Is House-Hacking Impossible in Bay Area, CA? I want your opinion!
San Francisco, CA · Member since 2020 · 17 posts · 9 votes
What's up BP family!
I know many of investors that search for out of state opportunities if they live in Bay Area, CA, or California in general. Especially for beginners. Myself included. But what I'm interested to know is what my experienced and informed BP people think.
I'm currently stationed here with my spouse on military orders and we're going to be here for a while. I wouldn't hate to use a house-hacking option for my first deal, as it would serve multiple purposes for us at this time. My thoughts naturally lean against it due to the property values in this area. But I would love to hear from some of you that have experience in this area or any expensive area.
Are there some hidden gems of neighborhoods to look out for in The Bay that DOESN'T cost $700k?!
Anyone currently house-hacking in an expensive area?
Any active duty members here that are using their VA loan and can provide any insight?
Anyone in the area part of a mastermind group they would recommend?
Any and all recommendations and insight is appreciated you guys; I'm ready to WORK!
Much love everyone, thank you in advance!
Definitely not impossible! I’ve done it more than once and have helped others do is. Here is a response I gave in some other threads. Hope this helps!
“ It's definitely feasible in the bay area market. That's where I primarily invest/ house hack in addition to out of state. We've helped many people house hack in the SF market but it is a little harder as its competitive and price points in SF are well above a million. Not saying it is impossible in SF because we have done it many times but it's easier in the smaller sub-markets close to SF like Oakland or the surrounding areas. Primarily, it's where you can do a low 5% owner occupied loan to stay in the confirming loan limits( 765K). Here is an example of a house I just helped my buddy get into in Oakland. I replied back to someone else on the forum and thought this may be of interest to you.
Out of state is good for sure as I have done quite a few there but I've realized, the cash out lay is almost the same. 200K on a 20% down is equivalent to 5% down on an 800K purchase. The cash out lay is both going to be 40K however, you will have more upside in appreciation and higher rents in the bay area from my experience. And as long as you can offset the costs by renting out the bedrooms, you can see it is very effective.
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I always recommend house hacking as that's how I started and got my feet wet. In the bay area markets you can house hack and have a pretty good ROI. I've helped many friends and clients down here that has done it successfully.
For example:
Purchase price: 800K
Downapyment: 5% = 40K cash outlay
Monthly mortgage(PITI) = $4,500 on a 3.5% owner occupied 30 year mortgage.
Typically, I will just rent out bedrooms to offset the mortgage cost. There was a Oakland CA property that I just helped my client get into with the numbers mentioned above. It was close to Bart/ public transportation and the average room rents go for $800 for a room with a shared bath and $1200 for a private bathroom. This home was a 5 bed 4 bath and had a 1 bed 1 bath ADU in the back that hes going to live in.
He rented out the main house using the room rental model.
2 bedrooms with a shared bath at 800 each = $1600
3 bedrooms with a private bath at 1200 each = $3,600
Total rents: $5,200
5200 ( total rents) - 4500 ( monthly mortgage) = 700 cash flow
700 cash flow x 12 = 8400 / 40,000( cash out lay) = 21% ROI
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But the kicker is when he moves out the following year to buy another one and rents his ADU out for $1500. Then his cash flow will be $2,200 a month. So on year 2, his cash on cash looks like this: 1500 + 700 = 2200 x 12 = 26400 / 40,000 = %66 ROI
Hope this helps! DM me if you have further questions, glad to help! I can send you some break downs of the previous SF ones I've done to show you what that looks like as well.
“
@Alliya Pinckney Thank you for your service. I was not aware the military still had a presence in San Francisco? I used to live in The City and am a Navy Veteran. I've used my VA loan to househack a duplex in Oakland and did not spend $700K........of course that was years ago.
News flash, the good and the bad.........I'm not being a jerk when I say this.....In certain parts of the East Bay you can find the one percent rule on a triplex or a fourplex, but it will be in an "up and coming, blue collar, working class neighborhood".
I will let you marinate on that for a minute.
MOST of BiggerPockets is not the Bay Area so when you hear people getting 1% and 2% rule in decent C class or even B class neighborhoods, those are generally in the midwest or the south. Not here.
What I've helped people do here in the Bay Area is actually pretty simple if they use the VA Loan. Use it to buy a duplex and owner occupy it. Dare I say who cares about "the neighborhood" because you are only going to live there one year or until you get orders somewhere else, whichever comes first.
If you get orders somewhere else, you simply put a renter in the unit you just moved out of and then hire a PM to manage the property for you while you are at your next duty station, then you use the VA loan again while you are at your next assignment. Conversely, if you are still stationed here after a year and it looks like you may be here for a while you may be able to refinance out of the VA Loan, into a conventional loan, then use the VA loan again to buy another duplex.....then you have rental income coming in from 3 units instead of just one. I'm speaking from personal experience and from having helped others do the same thing.
If you've already been pre-approved with a VA Lender then you are already halfway there.
Hope this helps.
@Alliya Pinckney Don't take this the wrong way, but I believe your question is framed poorly. Change it to "How can I make house hacking work in the Bay Area?"
It isn't an easy place to make it work, but definitely possible! I'm house hacking by renting bedrooms in San Diego, and I had friends who were able to make it work in Hawaii which is almost as expensive as the bay area.
You just need to be creative, and understand that you'll probably still need to come out of pocket a little bit while occupying the building, but it will save you money on your living expenses!
I am a new investor here, specifically targeting out of state investments. I am also based in the SF Bay area.
House Hacking by far I think is most successful here in the bay area. Before I was interested in investing, myself and many of my friends and colleagues rented bedrooms, living rooms, and even garages here in SF Bay Area. I have met people who had whole businesses leasing(not owning) and then house hacking on top of that. Turning 1Br Apartment in SF into at minimum to 2 bed by renting out the living room.
Individuals will pay a lot of a small footprint near public transportation.
The biggest challenge I see with the SF Bay Area is the high barrier for entry. When the average 3bd 2b is > $700k down payments are out of reach for many. However, if you're able to come up with the money, or leverage your VA loan in the Bay Area you can look forward to decent appreciation on your property. Many places that meet 1% don't appreciate like they do here in the bay.
Like Brandon Turner always says, every property has a number which we can make work. Where we increase our down payment, or rent out every room, there is a way to make it work.
In my opinion I am interested in looking for my next deal out of state right now, but still watching the bay area. With the swift trend of companies letting individuals work from home indefinitely, it is going to change the bay area landscape. If tech workers(majority of individuals still flocking here) realize they can work remotely, the supply and demand is going to reflect that.
Definitely not impossible! I’ve done it more than once and have helped others do is. Here is a response I gave in some other threads. Hope this helps!
“ It's definitely feasible in the bay area market. That's where I primarily invest/ house hack in addition to out of state. We've helped many people house hack in the SF market but it is a little harder as its competitive and price points in SF are well above a million. Not saying it is impossible in SF because we have done it many times but it's easier in the smaller sub-markets close to SF like Oakland or the surrounding areas. Primarily, it's where you can do a low 5% owner occupied loan to stay in the confirming loan limits( 765K). Here is an example of a house I just helped my buddy get into in Oakland. I replied back to someone else on the forum and thought this may be of interest to you.
Out of state is good for sure as I have done quite a few there but I've realized, the cash out lay is almost the same. 200K on a 20% down is equivalent to 5% down on an 800K purchase. The cash out lay is both going to be 40K however, you will have more upside in appreciation and higher rents in the bay area from my experience. And as long as you can offset the costs by renting out the bedrooms, you can see it is very effective.
-------
I always recommend house hacking as that's how I started and got my feet wet. In the bay area markets you can house hack and have a pretty good ROI. I've helped many friends and clients down here that has done it successfully.
For example:
Purchase price: 800K
Downapyment: 5% = 40K cash outlay
Monthly mortgage(PITI) = $4,500 on a 3.5% owner occupied 30 year mortgage.
Typically, I will just rent out bedrooms to offset the mortgage cost. There was a Oakland CA property that I just helped my client get into with the numbers mentioned above. It was close to Bart/ public transportation and the average room rents go for $800 for a room with a shared bath and $1200 for a private bathroom. This home was a 5 bed 4 bath and had a 1 bed 1 bath ADU in the back that hes going to live in.
He rented out the main house using the room rental model.
2 bedrooms with a shared bath at 800 each = $1600
3 bedrooms with a private bath at 1200 each = $3,600
Total rents: $5,200
5200 ( total rents) - 4500 ( monthly mortgage) = 700 cash flow
700 cash flow x 12 = 8400 / 40,000( cash out lay) = 21% ROI
-----
But the kicker is when he moves out the following year to buy another one and rents his ADU out for $1500. Then his cash flow will be $2,200 a month. So on year 2, his cash on cash looks like this: 1500 + 700 = 2200 x 12 = 26400 / 40,000 = %66 ROI
Hope this helps! DM me if you have further questions, glad to help! I can send you some break downs of the previous SF ones I've done to show you what that looks like as well.
“