SFH vs MFH in oakland

3 Replies

Hi all, I wanted to throw out a question about investing in Oakland and wondering anyone has any ideas or advice to share.

I am wondering about buying SFH vs MFH in East Oakland, specifically because it looks like SFH are exempt from rent control ordinances under Costa-Hawkins. I have analyzed a number of MFH properties but none of the numbers make sense because the rents are too low because of rent control with the only way I see to really increase to market value being on duplexes and triplexes after owner occupying for two years. Since SFH are exempt, theoretically one could use the BRRRR strategy very effectively in East Oakland (lots of distressed properties) and not have to worry about rent control. Ive seen a number of SFH which could cashflow if given some TLC.

Any thoughts, ideas, or opinions?

Originally posted by @Andrew Brewer :

Hi all, I wanted to throw out a question about investing in Oakland and wondering anyone has any ideas or advice to share.

I am wondering about buying SFH vs MFH in East Oakland, specifically because it looks like SFH are exempt from rent control ordinances under Costa-Hawkins. I have analyzed a number of MFH properties but none of the numbers make sense because the rents are too low because of rent control with the only way I see to really increase to market value being on duplexes and triplexes after owner occupying for two years. Since SFH are exempt, theoretically one could use the BRRRR strategy very effectively in East Oakland (lots of distressed properties) and not have to worry about rent control. Ive seen a number of SFH which could cashflow if given some TLC.

Any thoughts, ideas, or opinions?

 Generally, 
SFH will cash flow less than multifamily properties. Also, with lots of homebuyers looking for an affordable place to live, there is competition and increasing prices on SFH, especially down in East Oakland (I own a 4plex down there..) - while rents are not increasing as quickly any more.

That is correct that single family homes (operated as a single unit) are exempt from rent control under state law (Costa-Hawkins). 
And it sounds like you know about the owner-occupant exemption from rent control for duplexes and triplexes in Oakland... 
That is an almost sure-fire way to unlock value, if you can live there 2 years.. 

Are you looking at the sold prices when analyzing the cash flow? Or list prices? 
Looking at auction properties that are distressed, and purchased for cash? 
Or properties that were sold w/ FHA or conventional financing?
Have you walked through some of these properties, and estimated remodel costs? 

Regardless of your financial situation, you can always find people to come in with cash on a good deal. 
But they seem hard to find on SFH cash flow in Oakland, based on the feedback I've received. (I've been out of country most of the last year..)

If you can find a bunch of great cash flow SFH deals in Oakland, you'd be able to make a lot of money, because that would be highly desired... ;)

I think your idea of BRRRR would work well. You would have to be very careful to purchase in neighborhoods that can absorb that upside increase in rents. Otherwise, you would rehab a house and not have any quality tenants to rent to who are willing to pay the market rent. Screening tenants would be your most important part of the process in order to secure a solid SFR investment.

Thanks @J. Martin , I've been looking at list prices, I understand that properties don't necessarily sell for what they list at but from what i've seen in the Bay Area they typically sell for over, rather than under. This may not be the case for MFH. I haven't looked at auction properties sold for cash. I don't have the cash on hand to buy outright and this would be my first deal so I don't have a track record to present to investors.

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