Househacking in Oakland 2019 Doable?

28 Replies

Greetings ladies and gentlemen,

So do you think it is possible to house hack in Oakland with the current market? 

I am young and single, currently living in Berkeley and working in SF, I have some money I want to invest, and I will probably do out of state, but right now I am still eligible for FHA loan and entertaining the idea of house hacking here in Oakland. I would totally do that if I lived in a more hackable area, but I thought it's impossible here, I am still not sure and that's why I am asking. Also, I am not willing to move to a total hood, but rather somewhere relatively safe within a couple of miles from a Bart station, probably not further south from Lake Merritt station and surrounding areas. I saw some 2-4 plexes within 600-800k, but not sure what the rents would be and if I'll be able to buy them with FHA/3.5% down.

Any input is appreciated! 

I've been thinking about this a lot as well.  Since Measure Y passed last year, you can no longer decontrol 2-3 plexes by owner occupying.  That was a major blow for a lot of folks who used that strategy to house-hack and move rents to market rate.

The only way I can see house-hacking work now is to possibly find a vacant property, or house hack for 2 years until you can raise rent through the RAP (though you would still need to petition the increase). Another option would be to look for SFH opportunities, since there still more flexibility with regulation there.

Let me know if there are other ways that house-hacking in Oakland can work.  Hopefully there brighter minds out there than me.

@Calvin Kwan

Wow I didn't know about this Measure! That's rough. I wasn't planning to stay there for more than a year anyways. And I assume vacant property it's a really rare find.

Well single family, I am not sure that I am willing not only to move somewhere I would really want to move but also share a unit with roommates.

Originally posted by @Mikhail Katz :

Greetings ladies and gentlemen,

So do you think it is possible to house hack in Oakland with the current market? 

I am young and single, currently living in Berkeley and working in SF, I have some money I want to invest, and I will probably do out of state, but right now I am still eligible for FHA loan and entertaining the idea of house hacking here in Oakland. I would totally do that if I lived in a more hackable area, but I thought it's impossible here, I am still not sure and that's why I am asking. Also, I am not willing to move to a total hood, but rather somewhere relatively safe within a couple of miles from a Bart station, probably not further south from Lake Merritt station and surrounding areas. I saw some 2-4 plexes within 600-800k, but not sure what the rents would be and if I'll be able to buy them with FHA/3.5% down.

Any input is appreciated! 

 The market turned on a dime about 3 months ago. It is no longer the case that you must assume everything will go for a zillion percent over asking, far from it. It probably hasn't been a better time to be a buyer in Oakland at any point in the last 5 years than today. So whatever else it is, it's better now than it was when you read whatever content you read from 1 or 4 years ago.

House-hacking should still work if you're willing to stay in the 2-3 plex for 2 years or if you invest in a SFH.

I'm doing it right now. House-hacking a duplex. I did buy 2 years ago though. 

I am pretty sure you can still do it. 

I'm shopping for my next house-hack. It's all about finding buildings where the rents are low, as that holds down the value of the building. Another approach is to bite the bullet, spend the $6-10K in relocation fees per the no-fault eviction ordinance. Then you can take down a fully occupied building with low rents in each unit, essentially getting a relatively cheaper building when comparing to similar buildings with a vacant unit.

If you do the math, paying $10k in tenant relocation fees to bring a triplex up in value by $200K - $300K is an investment worth making all day every day. 

How are you evaluating your deals? Are you looking at banked rent increases? ... that is rent increases the current owner has the right to make but has not yet made. Those transfer to the new owner. See here: 

https://www.oaklandca.gov/resources/learn-more-abo...

"Property owners may defer applying annual rent increases up to 10 years. Rent increases that were not imposed within 10 years expire.

You should build those banked rent increases into your evaluations, and ask your agent to get you rough move-in dates, based on the estoppels in the listing agent's disclosure package.

Hope this helps!

From what I've seen in the areas you're looking there isn't much available that's already setup as a multi unit where the numbers will work. If you're willing to flex on location a little there's quite a few options zoned correctly where you can convert the garage or add an ADU. I also wanted to be in the areas you described and looked for 3 years. Someone advised me to expand my search area and I'm glad I did.

East Oakland is currently working on the the Rapid Transit line which should bring eventual growth to the area. For $389k I bought a 1200 sq. ft 2 bedroom in the area (that can easily be converted to a 3 bdrm) with a  standalone 2 car garage I will convert. When the project is finished it will either work as a house hack or I can rent out both and it will cash flow. I didn't have to deal with inherited tenants and I can set rent to current market rate. I was able to do a conventional loan with 10% down. I was surprised at how easily I found financing by saving just a little more down, working with an agent who specialized in class B & C properties, and shopping around.

You will want to look into zoning for the area you buy in ahead of time, but currently things seem relaxed due to the housing shortage. Of course all this assumes you're willing to do the leg work and deal with construction projects. But for the total cost you're looking to spend you could shift areas, buy something for less, funnel the difference into rehabbing, and come out much more on top long term.

Originally posted by @Daniel Gonzalez:


If you do the math, paying $10k in tenant relocation fees to bring a triplex up in value by $200K - $300K is an investment worth making all day every day. 

I don't know of anyone doing it, but I wonder if that might be a viable flipping strategy. Normally it's the property condition that makes something a viable flip, but given the SF Bay Area's extensive tenant's rights regime, tenants are basically just as much appurtenant to the real estate as a collapsing roof... never noticed before but that word even has the word "tenant" built right into it.


@Mikhail Katz , I have to agree with everything that @Tobey Grey said - particularly expanding your search within a few miles of BART and the potential to add an ADU.

There's plenty of 3BD+ SFH in the sub $500k range that are perfect for an owner-occupant with 2 roommates and ADU potential (there's . a very informative PDF on the City of Oakland's website about ADU restrictions). The cost for ADU's can be $75k+ though, so just be aware of that.

I've recently gotten some clients great househacking deals in Oakland (decent areas between Lake Merritt & Fruitvale station) - and they even are searching for more properties to add to their portfolio now due to the deals they got. The market is currently a bit slower - with properties seeing more days on market and less offers. In my personal experience, there's quite a few properties that sell at asking or even under in Oakland.  Anything around Lake Merritt will likely be extremely competitive unless it is a complete gut job.

Hmmm thanks for your input guys. I like an ADU idea cause I am kinda tiny house fan and don't mind to live in one while renting out the house itself. Of course later I can rent the tiny house so hopefully the whole thing will cash flow.

@Houston Garcia I am a house hacker in the Fruitvale and am thinking about building an ADU. You wrote "The cost for ADU's can be $75k+ though, so just be aware of that." Where are you getting the $75K+ figure? I am thinking starting prices would be much more.

Originally posted by @Shannon Allaire :

@Houston Garcia I am a house hacker in the Fruitvale and am thinking about building an ADU. You wrote "The cost for ADU's can be $75k+ though, so just be aware of that." Where are you getting the $75K+ figure? I am thinking starting prices would be much more.

That figure is in line with what a friend of mine did on his corner lot, but he did most of the work himself for around 500 SqFt that he uses as a short-term rental. 

Generally top of the line brand-new residential renovations/construction are in the $200-$250 per SqFt range here in the Bay, but IMO that would be over-improving for a small ADU. The labor is where a big chunk of the cost comes from due the shortage of good contractors/competition around here.

@Calvin Kwan you mentioned that a way to get around Measure Y is to live in the property for 2 years and then petition to raise the rent through RAP. Does this also apply to Multi-Family Units? And after two years can one petition to raise the rent to market? Just curious how this works and if this is a backdoor way to decontrol 2-3 plexes in light of Measure Y. Thanks! 

Related to the comments above from @Donald Cespedes and @Calvin Kwan - could one, hypothetically, buy a duplex and occupy one of the units (leaving the second rented as-is), then, some time later, move into the other unit (renting the first at a market rent)... I believe, but am not sure, that once a unit is vacant, you can offer it at whatever rate you like... This may be an approach to bring rents up to market rates and also do a house hack.

@Mikhail Katz - we were looking at doing the same thing. I spoke to an attorney about a specific property (which won't work for a couple reasons), but she noted that many of the regulations being passed by the City Council are retroactive. So, not only might there all of the sudden be a moratorium on owner-occupiers avoiding rent control (as we saw earlier this year), but she noted that in some cases, rental increases have been rolled back...so the landlord has to drop rent back to some past level (in addition to not being able to raise moving forward).

The environment seems tricky, but it also seems very risky because we can't really predict what the government is going to do. I don't see the housing issues getting better, so I suspect the regulations become more stringent (not less). 

Happy to chat about these issues with anyone else looking to do a house hack!

Buy a SFR with an inlaw unit.........that way you never have to see your tenant.

Also....buy a duplex....and put a tenant in that gets govt. assistance....(Abode, Sect. 8, VASH)....they are NOT protected by rent control. That's what I did.

@Brian Garlington - good points, and I spoke to a realtor at an open house (also an investor) who noted that she prefers section 8... 

Can you recommend any good resources to learn more? I started reading and one site indicated that the voucher standard is all your can charge for rent (that'll change over time, I assume) but another from Oakland City seemed to indicate that there aren't standards, and that the city just assesses what your property is worth and that's your rent...

Is there an option to get a property priced for Section 8/Gov assistance just to know - without actually renting it that way?

Thanks much!

Originally posted by @Chris Mason:
Originally posted by @Mikhail Katz:

Greetings ladies and gentlemen,

So do you think it is possible to house hack in Oakland with the current market? 

I am young and single, currently living in Berkeley and working in SF, I have some money I want to invest, and I will probably do out of state, but right now I am still eligible for FHA loan and entertaining the idea of house hacking here in Oakland. I would totally do that if I lived in a more hackable area, but I thought it's impossible here, I am still not sure and that's why I am asking. Also, I am not willing to move to a total hood, but rather somewhere relatively safe within a couple of miles from a Bart station, probably not further south from Lake Merritt station and surrounding areas. I saw some 2-4 plexes within 600-800k, but not sure what the rents would be and if I'll be able to buy them with FHA/3.5% down.

Any input is appreciated! 

 The market turned on a dime about 3 months ago. It is no longer the case that you must assume everything will go for a zillion percent over asking, far from it. It probably hasn't been a better time to be a buyer in Oakland at any point in the last 5 years than today. So whatever else it is, it's better now than it was when you read whatever content you read from 1 or 4 years ago.

 How fast things change. :) The above post of mine is no longer an accurate reflection of the market in Oakland or the East Bay in general. Don't let those clouds today or that thermostat fool you, it's hot out there. 

@Joe Aamidor

Go to the Oakland Housing Authority Website and it is on there.

I may be a little biased but, like your colleague, I absolutely prefer Section 8 tenants, the biggest key is to SCREEN THEM PROPERLY.  I let them know upfront there is a $40.00 application fee that is non-refundable. I also let them know that the deposit is equivalent to the entire first month of rent, also,..no prior felonies or evictions in the last 5 years.....no smoking of any kind at all......and they can have 1 animal or pet, but it can't be a dangerous breed and it can't weigh over 20lbs fully grown. This eliminates a lot of the "nonsense" tire kickers and I've been able to get 3 different quality tenants on section 8  at my rentals here in Oakland and Concord.

@Lindsay Ferlin I bought in Eastmont! I would recommend visiting your location all times of day to get a feel for the neighborhood. I was lucky enough to find something on a quiet street with all the homes in good shape *except the one I purchased ;)

@lindsay ferlin     @tobey grey     Couldn't agree with you more. East Oakland properties, like all neighborhoods, you should look at in the day....and at night....what is happening at 7am may be drastically different then what's happening at 2pm as well as 10pm.   Those areas are also very distinguishable, block by block. 

How do I know this?  :-)