would you mind sharing your out-of-state investing story in another thread.  I would loveeeeeeeeeee to hear about it  -- and I'm sure others would too.  ;) 

I just may do that, but I probably will wait until my portfolio thickens up a bit and I cash out refi and head into some other markets.  I'd like you guys to see the full plan completed and right now i'm in the middle stage.

Originally posted by @Andrew Fingado:

 I think @Aaron Mazzrillo does make a good point in that if your mindset is there aren't a lot of good deals well you've already lost the game mentally.  I fell into a bit of that trap where nothing was working and I just gave up.

Just like running a marathon, you might not end up being the best, but you can't fail if you don't quit.

J,

There are always deals regardless of where we are in the cycle of the housing market.  We got spoiled from the recent mortgage meltdown where deals were abundant.   Just like anything in life, the party has to end at some point so is an opportunity once in a lifetime for real estate.  

As I discussed off-line with you and Johnson, my partner and I recently got into contract for two buildings totaling 13 units in downtown San Jose for $2.3MM.  They comprise of three studios, four 1/1 and six 2/1.  We found them through our property manager.  These are off-market deals, and the seller was represented by a commercial broker during the negotiation process. All I can say is we're happy with the purchase.  

The reason we still buy, given where we are in the cycle of the housing market, is because these deals meet our underwriting investment guidelines.  You have to put yourself out there.  Let everyone know what you do.  Do what you say you will do, and you will become a preferred client.  When you're living and breathing your market day in and day out, you will recognize a good deal when you see it. 

Originally posted by @David C. :

J. M. said, you don't invest in CA only for cash flow, you must look at the appreciation upside, else it will never make sense, especially in the bay area. Therefore, I tend to do flips and take advantage of the market momentum. All those were bought in the open market (MLS, auction, short sales).

Recent flip deals:

https://www.redfin.com/CA/Hercules/2051-Lewis-St-9...

https://www.redfin.com/CA/Hercules/151-Crabapple-C...

https://www.redfin.com/CA/Oakland/398-Adams-St-946...

https://www.redfin.com/CA/Oakland/3147-62nd-Ave-94...

https://www.redfin.com/CA/Oakland/6330-Camden-St-9...

Rental deal - bought a 4/3 townhouse in Dublin last year at a discount. Cash flow NEGATIVE and I am feeding it.

Current deals:

- SFR rehab in North San Jose

- In contract to buy couple houses to flip in Stockton

- bought one SFR from courthouse auction in the Modesto area this week.

- Possible SFR deal in the Vallejo area. Sellers said Yes, than No, than Yes.

Want to have:

- partnering up with you guys on a multi-family rental, really want this to happen!  I am working hard to flips & saving $$ for it.

- A great deal from a wholesaler, especially in Oakland or Richmond area.

 Nice flips David! It seems like every flip you use different materials, why is that? Or am I just flat out wrong and need my eyes check?!? lol

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