Bay Area Folks, Where are you looking to start out?
Hello fellow Bay Area people,
I'm fortunate enough to be a condo owner here in the Bay Area and I've listened to a lot of podcasts and read the forums that say it's ideal to own close to where you live. That makes tons of sense to me but living in the Bay makes following that advice pretty difficult without tons of cash. Where have you all been looking to start your real estate journey? Or, where did start your journey if you've already taken the leap? Personally, I've looking in the Lake Isabella region, Bakersfield, Fresno and some of the Inland Empire region.
Hi Brendan, I try to ask people what their goals of real estate investing are. If it's appreciation, I think staying local in the bay is a really good idea. Save for a primary residence down payment (3% to 5% down, so $50k on a $1mil property), and rent out the rooms to lower your housing costs. If it's immediate cash flow, you'll need 20% to 25% down on an investment property, and in Fresno area, it might be about $80k for a $400k property, and make sure you can charge rent to cover principle, interest, taxes, and insurance. The primary residence route allows you to learn firsthand how to maintain and manage a property. Even if you plan to have property management, you still want to know what's associated with owning a property because any experienced investor will tell you it's not all rainbows. Scott Trench writes about this "house hacking" strategy in his book Set for Life if you want to read more about it!
@Brendan S. good luck! The first deal is always the hardest. Fresno has been good to me in my investing journey, I'm fortunate enough to live here and I subscribe to the notion to be close to my investments, especially when I started out so it's all worked out. We do have quite a few Bay Area investors that we work with in our office, they like that the drive is only 3 hours to check on their investments. If you are curious about the area feel free to message me, I'm always happy to share anything that's helpful.
Edit - I missed "condo owner". In that case, if you can move out of the condo (assuming that's the primary residence) after owning it for a year or 2, and can manage to purchase another primary residence, and live with roommates, it's still a great strategy. You can then rent out the condo and still be local to learn the ins and outs of investment properties.
Buying an investment property in the bay is quite cash intensive... and I understand that the local laws don't necessarily help landlords, and single family rentals might not be cashflow positive for a while (years??). Since you already own a likely high appreciating asset (your condo), a cash flowing rental property in the less expensive areas you describe could be a nice diversification.
Quote from @Yue Lehman:
Edit - I missed "condo owner". In that case, if you can move out of the condo (assuming that's the primary residence) after owning it for a year or 2, and can manage to purchase another primary residence, and live with roommates, it's still a great strategy. You can then rent out the condo and still be local to learn the ins and outs of investment properties.
Buying an investment property in the bay is quite cash intensive... and I understand that the local laws don't necessarily help landlords, and single family rentals might not be cashflow positive for a while (years??). Since you already own a likely high appreciating asset (your condo), a cash flowing rental property in the less expensive areas you describe could be a nice diversification.
Thanks for the reply. Yeah, moving to a larger place and renting a room while renting our current condo is also a plan. We were lucky to lock in very low mortgage rates so getting that covered shouldn't be an issue.
I actually work in a municipal rental program, so I know I feel like I've got more knowledge about potential rental laws than the average bear. I'm actually surprised that rental management companies in my area know so little about program requirements and the mechanism in the laws that allow landlords to seek a fair rate of return. That being said, you aren't wrong, most municipalities here have restrictions that make earing significant returns on existing tenancies difficult.
Quote from @Jeff Zimmerman:
@Brendan S. good luck! The first deal is always the hardest. Fresno has been good to me in my investing journey, I'm fortunate enough to live here and I subscribe to the notion to be close to my investments, especially when I started out so it's all worked out. We do have quite a few Bay Area investors that we work with in our office, they like that the drive is only 3 hours to check on their investments. If you are curious about the area feel free to message me, I'm always happy to share anything that's helpful.
Good to know and thank you for reaching out, Jeff. I just might message you once I've got a little bit more cash in hand. My measly 20k doesn't seem to be cutting it right now, haha!
Hey Brendan,
That’s awesome you already have a place for your primary residence. If you are able and willing to stay there for a while and it’s not very reasonable financially to keep buying in your area, I would consider using the methods David Greene talks about in his out of state investing book. I’m renting in Livermore and we chose to focus on investment properties rather than our primary just because it didn’t make sense for us at the prices and our life situation. We bought a single family in Las Vegas and just closed this year on a triplex in Fresno and are still focused on investment properties. I would be happy to chat about the process if you are interested. Good luck!
The rental knowledge you have is something that other bay area investors don't have, which might be YOUR superpower if you decide to stay in the area. Wherever you choose, starting sooner is better than later!
Quote from @Brendan S.:
Hello fellow Bay Area people,
I'm fortunate enough to be a condo owner here in the Bay Area and I've listened to a lot of podcasts and read the forums that say it's ideal to own close to where you live. That makes tons of sense to me but living in the Bay makes following that advice pretty difficult without tons of cash. Where have you all been looking to start your real estate journey? Or, where did start your journey if you've already taken the leap? Personally, I've looking in the Lake Isabella region, Bakersfield, Fresno and some of the Inland Empire region.
The Inland Empire is a great option and the Central Valley are good spots too. Those spots are both in a good price point and for prospective in growth a good place as well. There are a ton of stuff to see, buy and invest in within the state that can get a good property. Check out the podcast with Jason Pritchard, he is on the BP podcast and lives and invest in the Central Valley with a great portfolio.
Quote from @Peter Mckernan:
Quote from @Brendan S.:
Hello fellow Bay Area people,
I'm fortunate enough to be a condo owner here in the Bay Area and I've listened to a lot of podcasts and read the forums that say it's ideal to own close to where you live. That makes tons of sense to me but living in the Bay makes following that advice pretty difficult without tons of cash. Where have you all been looking to start your real estate journey? Or, where did start your journey if you've already taken the leap? Personally, I've looking in the Lake Isabella region, Bakersfield, Fresno and some of the Inland Empire region.
The Inland Empire is a great option and the Central Valley are good spots too. Those spots are both in a good price point and for prospective in growth a good place as well. There are a ton of stuff to see, buy and invest in within the state that can get a good property. Check out the podcast with Jason Pritchard, he is on the BP podcast and lives and invest in the Central Valley with a great portfolio.
Thanks for the insight, Peter.
@Brendan S. - Very interested in the fact that Lake Isabella has been a location you have been looking at. Why is that exactly? Most people will go straight for Bakersfield at that point. Fresno does seem to have higher prices than Bakersfield, and Bakersfield is growing at a pretty decent clip especially with all of the new development which has come over the past few years. I am obviously a little biased to the Bakersfield area, but I think with the growth that is going on now, and the potential to grow into the future that Bakersfield would be a great place to look for investing. We have been seeing a lot of Bay area investors down here as well. Feel free to PM if you want to chat further about this as well!
Quote from @Sanjeev Advani:
@Brendan S. - Very interested in the fact that Lake Isabella has been a location you have been looking at. Why is that exactly? Most people will go straight for Bakersfield at that point. Fresno does seem to have higher prices than Bakersfield, and Bakersfield is growing at a pretty decent clip especially with all of the new development which has come over the past few years. I am obviously a little biased to the Bakersfield area, but I think with the growth that is going on now, and the potential to grow into the future that Bakersfield would be a great place to look for investing. We have been seeing a lot of Bay area investors down here as well. Feel free to PM if you want to chat further about this as well!
Hi Sanjeev,
Thanks for the comment. I've found the Lake Isabella region way more accessible for my budget, potentially more options for a short-term rental, if that's what I wanted to do. But I'm open to other locations!
Quote from @Yue Lehman:
The rental knowledge you have is something that other bay area investors don't have, which might be YOUR superpower if you decide to stay in the area. Wherever you choose, starting sooner is better than later!
I hope so. I'm also very open to sharing my knowledge so if folks have questions, please hit me up. Every municipality has their own rules, but they generally follow the same type of format and system.
@Brendan S. - The price point in Lake Isabella might be better, but the insurance might be outrageous due to it's very high propensity to experience yearly fires in the summer. There are only a couple of roads in and out of that community, and it's historically been very dry there. My folks have rentals there and I am an agent in Bakersfield. I would definitely recommend more of the Bakersfield and surrounding areas, without going to the lake. Please reach out if I can be of any assistance.
Quote from @Brooke Wilson:Brooke,
@Brendan S. - The price point in Lake Isabella might be better, but the insurance might be outrageous due to it's very high propensity to experience yearly fires in the summer. There are only a couple of roads in and out of that community, and it's historically been very dry there. My folks have rentals there and I am an agent in Bakersfield. I would definitely recommend more of the Bakersfield and surrounding areas, without going to the lake. Please reach out if I can be of any assistance.
This is great insight, thanks so much. I'm still looking around, for sure. I've got my calculation and I'm interested in anything where the numbers make sense. Unfortunately, not much in California makes too much sense for me but I'm not giving up hope, just looking. Thanks again for the feedback!