Cashflow in Northern California?

Question

I am ready to purchase my property in the bay area. I know historically this is area is known for its appreciation, but I am a little nervous due to the changing economy in this area. Anyone have suggestion on locations in the area where I can find cashflow. We plan to live in Oakland, ca area for a while and so I want to make my first purchase here instead of out of town.

Sanju K. · Answer

@Brooklyn Wright. It’s difficult to be cash flow positive in the Bay Area. You make money through appreciation. For example I bought a 3 bedroom single family rental in San Jose for $540k in 2012. Zillow/Redfin value it now at $1.3m. I bought a duplex in 2017 for $1.1m and it’s at $1.5m now.

Brian Garlington · Answer

@Brooklyn Wright   Welcome to BP!   With all due respect to what another poster mentioned, DO NOT base your property purchase based on finding a 1% rule place to live if it's here in the Bay Area at this time unless you are willing to buy a fourplex in an "up and coming, working class, blue collar, D-/F+" neighborhood.

I tell my buyer clients all the time,and especially this last year, be sure you have a pre-approval letter in hand, with proof of funds before having us even begin to show you properties because things move way to fast right now.

Dylan Vargas · Answer

@Brooklyn Wright Welcome! Congrats on being ready to purchase your property. I wanted to point out what @Chris Mason mentioned in another post. Try to find a house that has an extra bedroom or level of the house that can be converted to another unit. This will help with the cash flow in a big way. Chris was mentioning something along these lines. Instead of a 3 bedroom maybe find a house with 4 or 5 bedrooms or a lower level walkout with a separate bath. Good luck and keep us posted

Brooklyn Wright · Answer

@Ning Xie Why would you avoid Oakland and East Palo Alto?

Brooklyn Wright · Answer

@Brian Garlington Yes for sure. There is no way I can follow the 1% rule in the bay. I am preapproved and completely ready to go, but I am mostly looking for off market properties. The stuff on market just has too much competition.

Brooklyn Wright · Answer

@ning xie why would u stay away from oakland and east palo alto?

Darius Ogloza · Answer

@Brooklyn Wright I am not clear whether you also intend to live at the property you will be buying.  If so, your cash flow calculation should take into account the amount of rent you will no longer be paying to your current landlord or would be paying if you were renting instead of buying.

In the Bay Area, time is your friend.  What may not cash flow on Day 1 of your investment could gush cash after a number of years once your mortgage is paid down.  I do not know Oakland well enough to make any suggestions re: neighborhoods.  Good luck!

Ning Xie · Answer

Don’t bet on having high amount of net cash flow in Bay Area.  The Gain is in the equity appreciation.  if you can afford 40% down payment, cash flow breakeven can still be found in decent San Jose areas. I would stay away from Oakland or East Palo Alto

Phil Mcnally · Answer

I am curious if there actually is cash flow in properties here.

Phil Mcnally · Answer

Just start with the 1% rule and see if anything is remotely close. $1mill property = $10,000 monthly rent. I don't think you will find anything for 100's of miles that could cash flow from rent. That is why I rent in the Bay area where I can live in a 'normal' $1mill house for less than $3500 a month.

Cashflow in Northern California?

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