I understand that this is a rather vague question since there are numerous variables. However, I am definitely interested in hearing some ideas, whether traditional SFR, duplexes, or even far fetched ones.
2 constants; 1) not to be a primary residence, 2) $1 million as in 300k cash and rest in loans.
Rental Property Investor · Redwood City, CA · Member since 2017 · 50 posts · 22 votes
9y
@Jun Yang Hi Jun. I just sold my apartment building in downtown SF and netted close to $1.5M after closing costs and fees. So I have that amount and will have another $1M to invest sometime in early 2018. Basically, I'm in the same boat you are as an investor from the SF Bay Area.
What I am doing is looking to the Central Valley (Sacramento-Stockton-Merced-Fresno corridor). Sacramento is extremely hot and everyone is trying to purchase something in that market. Cap Rates are now in the 4-5% range, which is causing me to look elsewhere for higher yields.
Based on my investment criteria of 1) Cash-on-cash return, 2) Value-Add opportunities to increase the equity, 3) Cash out to purchase a property 2x as large (and continue that process with each new purchase), 4) Take the cash flows from each property and reinvest it into "smaller" properties (~$1M range) so I can follow the same process but 1031-exchange them into larger and larger properties.
None of my goals/criteria is possible looking in the SF Bay Area. Thus, I need to look outside in the Central Valley. Ultimately, I will look into and purchase properties in AZ, NV, TX.
Depending on your time requirements (e.g. work, family) and what they allow you, you may have to look outside the Bay Area.
But it all comes down to what your investment goals are and what you want to accomplish short/medium/long-term.
If you want to stay in the Bay Area, your down payment needs to be 50% or greater in order to bring in an adequate size of cash flow.
If you need any advice or have any questions please feel free to private message me. I would be more than happy to help out.
Developer · Long Beach, CA · Member since 2016 · 109 posts · 75 votes
9y
@Matt K. I have not cashed out financed my properties yet, since I do not need the funds. Pittsburg property, I would not buy at it's current value for investment purposes. Potentially good for holding it long term as more and more is getting developed there and jacking up property prices. Pittsburg, Antioch and Brentwood is seeing so much develops over the past few years and it isn't stopping.
The townhouses would be questionable if I would buy at today's value. It is about a 5% cap which isn't that terrible (in comparison). It nets after expenses about 140k annual. Honestly, if all I had was 2.4m and I can swap it for 140k annually for the rest of my life, I may do so since I can live off of 140k. This is just my sole opinion, to each their own. How I see it, is that if 2.4m buys me retirement at 30 years old, I'll take it.
Oakland, CA · Member since 2011 · 55 posts · 28 votes
9y
I still come across the occasional MFR that hits the 1% rule. They're usually in East Oakland or Vallejo. I still think that East Oakland has a way to go in terms of appreciation. The demand for housing is incredible here and doesn't seem to be going anywhere. I do love investing out of state to maximize cash flow but there are still places here where you can both cash flow and reap the benefits of appreciation.
Rental Property Investor · Denver · Member since 2017 · 121 posts · 121 votes
8y
Use your $300k to buy multi-family homes in cash flowing areas like the Midwest, upstate NY, etc.
Done properly you should be able to create 50K/yr+ in cashflow using this strategy after all expenses/professional property management.
Or buy in SF and probably end up putting money in rather than getting money out each month.
Mountain View, CA · Member since 2017 · 2 posts · 0 votes
8y
How about Peripheral Bay Area markets like Tracy, Livermore, Hayward Hills, or even Sacramento? $1M goes decently far in these places. Ok, Livermore is a tad expensive. But still, you can check out these markets and grab something. That 'something', hmm. I know you don't want it to be your primary residence. You could just buy a house and rent it out. Or by an income property and rent it out. Honestly, do the math and see if you are in the black or red.
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
All I hear is that the Bay Area is overvalued! I ask relative to what? Incomes, past prices, S&P market cap, market cap of Bay Area companies or is it just that people have a fear that the 2008 housing crisis is a recurring event that happens every 10 years?
Developer · Long Beach, CA · Member since 2016 · 109 posts · 75 votes
8y
@Sam Josh I don't think Bay Area is overvalued, personally. It reflects the jobs available here. There are just a lot of people that make a lot of money here and the homes reflect such demand. They can't build homes fast enough to meet up with demand. Yes, some people may say why is there so much homes on the market then, if demands are high? People with money demand upgraded move-in ready homes. There are so many cash buyers out here that any decent home gets bought within a weekend of open house. Time is money in Silicon Valley and buyers do not have time to do the rehab themselves.
To reiterate, Bay Area is not overvalued. It is expensive, but it purely reflects demand and jobs available. Our TOD properties are getting sold at $1,200-1,600 per SF, but that's typical to high profile buyers at tech/medical companies that make 8 figures a year and their typical bonuses can cash buy these types of properties. Right now, any property along South Bay near ECR in a transit oriented area is selling for about 5million per acre and developers will tear whatever is sitting on the lot down to build high density apartments to keep up with demand.
Sam, you live in Sunnyvale so you know all about the huge tech companies around South Bay that entice fresh graduates with six figure salaries to start with huge bonuses and incentives.
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
@Henry Chi. I agree. I don't think this market is overvalued. As someone who lives and works in the center of it all, the market does not seem overvalued in relation to incomes and wealth (stock options). Not to mention 2nd time home buyers, Chinese wealth and Startup wealth. A realtor friend of mine just sold a 3 bed apartment in SF for $2 million to a couple that jointly pulls 750k per year. Similarly I just heard about a Sunnyvale home that sold for 800k over asking price because it's close to the new Apple Campus. I am not saying prices are easy but as long as companies like Google, Apple, Facebook keep doing well, these prices will always have a floor.
Attorney · Sacramento, CA · Member since 2014 · 300 posts · 172 votes
8y
The true Bay Area bubble is the start up economy. Of course the goliaths like Salesforce, Google, Apple, FB, Uber, etc. will always be there. Any ol' programmer or business kid used to be able to form a start up and get it funded and use this is afford expensive housing and hire those who can. That's not the case anymore. From what I see, VC money is more picky, and when small Silicon Valley startups hit a bump in the road, that will effect RE.
I've worked with half a dozen folks who moved to Sacramento from the Bay because its not only home prices that are high, but also the price of everything else. They can afford to live there, but they pros no longer outweigh the cons.