Invest in Bay Area California? Just starting Out
Member since 2024 · 3 posts · 9 votes
Invest in Bay Area California? Just starting Out
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Jake AndronicoBusiness Member
Realtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votesWelcome to BP! You're in the right spot. I grew up north of San Francisco and moved to live and invest in Reno, NV, where I've house hacked twice.
It's completely changed my life.
With house hacking, there is a simple rule in my opinion: The more uncomfortable you're willing to live, the better the numbers can work, the more comfortable you need to live, the less the numbers will work.
The more money you save, the lower your monthly payment because the more you can put down.
But, you also have to weigh the time it's taking you to save, the market is (likely) going up. Each market is different, and SF is very unique.
I would HIGHLY recommend discussing w/ a RE attorney and getting familiar with the tenant/landlord laws in SF.
23 Replies
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes2y
Hi Adriana. If you're house hacking a condo could be a good move like splitting the rent with a friend. The only thing is the HOA fees go up and they can do special assessments and you have no control over it. If you're able to look further out for a SFH and rent the rooms out, that might be better. It's hard to say without knowing more about your financial situation (not that you should post that on a public forum). Also if you ever decide to move out and rent the entire condo, the HOA might have restrictions like limiting the percent of long term rentals. Many of them don't allow STRs
If you work remotely some days, would consider buying outside of San Francisco? The East Bay is more affordable than S.F. - I would caution against Oakland or Berkeley because they have very pro-tenant laws.
- 2yAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Adriana V Alvarado:
Hi everyone, I am just starting out in real estate investing. I would like to know what makes a good deal in the Bay Area, California (like in SF where I will be working) and how much money do I need to save to make the deal worthwhile? Should I start with a condo (about $400K for a studio/one bedroom) since that would be less than a single family home (800K+)? Even with house hacking with a lower down payment (which I am not sure would work if I get a studio size condo), I would still need to pay more out of pocket than what I would pay renting (I can get rent by splitting a studio with a friend for about $1200/month). Has anyone bought an investment property in the California Bay Area recently that could help strategize any ideas on how to move forward? Thank you!
I would look to invest out of state. A lot of Californian investors are putting their money in the midwest because of the cashflow incentive alongside appreciation. I would look into markets that heavily tech-focused like Columbus and invest. There has been significant growth in the last 3-5 years, with booming business and real estate sectors. Companies like Intel, Amazon, and Google are investing here.
I personally invest here and buy about 1-2 properties every month alongside my investors. Happy to share resources like my investor package and deal analyzer.
ReafCo | Ahmed Group 534 Reviews “Should I start with a condo (about $400K for a studio/one bedroom) since that would be less than a single family home (800K+)?”
FYI- Those prices are at least double, for decent neighborhoods in SF.
- 2yJake AndronicoBusiness MemberRealtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votes
Welcome to BP! You're in the right spot. I grew up north of San Francisco and moved to live and invest in Reno, NV, where I've house hacked twice.
It's completely changed my life.
With house hacking, there is a simple rule in my opinion: The more uncomfortable you're willing to live, the better the numbers can work, the more comfortable you need to live, the less the numbers will work.
The more money you save, the lower your monthly payment because the more you can put down.
But, you also have to weigh the time it's taking you to save, the market is (likely) going up. Each market is different, and SF is very unique.
I would HIGHLY recommend discussing w/ a RE attorney and getting familiar with the tenant/landlord laws in SF.
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
In the Bay Area, a good deal may not solely depend on cash flow, but also on appreciation potential, cash flow, location, and tenant demand. Condos may be an easier entry point, but they have pros and cons. House hacking can reduce living expenses but may limit roommates or share space. Long-term investment should cover income shortfalls and consider alternative markets outside San Francisco or affordable markets like Texas, Ohio, or Arizona. Networking with local investors and real estate agents is essential.
Good luck!
NETWORTH BUILDERS5236 Reviews - 2yAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Adriana V Alvarado:
Hi everyone, I am just starting out in real estate investing. I would like to know what makes a good deal in the Bay Area, California (like in SF where I will be working) and how much money do I need to save to make the deal worthwhile? Should I start with a condo (about $400K for a studio/one bedroom) since that would be less than a single family home (800K+)? Even with house hacking with a lower down payment (which I am not sure would work if I get a studio size condo), I would still need to pay more out of pocket than what I would pay renting (I can get rent by splitting a studio with a friend for about $1200/month). Has anyone bought an investment property in the California Bay Area recently that could help strategize any ideas on how to move forward? Thank you!
It is definitely tough to invest in the bay area and make the property cashflow positive. I would look into different markets that have strong appreciation and cashflow where your CoC returns are not negative every month.
ReafCo | Ahmed Group 534 Reviews - It is a tough buy and hole RE market everywhere but markets like San Francisco are particularly challenging in the short term due to the poor cash flow (negative cash flow). However, I expect for along hold, it will outperform virtually all other markets.
Quote from @Adriana V Alvarado:
Hi everyone, I am just starting out in real estate investing. I would like to know what makes a good deal in the Bay Area, California (like in SF where I will be working) and how much money do I need to save to make the deal worthwhile? Should I start with a condo (about $400K for a studio/one bedroom) since that would be less than a single family home (800K+)? Even with house hacking with a lower down payment (which I am not sure would work if I get a studio size condo), I would still need to pay more out of pocket than what I would pay renting (I can get rent by splitting a studio with a friend for about $1200/month). Has anyone bought an investment property in the California Bay Area recently that could help strategize any ideas on how to move forward? Thank you!
There is poor correlation between initial cash flow and actual long term cash flow. The reason for this is that RE market prices are based on numerous criteria. Some of the big ones are expected appreciation, expected rent growth, and risks.
In most markets, the market with the highest rent to price ratio is the lowest class areas. This is because of the risks and effort to have rentals in that market.
Similarly, the markets with the best initial cash flow typically have poor historical appreciation and rent growth. The properties with poor initial cash flow often have good/great historical appreciation. Rent growth has a strong relationship to appreciation.
The higher rent growth market will always surpass a market with better initial cash flow but lower rent growth given enough time.
On a long term hold, the rent growth is much more important than the initial rent growth.
If I invested $100k in the year 2000 using the same leverage and no extraction of value in both San Diego and Cleveland, which investments do you think would have the better cash flow over the hold? Which do you think would have appreciated more? If the answer is not obvious, remember the relationship between appreciation and rent growth so the answer is the same for both questions.
The point is that San Francisco RE is likely to do outstanding overs long hold period.
good luck - 2yNoah CorwickPro MemberRealtor · Phoenix, AZ · Member since 2021 · 276 posts · 117 votes
Hey Adriana,
I do not know the Bay Area market, but can connect you with one of my trusted resources who knows it like the back of his hand!
- Rental Property Investor · San Francisco Bay Area · Member since 2022 · 1k+ posts · 1k+ votes2y
Quote from @Dan H.
On a long term hold, the rent growth is much more important than the initial rent growth.
If I invested $100k in the year 2000 using the same leverage and no extraction of value in both San Diego and Cleveland, which investments do you think would have the better cash flow over the hold? Which do you think would have appreciated more? If the answer is not obvious, remember the relationship between appreciation and rent growth so the answer is the same for both questions.
The point is that San Francisco RE is likely to do outstanding overs long hold period.
good luckI completely agree. Coastal CA (Bay Area, LA, San Diego) has land constraints and it's very difficult to build new and continues to have high demand, despite the 300,000+ people who have left CA. The property values have dipped with San Francisco since COVID when people left to move to the suburbs, but the prices are still high. There are some people coming back because there's a segment of the population who love living in the city and being walking distance to restaurants, stores etc.
San Jose and Santa Clara are in high demand since they're in Silicon Valley. Prices will be extremely high - I don't think most investors are buying in these areas unless you have a lot of money and plan to house hack. In general the Peninsula will be higher priced than the East Bay. Some East Bay cities I've seen with more reasonable prices are: Concord, San Leandro, Hayward, El Cerrito, Pinole. These are all on the BART line to S.F. The last two cities I did see move in ready SFHs listed for around $650,000 to $700,000 in 2022 or early 2023. They were snapped up quickly by primary home buyers, I would guess.
I'm keeping my Bay Area properties because of the appreciation and passing on generational wealth to my kids. My kids are old enough to understand RE investing. When I die, they can keep renting out the properties or move into the SFH, or take the step up basis and sell it with not as high of a capital gains tax hit (I hope they wouldn't choose the 3rd option). I may consider selling off my Indianapolis area SFHs to 1031 exchange to Nevada (Reno or Vegas, looking at those 2 markets) - I think my kids would rather have another home in Nevada (future primary, vacation home or rental) vs dealing with rentals 2000 miles away. Those goals are very specific to my situation and not necessarily applicable to other investors.
I recently talked to a Bay Area investor who sold her SFHs around 2020 to buy OOS (I think her markets were Dallas, Atlanta, and a few other cities) and now she's regretting the selling those. Most of the CA investors (Bay Area and SoCal) I know have kept their properties. There are a few that sold them and bought OOS. My own thoughts are that you can own fewer properties in CA to built long term wealth vs. buy a lot more properties in other states. There's not one right answer for everyone since we all have different financial situations, different ages, timelines, family situations, risk tolerances etc.. - Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes2y
Quote from @Adriana V Alvarado:
Hi everyone, I am just starting out in real estate
Everyone has different ideas , goals, and resources but most people would probably tell you not to invest for rental in bay area. It's not landlord friendly. Price of entry is high, rent is super low. Buying a place to live in is completely different than buying a place for investment. Where you want to live and what you want for a rental are likely very different. Also for rentals condos are normally very tough to make money. There are just so many things that work against you investing in condos.
- Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes2y
@Jake Andronico
It's completely changed my life.
With house hacking, there is a simple rule in my opinion: The more uncomfortable you're willing to live, the better the numbers can work, the more comfortable you need to live, the less the numbers will work.
The more money you save, the lower your monthly payment because the more you can put down.
This is really great advice....some of the best. Amazing how many people want to house hack and then find out the should have roommates and the idea of being an investor ends.
- 2yKo KashiwagiPro MemberLender · Los Angeles, CA · Member since 2022 · 967 posts · 445 votes
Condos can have lower purchase prices, but SFH usually have better outlook on appreciation. If your priority is low cash entry or cash flow, condo or out of state investing can make more sense. A 2-4 unit may even make sense - although purchase price will be higher, you can offset the monthly payments with the other units. If you believe the area will appreciate heavy, I personally would opt for SFH.
- Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes2y
We’re not back in the early 2000s when you could buy/hope/pray a rental property for $70,000 and get $900 a month in rent—that’s just not the case anymore. The game has changed. My first rental in Birmingham I bought back in 2012 is now around $148,000 and rents for $1,000.
It’s all about adding value. You need to do renovations, improve the property, and drive up rents. The same applies to buying businesses whether it’s online businesses, plumbing companies, or professional services like a CPA rollup. - Member since 2024 · 1 post · 2 votes2y
We have an investment property in downtown SF - the relatively nice and safe SOMA area. It was in in one of those luxury towers.
I'd say it only makes sense if you live in those units yourself while getting a roommate to house-hack. Those condos have amazing amenities and great security. If you rent out the entire unit, you might not be able to cover more than 70% of your total monthly payments (mortgage + HOA + property taxes). Property taxes are especially high, as the city by default increases it at 2% per year even though market value of those condos have crashed by over 10%. We use an ai app to appeal our property taxes, instead of paying legal fees. - Investor · Seattle, WA · Member since 2023 · 87 posts · 44 votes2y
Quote from @Adriana V Alvarado:
Hi everyone, I am just starting out in real estate investing. I would like to know what makes a good deal in the Bay Area, California (like in SF where I will be working) and how much money do I need to save to make the deal worthwhile? Should I start with a condo (about $400K for a studio/one bedroom) since that would be less than a single family home (800K+)? Even with house hacking with a lower down payment (which I am not sure would work if I get a studio size condo), I would still need to pay more out of pocket than what I would pay renting (I can get rent by splitting a studio with a friend for about $1200/month). Has anyone bought an investment property in the California Bay Area recently that could help strategize any ideas on how to move forward? Thank you!
It is only a good deal for appreciation, there will be no cashflow unless you buy it outright....and for that amount you could a portfolio of cash flowing duplexes in the midwest.
So what is the goal? To own and let the CA property appreciate or Cashflow? Condo does not come with land, not a great investment property option, usually most people start with 2-4 unit properties or house hack them.
Personally, if i was just starting and I wanted a San Francisco property I would use the cashflow from my midwest rentals to fund it.
But since we are near the top of the market in SF, I would be cautious about investing in that area unless its an extremely good deal, and for those, you need to learn how to find them off-market before an agent lists them.
If you want to learn how to find off-market properties, I might be able to help you.
- Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes2y
@Adriana V Alvarado a "good deal" in the BA really depends more on your timeline and long term strategy. You will find people who make money in REI through many different strategies: buy and hold, flipping, BRRR, house hacking, short term rentals, rental arbitrage, etc. Don't get sucked into the trap of buying for the sake of buying. Analyze your strengths/weaknesses and also the type of business you are planning on building. Each one of the above examples are very different businesses and take different types of leaders. Once you figure out what type of business you want to start the type of property you should buy will become more clear.
As an example, if you think buying a condo and turning it into an airbnb at a later date is something that might interest you, you must do your research into the city rules regarding short-term rentals. It would be unfortunate if you bought a condo and later realized that you could not legally do Airbnb.
My son bought a 4 plex in Oakland at the beginning of the year for $770,000. This was fully vacant property near the lake and Whole Foods. This was on and off the market for nearly 2 years. It is in a great location, but needs a ton of work. It was a good deal for him, because he was willing to do the work to get the units into rent condition. To most it was a "hard pass" because there are many headaches that come with a building like this.
Long story short, there are deals out there for the right people with the right long term strategy. Figure that piece out before you put your money on the table.
- Oakland, CA · Member since 2015 · 246 posts · 127 votes2y
The best deals are had when you are able to add value to the property. I've never seen a turn-key property in the Bay Area where you will cash flow positive in any meaningful way.
Personally, I will only invest in areas that I am willing to live in. That being said, I buy run-down fixers that will scare most investors off in good neighborhoods. It's possible to cash flow positive in the Bay Area - you just have to put in the work and find the right deal.
Search posts from @Arlen Chou and all the other old school BP bay area folks. They may not flaunt it, but they've all done it.
- Member since 2018 · 40 posts · 18 votes2y
Quote from @Alfath Ahmed:
Quote from @Adriana V Alvarado:
Hi everyone, I am just starting out in real estate investing. I would like to know what makes a good deal in the Bay Area, California (like in SF where I will be working) and how much money do I need to save to make the deal worthwhile? Should I start with a condo (about $400K for a studio/one bedroom) since that would be less than a single family home (800K+)? Even with house hacking with a lower down payment (which I am not sure would work if I get a studio size condo), I would still need to pay more out of pocket than what I would pay renting (I can get rent by splitting a studio with a friend for about $1200/month). Has anyone bought an investment property in the California Bay Area recently that could help strategize any ideas on how to move forward? Thank you!
I would look to invest out of state. A lot of Californian investors are putting their money in the midwest because of the cashflow incentive alongside appreciation. I would look into markets that heavily tech-focused like Columbus and invest. There has been significant growth in the last 3-5 years, with booming business and real estate sectors. Companies like Intel, Amazon, and Google are investing here.
I personally invest here and buy about 1-2 properties every month alongside my investors. Happy to share resources like my investor package and deal analyzer.
Hi Alfath,
Would you be kind enough to share a list of the cities/counties/regions which in your experience are better suited for investment
Thanks
Suhaib
- 2yRaju BalakrishnanPro MemberRental Property Investor · Santa Clara, CA · Member since 2016 · 223 posts · 112 votes
If you think bay area, you should think of (potential) appreciation. Conventional renting out never makes sense here in terms of cash flow. Strategies like furnished mid-term rentals, renting by rooms, mid-term/short term rentals or creative mixes of these can be considered too. Needs more effort but you will get better rents on right locations. There are people who do that successfully. Whatever be the strategy, if you can hold in bay area for long term without money from your pocket, you are likely to end up being wealthy.
- Rental Property Investor · Member since 2021 · 19 posts · 9 votes1y
Quote from @Raju Balakrishnan:
If you think bay area, you should think of (potential) appreciation. Conventional renting out never makes sense here in terms of cash flow. Strategies like furnished mid-term rentals, renting by rooms, mid-term/short term rentals or creative mixes of these can be considered too. Needs more effort but you will get better rents on right locations. There are people who do that successfully. Whatever be the strategy, if you can hold in bay area for long term without money from your pocket, you are likely to end up being wealthy.
Great insights, @Raju Balakrishnan
- Member since 2022 · 2 posts · 5 votes1y
Hi Adriana,
I have lived in San Francisco many years and owned a duplex there for 20 years.
I invest in syndications in Texas but the returns have never been even close to what San Francisco has provided me- despite all the hype.
San Francisco is a Rip Van Winkle Market. You fall asleep for 10 years and you make a million bucks.
I would suggest you house hack a duplex. Have it be a fixer so you can add value. Condo convert this so you will separate the property into 2 APN's thereby, somewhat, making it exempt from rent control if done strategically.
Refinance when rates go down and hold this forever.
Buy in an area of the city where people are upwardly mobile so they will leave in a couple years as they have high paid tech jobs.
Purchase only one bedrooms as people grow out of them fairly quickly. They leave, you raise rents and on it goes.
My experience has been, as have other investor friends I know in San Francisco, is that the asset will double in value in 12-15 years.
Hope this helps. Feel free to DM me if you need more info on strategies.
- Real Estate Agent · San Francisco, CA · Member since 2024 · 3 posts · 1 vote1y
Quote from @Becca Hintergardt:
Hi Adriana,
I have lived in San Francisco many years and owned a duplex there for 20 years.
I invest in syndications in Texas but the returns have never been even close to what San Francisco has provided me- despite all the hype.
San Francisco is a Rip Van Winkle Market. You fall asleep for 10 years and you make a million bucks.
I would suggest you house hack a duplex. Have it be a fixer so you can add value. Condo convert this so you will separate the property into 2 APN's thereby, somewhat, making it exempt from rent control if done strategically.
Refinance when rates go down and hold this forever.
Buy in an area of the city where people are upwardly mobile so they will leave in a couple years as they have high paid tech jobs.
Purchase only one bedrooms as people grow out of them fairly quickly. They leave, you raise rents and on it goes.
My experience has been, as have other investor friends I know in San Francisco, is that the asset will double in value in 12-15 years.
Hope this helps. Feel free to DM me if you need more info on strategies.
Great insight into the San Francisco market. I tell my buyers if you buy and hold in San Francisco for long enough it likely will be beneficial. Similar to what Becca mentioned, if you can hold the home for long enough it will appreciate. SF's market is still very nuanced and strong due to the low inventory and demand here, homes still going above ask with multiple offers. Many investors buy these older homes, renovate them, and them covert to TIC's or condo conversion. Condo conversions usually sell at a higher price point compared to TIC's.
In regard to what you mentioned, yes rent often times is going to be cheaper than your PITI + HOA in the bay area.
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