4 plex in SF Bay Area or invest in Cleveland
San Leandro CA · Member since 2020 · 13 posts · 1 vote
4 plex in SF Bay Area or invest in Cleveland
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Rental Property Investor · Las Vegas, NV · Member since 2014 · 138 posts · 118 votes
6y@Erik Grahn Lot of questions and unknowns here. First, what is your budget? Can only imagine what a fourplex in SFBA costs, just knowing what a typical SFH/condo costs, unless you're buying somewhere east bay or ghetto. Imagine the mortgage on a fourplex, and if you live in one of them, you then only have 3 tenant dollars coming in. You will be cash flow negative aside from having a place to live, some extra write offs, and the primary home loan. IMO not much of a deal.
Are you single? Married/kids? Depending on answer to first question about budget and location, do you really want to live in one of said fourplex units? I know the answer to just "house hack" is super popular on this site, but anyone married with kids doesn't exactly want to move into a 2br apt in a fourplex in XYZ neighborhood. So, is that part of your personal plan? If you are single / young and willing to be flexible and move around, it does open more doors for buying and investing.
Third, just because random "couple who are successful in RE" said to do ABC doesn't mean you have to deviate from your desired plan to do XYZ. There are thousands of ways to be successful in RE. My parents were successful in RE but they bought in CA 40 years ago when homes were $40,000 so it's a different ballgame today. The couple you speak of may have done the same, so anyone with experience 20+ years ago before the modern spike in prices is playing a different game than today, may be out of touch, or may be rich and again can afford to play a different ballgame. Buying a fourplex in SFBA is $$$$$$$$. Stick with your plan (be it CLE or whatever) if that's what you want to do. I also live in a HCOL part of CA and will likely never invest here aside from my primary residence. My money will simply go further in other areas, which is what you want to do.
@Chris Mason is a local bay area lender, great to work with, and can also provide some advice once you update some parameters.
16 Replies
- Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes6y
@Erik Grahn You should get pre-approved with a lender first and then see where you stand. If have not done this already I have a couple of lenders I can refer you to for what you are looking at here in the Bay Area as well as Cleveland....I have rentals in both markets.
- San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes6y
You should fill out your profile, so people know where you are, etc., to give you advice and so they aren't writing posts asking you a ton of questions about where you are, etc.
- San Leandro CA · Member since 2020 · 13 posts · 1 vote6y
Originally posted by @Brian Garlington:
@Erik Grahn You should get pre-approved with a lender first and then see where you stand. If have not done this already I have a couple of lenders I can refer you to for what you are looking at here in the Bay Area as well as Cleveland....I have rentals in both markets.
Thanks Brian. I am currently working on that but I don’t think getting a loan will be a problem. I’ve been looking around Oakland, San Leandro, Hayward area at <$1million
- 6yCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
Those two markets could not be more different, and the strategies and returns would be completely different too. It's apples to oranges, and it's essential that you understand the benefits and detriments of any market before you jump in. Do you have an agent or partner in either of those markets who can advise you in a meaningful way?
- Rental Property Investor · Las Vegas, NV · Member since 2014 · 138 posts · 118 votes6y
@Erik Grahn Lot of questions and unknowns here. First, what is your budget? Can only imagine what a fourplex in SFBA costs, just knowing what a typical SFH/condo costs, unless you're buying somewhere east bay or ghetto. Imagine the mortgage on a fourplex, and if you live in one of them, you then only have 3 tenant dollars coming in. You will be cash flow negative aside from having a place to live, some extra write offs, and the primary home loan. IMO not much of a deal.
Are you single? Married/kids? Depending on answer to first question about budget and location, do you really want to live in one of said fourplex units? I know the answer to just "house hack" is super popular on this site, but anyone married with kids doesn't exactly want to move into a 2br apt in a fourplex in XYZ neighborhood. So, is that part of your personal plan? If you are single / young and willing to be flexible and move around, it does open more doors for buying and investing.
Third, just because random "couple who are successful in RE" said to do ABC doesn't mean you have to deviate from your desired plan to do XYZ. There are thousands of ways to be successful in RE. My parents were successful in RE but they bought in CA 40 years ago when homes were $40,000 so it's a different ballgame today. The couple you speak of may have done the same, so anyone with experience 20+ years ago before the modern spike in prices is playing a different game than today, may be out of touch, or may be rich and again can afford to play a different ballgame. Buying a fourplex in SFBA is $$$$$$$$. Stick with your plan (be it CLE or whatever) if that's what you want to do. I also live in a HCOL part of CA and will likely never invest here aside from my primary residence. My money will simply go further in other areas, which is what you want to do.
@Chris Mason is a local bay area lender, great to work with, and can also provide some advice once you update some parameters. - San Leandro CA · Member since 2020 · 13 posts · 1 vote6y
Originally posted by @Corby Goade:
Those two markets could not be more different, and the strategies and returns would be completely different too. It's apples to oranges, and it's essential that you understand the benefits and detriments of any market before you jump in. Do you have an agent or partner in either of those markets who can advise you in a meaningful way?
Thanks for responding.
Yes, I will he talking to an agent on Monday who specializes in multi family and commercial in my area. My mentor uses this agent as well - San Leandro CA · Member since 2020 · 13 posts · 1 vote6y
Originally posted by @Tom Kastorff:
@Erik Grahn Lot of questions and unknowns here. First, what is your budget? Can only imagine what a fourplex in SFBA costs, just knowing what a typical SFH/condo costs, unless you're buying somewhere east bay or ghetto. Imagine the mortgage on a fourplex, and if you live in one of them, you then only have 3 tenant dollars coming in. You will be cash flow negative aside from having a place to live, some extra write offs, and the primary home loan. IMO not much of a deal.
Are you single? Married/kids? Depending on answer to first question about budget and location, do you really want to live in one of said fourplex units? I know the answer to just "house hack" is super popular on this site, but anyone married with kids doesn't exactly want to move into a 2br apt in a fourplex in XYZ neighborhood. So, is that part of your personal plan? If you are single / young and willing to be flexible and move around, it does open more doors for buying and investing.
Third, just because random "couple who are successful in RE" said to do ABC doesn't mean you have to deviate from your desired plan to do XYZ. There are thousands of ways to be successful in RE. My parents were successful in RE but they bought in CA 40 years ago when homes were $40,000 so it's a different ballgame today. The couple you speak of may have done the same, so anyone with experience 20+ years ago before the modern spike in prices is playing a different game than today, may be out of touch, or may be rich and again can afford to play a different ballgame. Buying a fourplex in SFBA is $$$$$$$$. Stick with your plan (be it CLE or whatever) if that's what you want to do. I also live in a HCOL part of CA and will likely never invest here aside from my primary residence. My money will simply go further in other areas, which is what you want to do.
@Chris Mason is a local bay area lender, great to work with, and can also provide some advice once you update some parameters.Thanks for the referral and response.
Yes I am looking in lower income areas in the 800k-1mill. Even in these areas rents are fairly high. I’ve lived in these areas before so it’s not an issue for me.
The couple mentoring me are family friends and are still buying and selling multi family in the sfba - Rental Property Investor · Las Vegas, NV · Member since 2014 · 138 posts · 118 votes6y
@Erik Grahn sounds like this plan could work for you then. The devil is always in the details. If you can find a viable MF home in the SFBA in an area you're willing to live in, it could work. Especially if you remodel / forced appreciation on the unit you'd live in, so when you moved out in the future that unit would rent for more. You wouldn't cash flow on it while living there, but that's what house hacking is. But, this is a much higher cost business model vs. using that money to buy more volume in cheaper areas. Only you can decide which model you want to start with.
- Member since 2019 · 7k+ posts · 4k+ votes6y
I am doing both. Buying OOS at the same time building duplex/ADU in Bay Area. The priority is of course the one that you live in (Bay Area). Each unit in 4plex in Bay area will cost you $450-$550K. You can rent the other unit for $2500-$3500. For me it's no brainer since I acquired the property in 2009 so my only cost is building cost.
This is very simple math actually, whenever you live, always live in multi-unit. The rest of the money, you can Invest in anything (from Cleveland SFR to hard money loan investments).
Or you could always buy a cheap condo in Bay Area (~300-400K) and invest in Cleveland. - Investor · Los Altos, CA · Member since 2014 · 942 posts · 1k+ votes6y
@Erik Grahn Although you are considering investing in similar types of properties, the strategies are/should be different. What you should first decide is the "type" of investor you are, before deciding on a market or real estate strategy. The problems you will face, although appear similar will be very different.
In an OOS investment scenario, you will be at the mercy of your property manager. You will be paying for support that will be untested. Even if you go with a "reputable" outfit to support you, the reality is that you will own a very small piece of mindshare. Keep in mind that most anecdotal information you find online will be from people who had good experiences. Most people who have bad experiences don't post about it, they just fade away. If you are willing to make the effort to build a strong relationship and team OOS, you might have a good chance.
If you invest locally, you can always act as the backup to anything the property manager did not catch. If you live in the unit, you will get some nice tax deductions. Additionally, you will have the benefit of Prop 13 in California. I don't know what appreciation looks like in Cleveland, but it has been amazing in the SF Bay Area. Yes, we are due for a correction, but if you are a buy and hold guy, time is on your side in this market.
Personally, I only invest in the SF Bay Area for the above reasons.
Good luck with whichever direction you go!
- Bay Area · Member since 2019 · 29 posts · 10 votes6y
Hi Erik,
I understand what your thought process is in investing in another market due to HCOL in the Bay Area. I had the same idea as you I live in San Leandro and prices on a multi units are very pricey so I decided to look into other markets. But my lender advise me I would get a better rate as owner occupied and also experience being a local landlord first.
Ultimately you had to do what's best for you and what fits in your long term goals. I wish you the best of luck.
Enjoy Your Day,
Tonya
- Investor · Marin County California · Member since 2018 · 1k+ posts · 2k+ votes6y
If you know the area and expect to live there, I would strongly urge you to explore your local markets where the rents will be much higher, the tenant profile similar and will not have harsh winter weather beating your investments (roofs, furnaces, etc. are very expensive to replace).
- Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes6y
For those of you in the rest of the country, marinate on what the OP just said. He literally said
"Yes I am looking in lower income areas in the 800k-1mill."
In most of the rest of the country that price range is paradise.
- 6yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ voteshouse hack bay area is no brainer in my mind get that done then go look elsewhere..
- Member since 2019 · 7k+ posts · 4k+ votes6y
These questions are a classic questions. California Investor can't invest locally and would like to invest out of state. The answers are the same as well :
mostly polarized between "Put 100% Investment Out Out State" Or "Are you crazy to invest outside California ?" and "1 million is heaven outside California".
I was in the same position a few months ago and I found my answer: "If you can escape from California HCOL, and move to South, that would be the best IMO". Of course, everybody is different, but in terms of investing outside CA is the one that makes sense. Historically it's almost impossible for CA properties to get more appreciation compared to today's market, and the house price in CA is becoming more expensive because of too many foreign investments in this area and also Tech's job market. - Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes6y
Agree with Jay ....start off by househacking. Get pre-approved with a lender. If you don't have a lender, I've got a couple I can refer you to whether it's here in the Bay Area, or out of state.
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