Newbie Working on First Deal in Oakland

7 Replies

Hi All, 

My name is Danny. My day job is in A/B testing websites and doing conversion rate optimization to get more revenue/purchases from people visiting websites. 

I've been pounding the pavement pretty hard since December of last year to find a solid first deal in here Oakland CA. I'm finding that good deals are few and far between, like 2 months or so between good deals rolling on the MLS. I found a duplex out by 73rd Ave in Oakland that I Offered 380K on, but was sold to a cash offer for 294K. Bummer...

I'm finding it's too expensive for me around Lake Merrit, West Oakland, North Oakland, as I'm only qualified to buy an SFH for up to 430K.

I am going to owner occupy the property I buy, so I don't want to end up in "too rough" a neighborhood out in East Oakland. I think I've settled on Fruitvale (94601 zip code) as my sweet spot, where homes are cheap enough, and I can see myself living there (and enjoying lots of tacos) until I get into my next property. 

Here's my situation:

  • I've got 24K in cash for a downpayment
  • I'm trying to finance with an FHA loan
  • I can qualify for up to 430 on an SFH, or a 45% Debt to Income ratio considering additional income from rental units in a multifamily

I'm having trouble finding deals. I think listing agents shy away from FHA financed offers, because they take slightly longer to close.

I'm also confused by some things. Apparently it's legal to raise the rent on single family homes in Oakland, but not on units within multifamily buildings. 

I've considered looking in Richmond CA, but looking over the rental prices on craigslist, I'm seeing that rental income is kind of unpredictable in Richmond. Does anyone else feel that's the case?

I'm eager to jump into my first deal, but I keep hitting snags. Any advice?

Nice to meet you all. 

Updated over 5 years ago

I should mention I've made 10 offers over the last 3 months.

Persistence is key. keep making offers. You never know when you might end up with a successful second-place-to first-place-offer. Based on the information you gave, I would say that a duplex in East Oakland could carry a certain amount of risk as your cash is a little bit lean considering the potential liability of a duplex in a less desirable area. Best of luck to you.

Welcome, @Daniel Gonzalez.

Richmond is very neighborhood specific. 

If you're determined to both house-hack and get a great deal, the 3.5% down is already a great deal. Making one offer every two months, on homes where the listing agent listed low to get future clients to show up to her open house, will almost never get you keys.

Remember that the home is almost always going to go what it goes for, the choice of a listing agent to list for this or that mean jack squat, except that she will get more or less looky loos or potential future clients to come to the open house. Finals sales price will be whatever it is, regardless of the asking price.

East Bay house hacking is about persistence and being aggressive. You aren't an all-cash buyer. You can't do what they do and sit on the sidelines, only writing lowball offers.

Also, with FHA financing some lenders can often go well north of 45% DTI. I've got one closing next week at 53% DTI. :P

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@Joshua David Thanks for the comment. Are you saying that it's a risk because of vacancy rate in less desirable areas? Or, is this more of a CapEx concern?

@Chris Mason

I've made about 10 offers in the last 3 months. My concern is about cashflow. I'm hoping to get into a property, and then be shopping for my next one in 1 year to 18 months. The most recent suspect is a 3 bedroom 1.5 bath, it has mortgage with PMI that'll be ~2700, while rent in Fruitvale area is about 2250 for that type of house. Plus this specific property is on a rough stretch of 35th Ave: ( https://www.redfin.com/CA/Oakland/2626-35th-Ave-94619/home/552254 ) --- so my concern is that rent won't increase enough to cashflow and cover the mortgage, repairs, and vacancy when I'm ready to move out.

Do you think I need to get a longer timeline for moving on to property 2? Or do you think the home will appreciate enough to refinance out of PMI within a year or 2, so I can drop the monthly payment to a place where it could cashflow?

@Daniel Gonzalez

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers (cash buyers). Find them through Google and meetup.com

You might consider Niche or Specialized Housing like student housing, vacation rentals. Rents can be 2-4 times more. Remember you don't have to own a property to control it.

Consider checking out HUD homes for small multi's owner occupied gets first crack.

Download BP’s newest book here some good due diligence in Chapter 10. Real Estate Rewind Starting over

http://www.biggerpockets.com/files/user/brandonatbp/file/real-estate-rewind-a-biggerpockets-community-book

Good Luck

Paul 

@Daniel Gonzalez as a few others have mentioned, continuing to look and make offers is key. A few quick notes:

1) It sounds like you are not just offering lower than list (based on the $380K offer). As @Chris M. mentioned, list price often has nothing to do with seller (and listing agents) expectation for the sale price.

2) For an FHA loan, there are certain requirements the property needs to be in for the financing to work. Depending on the level of work the properties need you are looking at, that may be one of the issues.

Daniel Gonzalez One thing I would like to point out about Oakland rent control laws is that for up to a 3-unit building, if you owner occupy, you can start raising rents after you have lived as owner in the building for one year. It is a less known law and many people are not aware of it.

As for finding deals, they are scarce right now. Your best bet would be to find something off market. I personally would stay away from fruitvale, but you can check out havenscourt blvd (further east).

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