Real Estate Broker · San Francisco, CA · Member since 2013 · 51 posts · 48 votes
11y
"Regarding your last post, the SF bay area is about the last place you'd want to buy and hold especially if you're just starting out."
@Account Closed showed you, you can buy a $1M house with only $50K in equity. Additionally if you dont have $50K, then there are plenty of opportunities for duplexes to fourplexes in the $200-$400K range in less desirable areas. You'll need to be willing to make the sacrifice to live in one of the units and do some of the work yourself to create sweat equity. Anyone who tells you that real estate is easy is naive and you need to have the fortitude to set some goals for yourself and make your dreams come true. Real estate is all about finding market inefficiencies and turnkey operators have already taken all the profits out and eliminated your potential upside. You need to get creative, improve your W-2 income, house hack, or find some way to make yourself valuable to others whereby they're willing to invest their money with you.
Welcome to Biggerpockets. Great to have you here. You can start by going to Learn. You can find a lot of strategies that can go with your experience. Good luck in your REI journey!
Investor · Lodi, NJ · Member since 2013 · 487 posts · 179 votes
11y
Hey Dhiren. Good to see you taking that first step! Be sure to let people know what your background and interests are. Look for local BP members to sit down and chat with as well. Take your time and enjoy the process!
Investor · Jacksonville Beach, FL · Member since 2015 · 21 posts · 6 votes
11y
Welcome! I am new as well. I have been well received and I hope you are too. BP (BiggerPockets) Has meet-ups for face to face networking and plenty of interaction on the site. Just jump in and give your two cents on some topics here in the forum.
Investor · Fort Lauderdale, FL · Member since 2015 · 17 posts · 2 votes
11y
This looks to be a great start for us all. I signed up just the other day and it seems like the community here is truly about sharing the knowledge and experience to help others. I only wish there were more communities like this in other industries and in life!
I'm in South Florida, new to the REI world, but definitely looking forward to the entire process.
Investor · Mountain View, CA · Member since 2015 · 2 posts · 0 votes
11y
Thank you all for the warm welcome.
To add to my introduction, I am looking to buy and hold in local area (i.e North California-San Francisco Bay area). But before doing that, I would like to start building a team to include local real estate agent, property managers, general contractors, home inspector, and most importantly local investor to network and learn about the market.
I would appreciate any tips or advise you guys have.
San Jose, CA · Member since 2015 · 132 posts · 50 votes
11y
Welcome to BP
@Dhiren Mistry and @Mario Bermudez. This is a great community to ask questions, network, and form partnerships. Definitely take advantage of the free learning materials offered through this site such as the podcasts and the ebooks (See the "Learn" tab above). Don't be afraid to ask questions!
I'm pretty close by. I work in Sunnyvale. Nice to see another south bay-er on here. I like to reach out to the locals who show an interest in RE. Regarding your last post, the SF bay area is about the last place you'd want to buy and hold especially if you're just starting out. Some might disagree with me, though I think the majority are in favor. There's multiple reasons why one would avoid investing in buy and hold in the SF area. If you're interested in chatting over lunch sometime, let me know.
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
11y
Dhiren,
Welcome to Biggerpockets. It's a great free on-line real estate resource so take advantage of it. I'm one of those individuals that disagree with @Account Closed's meet-up at Whispers Cafe and Creperie this Friday afternoon 7/17 at 7pm to exchange some ideas with us local investors. Some of us normally arrive around 4ish to beat the traffic. We stick around until 11pm. I'll share with you how you can generate $100k/year tax-free money for years to come. That's equivalent to making $150k/year pre-tax.
I am with @Account Closed on this. I have found that the Bay Area is a great place to B/H. Definitely stop by the meet up that @Johnson H.puts on. You will meet lots of people with many different strategies and opinions about the market.
Real Estate Broker · San Francisco, CA · Member since 2013 · 51 posts · 48 votes
11y
@Account Closed all you need to do is explore a market you're familiar with in the Bay Area with the correct fundamentals: jobs, high-income earners, attractive school districts, growing population ect., buy one of the lower-end homes in the area and put some money and sweat equity into it to make it a winner!
I agreed with everything you have said above with the exception of this "............will be hit much harder when interest rates rise and we experience the next downturn in the real estate cycle." What makes you think interest rates will rise? When do you think it will rise, and how many basis points (bp) do you think it will go up? The reason I asked is because everyone is expecting interest rates to rise. You know what happens when the majority of people is expecting something, it doesn't happen.
What do you or M&M expect when interest rates rise 100 bp, 200 bp, or 300 bp? How would 100 bp affect the housing market compared to 300 bp? How many bp would the Fed have to raise before we're heading into the next recession?
San Francisco has proven to be very cyclical over the past 35 years. Currently the median household income is $76,000 while the median home price just hit $1,000,000 for the first time. That by definition is a bubble with price-to-income ratio exceeding 13x.
My advice to newbies reading this thread is to avoid San Francisco until the next bust occurs. Not only is real estate cyclical but the tech sector itself is very cyclical. Don't get caught being the next bag holder. Wait for the market cycle to come to you and buy when there is blood in the streets and there are an abundance of motivated sellers and good deals to be had. Now is not that time.
Real Estate Broker · San Francisco, CA · Member since 2013 · 51 posts · 48 votes
11y
@Account Closed
This is a two-fold response for single family homes vs. commercial properties. In the Bay Area, where the average income is substantially higher than the rest of the country, I don't project that a rise in interest rates will affect the single family housing market values all that much. Supply will continue to be very scarce and the previous bubble was created was due to relaxed lending practices and over-speculation which led to foreclosures. I've been through 2 refinances and gotten 1 new loan in the past 12 months and I've seen first hand how difficult it is to get financing today. Luckily the banks aren't repeating the same mistakes again and an increase in interest rates will also most likely lead to an increase in rents since more people will choose to continue renting rather than purchasing a home. It's also important to note that home ownership is currently at 20 year lows in the U.S. and eventually all of the pent up demand from the Millenial generation will boil over and cause another upswing in the single family market.
As long as the economy keeps churning along, the Bay Area will continue to thrive along with the rest of the country. Our diversified economy, however, offers a much better alternative to a turn-key market in a downswing. The turn-key secondary/tertiary markets have far fewer jobs, a much higher supply of properties and excess land available. Any downturn or increase in interest rates in those areas will cause more drastic downward fluctuations in home values. They simply don't offer the same fundamentals and in my opinion their prices are currently very overheated.
Real Estate Broker · San Francisco, CA · Member since 2013 · 51 posts · 48 votes
11y
The 2nd part of the answer to your question is in commercial properties, as opposed to single family homes, there's much less of an intrinsic value for the real estate and less demand for the specified uses if you lose a tenant. These reasons lead most commercial properties to be priced largely on the cap rate produced. In order to invest in a stabilized commercial property, there has to be an arbitrage between the prevailing interest rates and the cap rate, creating a return (highly sophisticated individuals will occasionally buy negative cash flowing value-add investments, but this is uncommon). Over the past 3-4 years, the spread between cap rates and interest rates has continued to compress over the past 24 months. This is unsustainable in the long run and is largely driven by the fact that there are few other viable alternative investments available and private and institutional investors have entered the commercial market seeking yield. We're now currently back at 2005-2006 levels for cap rates. Since commercial properties cap rates are in essence directly tied to interest rates, in the event of a 100 bps increase in interest rates over the next 18 months (which I believe is likely) I would fully expect cap rates to increase 100 bps as well and values to therefore decrease.
Welcome to Bigger Pockets. BP is full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members. This is one of my favorite features of Bigger Pockets especially for asking specific questions.
I stated that I wouldn't buy and hold in SF. If I had 200-300K liquid, I would consider investing in the bay area through various means. The bay area will continue to show high demand for rentals, especially as home prices become further and further out of reach for even the average earners. However, a simple ROI or COC calculation would easily justify looking elsewhere for buy and hold.
@Account Closed Bay area RE is very lucrative, if one can enter the market. How would you suggest a beginner with no experience and less than $50K enter this market?
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
11y
@Account Closed and a few other investors at the meet-ups how lucrative it is to invest in the Bay, and they were blown away by the numbers.
I don't know if there's any merits to this saying, but an experienced investor once told me "out of state investing is where CA investors go to lose money." So far, he has been right based on the people that I have talked to at meet-ups, with the exception of the marketers and TK providers of course.
Real Estate Broker · San Francisco, CA · Member since 2013 · 51 posts · 48 votes
11y
"Regarding your last post, the SF bay area is about the last place you'd want to buy and hold especially if you're just starting out."
@Account Closed showed you, you can buy a $1M house with only $50K in equity. Additionally if you dont have $50K, then there are plenty of opportunities for duplexes to fourplexes in the $200-$400K range in less desirable areas. You'll need to be willing to make the sacrifice to live in one of the units and do some of the work yourself to create sweat equity. Anyone who tells you that real estate is easy is naive and you need to have the fortitude to set some goals for yourself and make your dreams come true. Real estate is all about finding market inefficiencies and turnkey operators have already taken all the profits out and eliminated your potential upside. You need to get creative, improve your W-2 income, house hack, or find some way to make yourself valuable to others whereby they're willing to invest their money with you.
Investor · Orange County, CA · Member since 2014 · 137 posts · 96 votes
11y
According to Case Shiller, San Francisco hasn't gone anywhere in 10 years. No appreciation. I wonder how many of the people claiming San Francisco is a can't-miss investment today were thinking the same thing in 2005? Not only that but anybody buying from 2001 to 2007 had to wait at least 10 years to see a gain on their investment. Some of them still haven't.
The moral of the story is to buy assets when they can be had for a discount, like from 2009-2012, and avoid overpaying when things are frothy, like they are now. You can see that the current market is way above the long term trend line for San Francisco. Eventually mean reversion is going to run its ugly course, and prices are either going to fall or there will be a long period of stagnation. Combine that with a lack of cash flow and this is a losing proposition.
The price-to-income ratio is already in excess of 13 so you have to ask yourself how are prices going to triple or quadruple in 20 years? Incomes just aren't rising that fast. Will the price-to-income ratio really hit 25 or 30? That would far exceed the prior bubble if it does.
Wholesaler · Columbia, SC · Member since 2015 · 123 posts · 15 votes
11y
@Dhiren Mistry, welcome to BP! I am new to the real estate investment world, too! I've found this site to be very helpful and the other members are great! I plan to use the resources on here to the best of my ability...I hope you do the same! :-)