All Forum Posts by: Amit M.

@J. Martin  is your recent SF acquisition a flip or buy and hold?  Interesting that you're in SJ and buying in SF.  Do tell/share the deets on your objective :)

@J. Martin "it's figuring out what you can get into that fits what you want to do in your life..."

Yes, of course. And most of my post was about how that works for me.  But remember, it's highly individualistic, as everyone likes/dislikes different things. 

wrt the turning Japanese thing, if you invest in the Bay Area, it's almost the best of both worlds.  Low interest rates for your properties, while our local economy is going gang busters, hence rents keep going up. It's the old adage, while interest rates effect the macro economic picture, what's happening in your local economy is often more relevant to your personal fortune. Of course longer term, persistent low/no growth is more the perma bear mentality, which I don't subscribe to. 

@Account Closed  Those rates seem pretty high to me (the condos and the triplex). Ill PM you my agents info. 

Yes of course there are different ways to invest, and they they will resonate differently with each individual. My main point was this: if you live here, you have the unique option to try and invest here. If you live out of state, to start out investing in the Bay Area responsibly is almost impossible unless, A- you have tight local investor friends or relatives that will walk you through and babysit your investment or B- you are already wealthy and want to park some cash in blue chip real estate.  

@Eric Black  oh, we're to begin!  

1- Dude lives in Sunnyvale, so yes, areas I suggested much closer. Sacramento is doable, but why go there if you can invest in more prime Bay Area. 

2- appreciation is not speculation. Not in prime and up and coming Bay Area. (Boom bust places like AZ, FL, and NV are a different story.)  San Francisco's better hoods only dropped 10-15%. Rents went up 30-35% during the recession. Since last year values already surpassed last decades highs. It's like recession?  What recession?  Areas that were hit harder, like Oakland, is now a great place to invest. So are parts of San Jose. Just ask @J. Martin  and @Account Closed , who are in those markets. 

3- some fly over states dropped 50% or more. Maybe the owner's children will get back to pre recession levels there. And the ones that didn't drop historically have very low appreciation, decades on end. Texas is a great example of that. You better own a lot of doors in TX if you want high income. And even then, hope your B/C complex doesn't get left in the dust once the new subdivision or apartment block gets built down the road. 

4- vacancy and repairs are related to an owners distance. Especially when starting out, you need to know what's going on first hand. Wealthy CA investors (who normally got wealthy due to home appreciation btw) get ripped off by out of state "turn key" investments left and right. I'm not saying it can't be done, just that it's fraught with problems that you can't control. Furthermore, it's much riskier getting trapped in an area with too many rentals, or homes turned as rentals in lesser areas. Vacancies can be a real problem.  They are virtually non existent in SF, and usually not a problem in the Bay Area in general. Repairs. When you need to own 10x the number of units to get the same income, yes repair liability is x10. WRT repairs and maintenance, I'd rather own a well producing 4 plex in the Bay Area than 20 units out of state.  

Although my tone may have been lackadaisical, what I'm telling @Ahmed Moussa is very serious: you're fortunate enough to live in the Bay Area. Take advantage of that! Yes, it's a challenge finding the right property here. But if you can get into an up and coming area, you'll get a foothold. And after it appreciates you'll be able to leverage that into another property. Of course there are market ups and downs, and you need to learn to manage that. Try not buying at market high. Try getting something you can add value to short term. Try locking in a low fixed rate.  Manage it yourself, control the tenants you bring in, and learn to optimize the operational side first hand. Many investors that had the wisdom to do that in prime Bay Area in the past are doing very well now. 

just keep in mind, those fly over states properties with higher cash flows, A- give you almost zero future appreciation, B- higher risk of vacancies and repairs because you are not there and do not know the neighborhoods well.  These are nothing like the reliability and quality of tenants in the Bay Area!

My suggestion: consider slightly more expensive homes, like low $200k, to get into decent hoods with appreciation potential being as important as immediate cash flow. Or look into 2-4 units. I'd also look into slightly more sketch areas of San Jose or further down south, or Oakland, Fremont, San Leandro, as they're all closer to Sunnyvale, before jumping into Sacramento.  Your cash flow may be small or non existent at first, but if there is some upside in repositioning or renovations, you'll build equity back in and probably get better cash flow in 1-2 years. Then watch your appreciation grow!  Chasing after the highest cash flow (and disregarding the above) is a fool's errand IMO. 

yup, great read guys. Nice to vicariously follow a commercial deal with such details. Keep up the questions Nik!

the people that tend to do well in the Bay Area are the ones who: A- already got on the appreciation train by having purchased a home (move up buyers) or B- move here because of high paying jobs in tech, finances, management, etc. (and can afford the prices). 

It's the existing blue collar and middle class who did not buy years ago that are priced out.  (That is the entire debate in San Francisco right now, as stringent rent control policies allows these people to hang on to low rents.  This causes all sorts of nutty distortions in the rental market here, but that's a different story.)  So more working class folks are having to move out of prime Bay Area into secondary markets like Oakland and Vallejo. That's how neighborhoods change due to market forces. But it does give pause on a social policy level. Sure, one can see expensive (but small) towns like Palo Alto or Los  Altos bereft of the working class, but the entire Peninsula?  That's like 2 million people. Hard to have a large area with 2 million people, all of them yuppies. Someone has to cook the food, wash the dishes and operate the retail stores? Of course we are not at this extreme *yet*, but if the Bay Area economy continues to hum along, in the next generation or two, we may very well be.  My gut feeling is that it will lead to "interesting" social policy, as I don't see a peoples revolution happening anytime soon :)

the issue in SF Is that the bldgs are older. I use farmers and have gotten decent rates in the past, but yes, they have gone up on 2-4's. Safeco used to be cheap, and I managed to get a bldg with them for dirt cheap- about $1200/yr for a triplex. My most recent duplex with farmers is more like $1500. I couldn't get safeco again, unless I transferred all my policies with them, which I don't want to bother with.  The only reason safeco was cheap is because they inc a 50% overage, so I could insure for lower value. Now I was told they are making people in SF insure for much higher amounts, so not sure if they really are much better than farmers anyways. 

At the end of the day, it's all a balancing act. I get good rates on my condos with farmers, and on my umbrella liability policy as well. My farmers agent is very savvy. Let me know if you want his contact info. Cheers. 

I also wonder what @Account Closed  (See, tags work:) is doing on insurance....go on...spill the beans girl!