New Investor from San Jose, California!

23 Replies

Hello everyone! My name is Steven L. (age 23) and I’m a long-time podcast listener who finally decided to take action on my interest in real estate. I am from San Jose, California and often commute around the San Francisco Bay Area. Currently, I work as a scientist at a biotech/biopharmaceutical company out in Pleasanton, CA paying out student loans as quickly as possible to build funds for my first investment!

As it stands right now, I am a newbie that has yet to do his first deal, however, I have been taking in a wealth of knowledge to narrow down my market and strategy of interest. The Bay Area & California markets are hot and expensive at the moment so I plan to start off my journey with long-distance real estate investing. I would love to chat with others about their thoughts on current opportunistic markets as well as markets that are up and coming that I should keep an eye on.

I have been analyzing 5 properties per day, running the numbers, and hypothetically strategizing how I would finance/rehab and complete the deal. I’d be very interested in connecting with others who I can chat with about my numbers, different strategies to finance/rehab the property and such.

My goal is to acquire buy & hold rental properties long-distance and put systems in place to manage those properties to increase my passive income to free up time allowing me more family time and time to venture into other interests. I would like to complete my first deal within a year of this post. If anyone in the bay area would like to chat at a local meet-up or over a brew or dinner, feel free to link up and who knows, we could potentially partner up on a deal!

I am very much open to any suggestions that any members have for me as I inch closer to my first deal; let’s link up and chat!

Welcome to the site Steven.  First piece of advice is get yourself preapproved with a lender. No use in doing analysis paralysis on $1,000,000 Triplex scenarios of a lender won’t approve you for that much.

I do recommend starting out by house hacking a duplex and then build up your portfolio from there 

@Brian Garlington Thanks a bunch for the advice, I appreciate it! As for getting preapproved by a lender is it as simple as contacting multiple lenders and seeing whom would be interested in funding my investments?

Also, you mentioned house hacking a duplex. I've been contemplating about that for the past few weeks! I want to ask, even though the Bay Area market is hot, what are your thoughts on purchasing either an SFR, duplex, or triplex in the area, living in one room/unit and renting out the other room/units? Of course it would have to be a good deal to start off with but would house hacking a Bay Area property and using the rents from other tenants to cover expenses and mortgage P&I be sufficient enough to "make sense" to actually put this idea into motion? By make sense I mean that regardless of how good of a deal, it would be difficult to find a property that would be the 1-2% rule as well as the 50% rule in the California market. We can discuss over PM also. Again, thanks for the advice!

Hey Steven! I'm down in LA, so same reasons to go out-of-state. What are your goals and preferences with a property? Do you want something you have to put work into? Is cash flow your goal?

@Steven Lam

You literally just described house hacking in your question to me. :-)  See you're learning already. As for a PM....you won't need one intitially because YOU will be the property manager when you buy the triplex and live in one of the units. As for lenders....there are plenty here on BP....I believe there is a local lender here on BP as well named @Chris Mason   who understands investors.

@Ali Boone Hi Ali, thanks for your response! Yes, currently my goal is build up passive income through acquiring out of state buy & hold residential properties. Specifically I’m interested in single family and multi-family residences.

I'm mainly planning to BRRRR many of these properties because I believe that it would be the best strategy for me to get into the market due to the lower acquisition price and ability to increase equity through rehab. I'll also plan to hire out the rehab process to a general contractor in the area I'm investing in!

Another goal of mine is potentially to house hack a property in the Bay Area but I’m thinking it would have to be a great deal and if the numbers would make sense to do this in the hot California market!

Which markets are you currently invested in and what strategies do you often implement to achieve your goals, Ali? Thanks again for the response!

@Brian Garlington Hey Brian! Thanks for the follow up. I wanted to ask if house hacking in the Bay Area market “makes sense” as a good real estate decision.

For example, let’s say I purchase a single family residence (4 bed 2 bath) for $600,000 in the Bay Area, lived in one room and rented each of the other rooms for $1000/each. If I calculate the monthly rent without my contribution, it would be $3000/month based off the other tenants which is 0.5% of the acquisition price (which is less than the recommended 1% rule). In any other market, many would advise against this action due to its low monthly rent to acquisition price percentage, but since its the Bay Area market do we judge properties differently?

I may not have explained the situation well, if you have any questions please ask! Thanks again :)

Originally posted by @Steven Lam :

@Brian Garlington Hey Brian! Thanks for the follow up. I wanted to ask if house hacking in the Bay Area market “makes sense” as a good real estate decision.

For example, let’s say I purchase a single family residence (4 bed 2 bath) for $600,000 in the Bay Area, lived in one room and rented each of the other rooms for $1000/each. If I calculate the monthly rent without my contribution, it would be $3000/month based off the other tenants which is 0.5% of the acquisition price (which is less than the recommended 1% rule). In any other market, many would advise against this action due to its low monthly rent to acquisition price percentage, but since its the Bay Area market do we judge properties differently?

I may not have explained the situation well, if you have any questions please ask! Thanks again :)

 Hi Steven,

For that sort of thing, living in the bay area is a tad more about "mitigating" the cost of living here than it is the 2012 Midwest dream that a lot of the legacy BP content is about. In such a hypothetical as you presented, depending on what assumptions we use (down payment, the rate your FICO score can get you, etc etc), you're now living in the bay area for something like $500 to $750 per month out of pocket. Considering how much you'd otherwise pay to rent while living here, that's not doing bad at all. 

And then on top of that you have ballpark $700/mo to $820/mo going towards paying down the balance (again, depending on the assumptions), which basically means your portion of the payment is going directly towards equity while the tenant's payments to you are covering the interest / prop taxes / etc. You're not living for "free" on a monthly cashflow basis, but from a "true net" perspective (zoomed out 10-15 yrs when you go to sell) assuming zero appreciation in the SF Bay Area (lol) you are -- tenants are covering the interest/taxes, and you will get back however much you pay the balance down by when you sell (assuming you ever sell, a different debate entirely). 

You can introduce an appreciation factor if you wish (& many of the graybeard bay area REI often do), but it's not necessary using the numbers you hypothesized.

@Chris Mason WOW! Thanks a bunch for that response Chris! The way you explained that helped me understand the situation from my simple example much better when I zoom out and think of it from a future perspective and about how I’m mitigating costs now but hopefully getting the money back later during the sale of the property!

I’ll keep this in mind in the coming months as I keep an eye out for a multi-family property in the Bay Area that would be a good deal to house hack. Thanks again! :)

Originally posted by @Steven Lam :

@Chris Mason WOW! Thanks a bunch for that response Chris! The way you explained that helped me understand the situation from my simple example much better when I zoom out and think of it from a future perspective and about how I’m mitigating costs now but hopefully getting the money back later during the sale of the property!

I’ll keep this in mind in the coming months as I keep an eye out for a multi-family property in the Bay Area that would be a good deal to house hack. Thanks again! :)

 Wish I could say I'm a genius, but my clients teach me way more about wealth creation than I teach them.

Oakland example one. Homeless to landlord. SFR focused.

Oakland example two. MFR focused.

You see a lot less "rags to riches" stories in San Francisco or Silicon Valley, fwiw. I'm pretty sure you already had a sense for that, the purchase price number you offered was $600k, not $1,600,000.

@Steven Lam - Welcome to the site!  BP is a great place to meet others and see what's really possible.  We have a lot of house hacking clients as well and I can tell you a tip that's helped.  The new homes that are relatively new on the market, we tend to shy away from.  There will normally be a lot of interest there, and a lot of the times someone overpays for it.  That's not how you wan to get a start on your rei career.  We like to look for properties with a creative eye that have been on the market with a while and see what other can't.  Ways to make the property work for you, instead of you making the property work.  Shoot me a PM if you want to talk shop sometime!  We are in the East Bay and I grew up in Cupertino so I know the sticker shock is breathtaking!

@Chris Mason Great examples, thanks for sharing! Haha yeah I believe the hot California ties in with the reduced stories of rags to riches in that market. I only entertain the idea of purchasing a property in the Bay Area because of the opportunity to house hack it and eventually own a California property for mitigated pricing! Otherwise, I’m very much interested in out of state single and multi family properties to start out my portfolio and potentially bringing it full circle back to California in the future if the opportunity presents itself. Again, thanks for sharing the explanation and follow up, much appreciated!

@Blake Edwards Hey Blake, thanks for the greeting and the tip! I agree, new properties may gain more attention/interest and are highly out of range of what I’d want to pay for my first few properties. Hopefully if I could come across a property in the Bay Area that is a bit more distressed and i could get a great deal out of it and have to rehab some, then it’d be a good opportunity to house hack it! Thanks again for reaching out, I’ll make sure to follow up and send you a message so that we can talk sometime!

@Steven Lam wishing you the best of luck with whichever decision you end up making. I too am in a very similar situation as yourself, I just live/rent in San Francisco. Im trying to figure out whether to make my first investment an out of state MFR to BRRRR or a 2/3/4 home to house hack at a good price.

Again good luck!

@Denis Dineen Hey Denis, thanks for reaching out! Since we have similar interests and are currently living in the same area, let’s connect via message or over a meal sometime and discuss opportunities and strategies. Hopefully we can be of benefit to each other’s goals, best of luck to you as well!

According to the below Forbes Article Oakland is one of the best cities in Ca to buy investment property.

I live in Oakland and have rentals here and Concord and Ohio.

Anyone eve have any questions.... feel free to ask.

https://www.forbes.com/sites/andrewdepietro/2019/01/31/best-cities-own-rental-property-california/#623fbe2d4bb2

Originally posted by @Steven Lam :

@Ali Boone Hi Ali, thanks for your response! Yes, currently my goal is build up passive income through acquiring out of state buy & hold residential properties. Specifically I'm interested in single family and multi-family residences. I'm mainly planning to BRRRR many of these properties because I believe that it would be the best strategy for me to get into the market due to the lower acquisition price and ability to increase equity through rehab. I'll also plan to hire out the rehab process to a general contractor in the area I'm investing in! Another goal of mine is potentially to house hack a property in the Bay Area but I'm thinking it would have to be a great deal and if the numbers would make sense to do this in the hot California market! Which markets are you currently invested in and what strategies do you often implement to achieve your goals, Ali? Thanks again for the response!

Definitely be careful on the numbers on a SF househack. And think about these things-

https://www.biggerpockets.com/...

For out-of-states, I've always done turnkeys myself... never had a desire to deal with BRRRRing. I do work with some properties now though that are BRRRR+turnkeys: you get the benefits of both- the forced appreciation by rehabbing, but the turnkey company does all the work for you. You fund the project upfront, so higher upfront costs than a standard turnkey, but you cash-out refi it after the work is done and pull the money back out. But other than those, I've been a turnkey-er.

 

Originally posted by @Steven Lam :

Hello everyone! My name is Steven L. (age 23) and I’m a long-time podcast listener who finally decided to take action on my interest in real estate. I am from San Jose, California and often commute around the San Francisco Bay Area. Currently, I work as a scientist at a biotech/biopharmaceutical company out in Pleasanton, CA paying out student loans as quickly as possible to build funds for my first investment!

As it stands right now, I am a newbie that has yet to do his first deal, however, I have been taking in a wealth of knowledge to narrow down my market and strategy of interest. The Bay Area & California markets are hot and expensive at the moment so I plan to start off my journey with long-distance real estate investing. I would love to chat with others about their thoughts on current opportunistic markets as well as markets that are up and coming that I should keep an eye on.

I have been analyzing 5 properties per day, running the numbers, and hypothetically strategizing how I would finance/rehab and complete the deal. I’d be very interested in connecting with others who I can chat with about my numbers, different strategies to finance/rehab the property and such.

My goal is to acquire buy & hold rental properties long-distance and put systems in place to manage those properties to increase my passive income to free up time allowing me more family time and time to venture into other interests. I would like to complete my first deal within a year of this post. If anyone in the bay area would like to chat at a local meet-up or over a brew or dinner, feel free to link up and who knows, we could potentially partner up on a deal!

I am very much open to any suggestions that any members have for me as I inch closer to my first deal; let’s link up and chat!

 Hello and welcome! Best of luck to you! 

Hey Steven, 

I'm in the Kansas City area, and I'm sure the numbers for rental properties here work out much better than in CA. Cost of living is lower, and the 1% rule is easier to get here. If you want to know more about the Kansas City market, we can connect and I can tell you about it.

Good luck on your real estate investing journey!


@Steven Lam saw your post and am in a very similar situation. Starting listening to the podcast a few months ago and am really diving in to read and learn as much as possible before hopefully getting started with my first property in the next year or maybe sooner. Also looking out of state to potentially BRRRR a SFR or smaller MFR.

Feel free to message me we can talk potential markets/strategies or anything RE related. Good Luck!

Originally posted by @Steven Lam :

Hello everyone! My name is Steven L. (age 23) and I’m a long-time podcast listener who finally decided to take action on my interest in real estate. I am from San Jose, California and often commute around the San Francisco Bay Area. Currently, I work as a scientist at a biotech/biopharmaceutical company out in Pleasanton, CA paying out student loans as quickly as possible to build funds for my first investment!

As it stands right now, I am a newbie that has yet to do his first deal, however, I have been taking in a wealth of knowledge to narrow down my market and strategy of interest. The Bay Area & California markets are hot and expensive at the moment so I plan to start off my journey with long-distance real estate investing. I would love to chat with others about their thoughts on current opportunistic markets as well as markets that are up and coming that I should keep an eye on.

I have been analyzing 5 properties per day, running the numbers, and hypothetically strategizing how I would finance/rehab and complete the deal. I’d be very interested in connecting with others who I can chat with about my numbers, different strategies to finance/rehab the property and such.

My goal is to acquire buy & hold rental properties long-distance and put systems in place to manage those properties to increase my passive income to free up time allowing me more family time and time to venture into other interests. I would like to complete my first deal within a year of this post. If anyone in the bay area would like to chat at a local meet-up or over a brew or dinner, feel free to link up and who knows, we could potentially partner up on a deal!

I am very much open to any suggestions that any members have for me as I inch closer to my first deal; let’s link up and chat!

 Welcome aboard Steven.

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