Investment in East Palo Alto

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Investment in East Palo Alto

Anil Bansal
Investor · Member since 2017 · 7 posts · 3 votes

I have bought 2 SFR in East Palo Alto for around 800K and 900K and have rented both of them. They are both cash positive. This was during last 1 year. What do people think of East Palo Alto in terms of further appreciation of real estate. Real estate has taken a dip during last 6 months but now has begun to show signs of again coming up. I have seen that EPA is one of the very few places in Bay Area where rents are high as compared to the price you pay for the property. This is in comparison to other cities in the bay area. Would like to get in touch with other people who have invested in EPA and know their opinions.

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
6y
Originally posted by @Arlen Chou:

@Anil Bansal EPA is an interesting market. As you are probably aware there is strong RC in EPA. There has been a steady increase of gentrification in the city for many decades, but it has accelerated over the past few years. The city itself was very limited in tax revenue for decades because of its small size.  However, they have done a great job of building up the area on both sides of the 101 near Palo Alto. If you follow the growth of the tax base, the infrastructure of the city has gotten much better. All of this has lead to lower crime rates and increasing property values. Million dollar homes are becoming the norm in what was considered the "hood". I am sure your 2 homes have seen great appreciation since you purchased them! If you have the cash to invest in this town to make your properties cash flow positive, I think the appreciation play is strong in this little city.

I can hardly stand to read this..  I bought a home in 1979 in EPA for 8k  it was a wreck of course and you took your life in your hands going there.. but man what a play that would have been to stack up on all those sub 30k homes back then :)

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  • Jason Hsiao
    Investor · Pasadena, CA · Member since 2015 · 269 posts · 189 votes
    7y

    I've been looking in EPA... when the tide goes out, the last one to rise is the first one to tank that was my conclusion.

    1Reply
  • Anil Bansal
    OP
    Investor · Member since 2017 · 7 posts · 3 votes
    7y

    @Jason Hsiao Thanks for your reply. I am in this for long term 10+ years. As long as I am cash flow positive all along, I think I should be fine. In case real estate market tanks during next 1-2 years, I would regret that I could have waited. But that is timing the market.

    1Reply
  • Jason Hsiao
    Investor · Pasadena, CA · Member since 2015 · 269 posts · 189 votes
    7y

    If you're in it for the long haul then by all means ignore the noise. Sorry if I read too much in btwn the lines your initial post sounded like you're worried. Bay area in the long run will continue to outperform.

    There are signs and indicators but there's no timing the market from my 16 years of investing. Even Warren Buffett said in their latest shareholder newsletter they're not in the game of timing the market but focus on getting undervalued assets.

    0Reply
  • Arlen Chou
    Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
    7y

    @Anil Bansal EPA is an interesting market. As you are probably aware there is strong RC in EPA. There has been a steady increase of gentrification in the city for many decades, but it has accelerated over the past few years. The city itself was very limited in tax revenue for decades because of its small size.  However, they have done a great job of building up the area on both sides of the 101 near Palo Alto. If you follow the growth of the tax base, the infrastructure of the city has gotten much better. All of this has lead to lower crime rates and increasing property values. Million dollar homes are becoming the norm in what was considered the "hood". I am sure your 2 homes have seen great appreciation since you purchased them! If you have the cash to invest in this town to make your properties cash flow positive, I think the appreciation play is strong in this little city.

    2Reply
  • Anil Bansal
    OP
    Investor · Member since 2017 · 7 posts · 3 votes
    7y

    @Arlen Chou Thanks for your response. With the positive cash flow every month, and 10+ year hold strategy, I am quite positive, I will come out ahead.

    0Reply
  • Bob L.
    Rental Property Investor · San Jose, CA · Member since 2017 · 22 posts · 12 votes
    6y

    @Anil Bansal, I would be a keeper of CF properties in EPA for the long term.  You are surrounded by the highest property prices in the state in all 3 directions.  There will be people willing to living in EPA for the short commute to the large tech co.  There are also large tech companies moving in like Amazon.  It is more volatile, but it has higher appreciation rates because property prices are so much lower compared to the surrounding cities.

    Did you hear of the water shortage/water rights issue in EPA?  There was a halt to larger residential developments because of water issues.  That could be a positive to existing property owners as housing growth is limited. 

    2Reply
  • Deepti M.
    Rental Property Investor · Santa Clara, CA · Member since 2019 · 24 posts · 8 votes
    6y

    @Anil Bansal: Hi Anil, can you provide more detail on the units you purchased. Are they single family or condos ?

    I have recently started researching EPA for possible investment and was actually surprised by how nice the houses are but the schools are really really bad.

    Any advice on pockets within EPA to focus on ?

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Arlen Chou:

    @Anil Bansal EPA is an interesting market. As you are probably aware there is strong RC in EPA. There has been a steady increase of gentrification in the city for many decades, but it has accelerated over the past few years. The city itself was very limited in tax revenue for decades because of its small size.  However, they have done a great job of building up the area on both sides of the 101 near Palo Alto. If you follow the growth of the tax base, the infrastructure of the city has gotten much better. All of this has lead to lower crime rates and increasing property values. Million dollar homes are becoming the norm in what was considered the "hood". I am sure your 2 homes have seen great appreciation since you purchased them! If you have the cash to invest in this town to make your properties cash flow positive, I think the appreciation play is strong in this little city.

    I can hardly stand to read this..  I bought a home in 1979 in EPA for 8k  it was a wreck of course and you took your life in your hands going there.. but man what a play that would have been to stack up on all those sub 30k homes back then :)

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    2Reply
  • Arlen Chou
    Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes
    6y

    @Jay Hinrichs look on the bright side, your sale back in '79 has to lead to your success of today! Still a win in the big picture.

    2Reply
  • Anil Bansal
    OP
    Investor · Member since 2017 · 7 posts · 3 votes
    6y

    @Deepti M.

    These are all SFR. Bought them in 2016, 2018, 2019. I always prefer SFR because you can always build additional rooms/ADU to increase rental income and price of the property. You can't buy a SFR for 800k or 900k at such a prime location.

    0Reply
  • Amit M.
    Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    @Jay Hinrichs yeah you would have gone from hard core slumlord to ritzy glamlord in 2-3 decades and have made more money than you’d ever need. But I lived I in PA proper 1989-1994 and visited EPA when I wanted some down home bbq ribs (during daytime I might add ;). I worked at Sun Microsystems at the time and tried to get a few coworkers to have lunch in EPA- they thought I was batsh*t crazy! The difference between PA, MP, etc. and EPA was very binary. It was pretty difficult back then to imagine that payoff, that’s for sure!

    Fortunately I moved to SF in 1994 and along with the dot com boom, I could see gentrification in the city being much more fluid than Santa Clara. That allowed me to jump into neighborhoods slightly ahead of critical mass, which significantly helped to lock in my success. I did that twice, in 2003-2005 in the Mission district and again 2014-15 in Bayview. But I think that now all of core Bay Area is prime candidate for gentrification, be it EPA, Richmond, Oakland, etc. How the times have changed in 20-30 years :)

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Amit M.:

    @Jay Hinrichs yeah you would have gone from hard core slumlord to ritzy glamlord in 2-3 decades and have made more money than you’d ever need. But I lived I in PA proper 1989-1994 and visited EPA when I wanted some down home bbq ribs (during daytime I might add ;). I worked at Sun Microsystems at the time and tried to get a few coworkers to have lunch in EPA- they thought I was batsh*t crazy! The difference between PA, MP, etc. and EPA was very binary. It was pretty difficult back then to imagine that payoff, that’s for sure!

    Fortunately I moved to SF in 1994 and along with the dot com boom, I could see gentrification in the city being much more fluid than Santa Clara. That allowed me to jump into neighborhoods slightly ahead of critical mass, which significantly helped to lock in my success. I did that twice, in 2003-2005 in the Mission district and again 2014-15 in Bayview. But I think that now all of core Bay Area is prime candidate for gentrification, be it EPA, Richmond, Oakland, etc. How the times have changed in 20-30 years :)

    OH boy.. I live in PA  ( Barron Park ) 1985 till 1992.. and I worked in the Bay view in my early sales days 1976 ish 

    never could see the forest for the tree's..  but I worked all of SF in those days.. but Bay View I had a lot of clients.

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  • Account Closed
    Member since 2019 · 1 post · 0 votes
    6y

    I was just saying early today buy everything Richmond California Richmond will be the next Real Estate Boom for gentrification. Currently Richmond is dangerous at night. But that won't stop the next wave of millennials coming in.

    To comment on the word gentrification. This is not a case of gentrification anywhere show called Millennials move. It is more a case of their parents lived in the suburbs and as teenagers Millennials gravitated towards the city. Show me the news grow up go to college and don't want to live in the suburbs. They all gravitate towards downtown cities skyscrapers concrete parts in apartment buildings without parking. Now, millennials have kids who are raised in the city. As teenagers growing up they gravity towards the suburbs. These kids grow up from teenagers young adults and naturally gravitate towards the suburbs.

    So stop calling me gentrification cuz it's not. It's just a season

    0Reply
  • Amit M.
    Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
    6y

    @Jay Hinrichs It’s interesting that you had clients in Bayview back in 1976! I think that may even be before the neighbored fell into decay in the 1980s-90’s? It was initially a working class neighborhood, mostly black, which had the navy shipyards as a main employer. But the shipyards closed down in the 1970s, I believe, which led to the decay. It then started a comeback mid 2000s, slipped due to the Great Recession, and made a lot of progress again starting in 2012.

    How do you remember that area in the mid 1970s?

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    6y
    Originally posted by @Amit M.:

    @Jay Hinrichs It’s interesting that you had clients in Bayview back in 1976! I think that may even be before the neighbored fell into decay in the 1980s-90’s? It was initially a working class neighborhood, mostly black, which had the navy shipyards as a main employer. But the shipyards closed down in the 1970s, I believe, which led to the decay. It then started a comeback mid 2000s, slipped due to the Great Recession, and made a lot of progress again starting in 2012.

    How do you remember that area in the mid 1970s?

    Just as you described.. plus we had 49er season tickets so was there for the games.. you go around candlestick and under the freeway on the west side and that's a tight little area there. did a lot of work in that neighborhood before it rolled up to the projects next to McClaren park.

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  • Sayantan Satpati
    San Jose, CA · Member since 2017 · 19 posts · 9 votes
    5y

    Was searching for info on East Palo Alto when I bumped in to this old thread. Any opportunities in EPA? Any feedback from folks who have invested there? I see some comments on +ve cashflow. Is it possible now?

    0Reply
  • Ike Patel
    Member since 2020 · 8 posts · 4 votes
    5y

    EPA isn't cash flow positive. I would love to see top commenter's math. My guess is they're not including property taxes (not to mention capex, property management etc.) Rough .9-1M sfr will usually rent out for 3.5k-4k. Mortgage+HOI+property taxes will average out to 4-4.5k. You'll be in the hole and have to deal with capex.

    Bay area is about chasing growth. I bought in EPA in 2015 for ~600k. House worth 1M and only in 2019 became cash flow positive. 2020 due to rent problems will probably be negative for me. Debating whether to sell before the eviction moratorium ends.

    2Reply
  • Anil Bansal
    OP
    Investor · Member since 2017 · 7 posts · 3 votes
    5y

    You need to be creative in order to be cash positive. Bought a SFR for 900K. Built an ADU for 150K (added 600 sq ft). Now renting both the places for $6K. Mortgage (P+I+Tax) is $3500 out of which $1K is going towards principal. Essentially paying $2500/month (Interest & tax). With ADU built, it has increased the property value.

    0Reply
  • Sayantan Satpati
    San Jose, CA · Member since 2017 · 19 posts · 9 votes
    5y

    @Anil Bansal Can you share the details how you were able to build the ADU @ 250 / sq ft? Best quotes I am getting are around 350 / sq ft. I need to do something similar to go cash flow + ve.

    0Reply
  • Mitch Speigle
    Member since 2020 · 10 posts · 1 vote
    5y

    @Sayantan Satpati 350/sf is what I've been quoted as well. Not sure your timeline but there is is a backlog on permitting, materials, appliances, etc so take that into account with holding costs. There is opportunity to go cash positive in EPA but you'll have to take on additional risk through value add, new const, co-living etc. 

    0Reply
  • Mitch Speigle
    Member since 2020 · 10 posts · 1 vote
    5y
    0Reply
  • Funmilola Oladini
    Homeowner · Member since 2020 · 3 posts · 0 votes
    5y

    I'm also considering purchasing a primary residence SFH in EPA or RWC and then renting after I move, and possibly adding an ADU within the next 3 years. Actually considering a fixer-upper. Do people forsee increased inventory for purchase in the upcoming months?

    0Reply
  • Funmilola Oladini
    Homeowner · Member since 2020 · 3 posts · 0 votes
    5y
    0Reply
  • Mitch Speigle
    Member since 2020 · 10 posts · 1 vote
    5y

    Hi @Funmilola Oladini I think there may be more inventory as mortgage forbearance & the eviction memorandom comes to an end in 2021 but in CA that date could be pushed out even further so I'm not putting a ton of faith in that. That being said there is a pretty steady stream of fixer upper inventory in EPA/RWC but with construction costs, expanded timelines and new retrofit codes there is an increasing $$ barrier to entry- Good for buyers that have the capital to reno and are aware of costs/timelines, not as good for those that are budgeting a quick, inexpensive reno. I almost pulled the trigger on a property in EPA for full rehab plus ADU in June but instability in timelines/costs made it a little unwieldy for my liking. Send me a DM and I'll forward you my const budget/timeline if you care to dig a little deeper.

    1Reply
  • Michael C Williams
    Real Estate Agent · San Francisco · Member since 2018 · 42 posts · 13 votes
    5y

    Hey all. Super interesting to hear your thoughts on East Palo Alto market. I've invested in East Menlo Park and a little in East Palo Alto (12 home flips, 2 long term rentals) and curious to see where the top of the market is. With inventory down across the board in the Bay Area (especially sub 1.5MM) these markets may see a resurgence this year although permanent work from home status may push people into Fremont, Newark etc which have better elementary/middle schools. Happy to chat with anyone about my experience. 

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