Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
8y
@Kimber Lockhart Its not supposed to be that simple. For one, I am not sure what interest rate you are using, but you are way off on P+I. Your P+I (for 30 yr fixed) is going to be closer to $3,000-$3,100 for a 3-unit investment purchase. Then to that you need to add Taxes and Insurance. Finally you don't take the rent at face value. You need to see if it is real. All unit being vacant for they type of cash-flow, smells to me. Even if the rent is real, you need to discount it to account for expenses. That's when you get to your actual #s.
Lender · Nationwide Lender · Member since 2015 · 1k+ posts · 814 votes
8y
@Kimber Lockhart Its not supposed to be that simple. For one, I am not sure what interest rate you are using, but you are way off on P+I. Your P+I (for 30 yr fixed) is going to be closer to $3,000-$3,100 for a 3-unit investment purchase. Then to that you need to add Taxes and Insurance. Finally you don't take the rent at face value. You need to see if it is real. All unit being vacant for they type of cash-flow, smells to me. Even if the rent is real, you need to discount it to account for expenses. That's when you get to your actual #s.
San Francisco, CA · Member since 2017 · 10 posts · 11 votes
8y
You're right, I'm using a slightly out of date investment property rate, and was told I'd need to put 25% down.
I pulled rents from Rentometer, which is reasonably accurate for my other properties, but I will need to do actual local comps. Rent seems to be moving quickly in the area -- any strategies for estimating? I've found comping on Craigslist seems to run high as it shares only asking rents not rents for units that actually fill.
Assuming a 10% vacancy, taxes at current property tax rate + insurance it still leaves $1000 or so a month for other expenses and cashflow.
San Jose, CA · Member since 2018 · 6 posts · 2 votes
8y
Hello Kimber,
Welcome to the real estate investor world. Not the bash you, but the number seems too good to be true. The average rental in that area actually little bit lower than you expected, plus the turn over rate is higher as well due to tenants creditability. Base on your calculation, $6K x12 = $72K/YR, then minus 12K/Yr(Tax, Ins, Mx) = $60K/yr then divided $783K, looking at cap rate (NOI) 7.6% which is high compare to the bay area cap rate.
Usually high cap rate (8-12%) = high turn over tenants (Crappy tenants) lower appreciation.
Lower cap rate (3.5 - 4%) = Quality tenants and high appreciation.
Been an investor in/out of CA for the past 10 years, I will always pick bay area.
Realtor · Mountain View, CA · Member since 2017 · 120 posts · 108 votes
8y
Kimber, list price is never what you need to use for calculation. Homes are selling over asking, by up to 25% in some areas. You should use market value of property not list price and assume that home will sell for over market price based on how things are appreciating in the neighborhood.
Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
8y
@Kimber Lockhart nice location. Its been on Redfin for a long time, so there might be some room to negotiate. I personally don't like the architecture of that style of building. They get hot in the summer and cold in the winter, but that is just a personal buying preference for me. As I see it, the real issue with this building is that all of the appreciation has been squeezed out of it by the flipper. Have you spent some serious time in Richmond to get a feel for the area? If you have not, I HIGHLY suggest that you drive AND walk the different neighborhoods to get a good feel of different areas. Personally, I will drive and walk on different days and at different times to get a really good understanding of an area. Some areas in the East Bay look completely acceptable during the day, but at night it is a totally different vibe. On the numbers side of things, that is just a matter of doing your math and finding your comfort zone to get to an offer price.
The original linked property was a great learning point: the agent repeatedly indicated he was unable to get in touch with the owners to consider my offer, which was competitive enough that it should have triggered a counter. It's hard to say what was really going on, seemed like fishing the market. The answer to what I was missing with a MLS property vacant and able to cashflow without a lot of work is that it wasn't actually for sale at that price.
I've since acquired 10 units in the East Bay (4 in Richmond). I'm finding that my cashflow numbers are modest compared to the claims others make on these boards. I'm not interested in investing tons of time finding bragging-rights deals, but am happy with the buy and hold approach. I'm centering on a philosophy of finding a middle ground between cashflow and appreciation. I have been able to find buildings in the black cash-on-cash by a few percentage points that (I believe) will also appreciate due to proximity to the Bay. We're not talking SF-over-the-last-10-years appreciation, but I'm interested in predictable investment returns, not gambling.
Oakland, CA · Member since 2015 · 246 posts · 127 votes
7y
@Kimber Lockhart
Hey Kimber! Just shot you a colleague request. Hoping you can share knowledge in the Richmond area. I already own property in Oakland, but am looking in Richmond. Would love to pick your brain 😊
Investor · Richmond, CA · Member since 2015 · 2 posts · 2 votes
7y
Richmond, CA has hardcore rent control.
This is what makes me leery about investing unless units are completely vacant. Also, one must be selective about the area where property is located. I'm a native, of Richmond, and there are some placed that I wouldn't want to live or landlord. Good Luck!
As others have said here Richmond has serious rent control and when the tenant needs to move out on your own...otherwise you get the pleasure of PAYING them to move and it's between 12K to 20K per unit depending on how long they have been there.
The good news is you are like me in that you are buy and hold. I've got a duplex in Oakland, a condo in Concord and 6 units in Cleveland. Sometimes I wonder when I hear people talk about doing "A 100 Deals in a 100 Weeks!"....Are they wholesaling? If ot's buy and hold how much are they getting per door?....I'd rather acquire 20 units over a 4 year period with EACH unit at the 2%/4% rule in a C area then trying to simply accumulate a "door count" for bragging rights.
Rental Property Investor · CA · Member since 2018 · 225 posts · 180 votes
7y
@Kimber Lockhart that area isn’t terrible, but it isn’t great either. I would call it a D class neighborhood, I have seen some very SKETCH behaviors in that neighborhood, I had a coworker who saw a homicide at the gas station on cutting and 37th.
I would be looking Richmond annex, carriage hills (SFH neighborhood) parts of Dam road (which El Sobrante also), and streets near San Pablo Ave, areas near Richmond marina (ferry just opened up).
I grew up in contra costa and worked the area for 4 years, hit me up if you have any questions. I also have a colleague who moonlights as a realtor, he is a Richmond local.
Investor · San Francisco Bay Area, CA · Member since 2020 · 16 posts · 6 votes
6y
Hello Everyone!
I am relatively new to the rental/investor scene, but am interested in "house hacking" a property in the middle of iron triangle forest park, belding woods, and metro richmore village. What are your thoughts on this location? I am native to vallejo but work in silicon valley and was looking to house hack a property closer to work.
I've checked crime mapping and it seems safer than most multifamilies in my price range of 500-600k in Oakland. Any thoughts would be helpful!
I hear North Richmond & Iron Triangle are the higher crime areas, so maybe if you're brave. If anyone has an agent they'd recommend for this area, lmk, I'm looking at the Richmond area as well
Investor · Berkeley, CA · Member since 2016 · 242 posts · 304 votes
5y
@Jeffrey Ji. I have properties in both the iron triangle and north Richmond. They have done very well and I have had relatively great tenants over the years. North Richmond is tougher than the iron triangle, but it is unincorporated so it falls under County of Contra Costa and not under City of Richmond tent control which is a big plus. Lots of realtors out there that can help you look in these areas. Good luck.