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Updated about 5 years ago on . Most recent reply

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Jasraj Singh
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295
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Affordable markets to invest in california?

Jasraj Singh
Posted

Hi,

Since I have a couple of friends studying and living in California I would like to know is there any affordable markets to invest in California?

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Johnny Hoang
  • Real Estate Agent
  • San Jose, CA
66
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Johnny Hoang
  • Real Estate Agent
  • San Jose, CA
Replied

Hey Jasraj!

What part of CA? 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!

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