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Updated over 1 year ago, 05/09/2023
Real Estate Investors in SF Bay Area
Hi everyone,
I currently live in the Bay Area (California) and I’m interested in getting into real estate investment. My goal is to start out buying a multi-unit property in early 2021. Ideally, it’d be somewhere in the east bay since I work in San Francisco and plan to live in one of the units for a few years. I’ve lived in the Bay Area (Berkeley, Sunnyvale, and currently live in Walnut Creek) for the last 11 years.
Right now I’m listening to the BiggerPockets podcast and Brandon Turner’s Book on Rental Property Investing. I plan to spend the next several months learning as much as I can about real estate investing. I’m hoping to connect with investors in the Bay Area. I’m open to advice on what things I should be doing now, cities are good investment areas, etc.
I look forward to connecting!
Bay area numbers works in different ways. Since you are house-hacking and plan to live in bay area, out of state is not an option for you. Your plan looks excellent. My suggestion is to try to get a three of even better four units instead of duplex, if you qualify for a mortgage. That may pay-pay off most of your mortgage payments and taxes, and interest rates are excellent. But keep in mind that cash flow rent alone does not make financial sense in bay area, appreciation needs to be factored in as others pointed out. The expectation for appreciation is contained in the house prices. Bay area has been pretty good in giving good appreciation so far, and hopefully will continue to do so after COVID-19 fears are over.
@Mary Griffin
Hi Mary,
It’s not easy but it is possible. My wife and I just did it in Alameda. Our entry was a bit hard as we had to put in more than 10% on million dollar duplex. It also took some ninja negotiations with the listing agent. We were stoked to get it under contract though as we too were looking at it as a place for us to live as well. Given the appreciation in our market too, at the 6 month mark I did a refi on the property and dropped our monthly payment by $1300 / mn. That’s a rent payment in itself in some markets. We had our second unit rented within 5 days of closing too. All in all, it was a lot of work and creative thinking. But being in the biz was also helpful for sure.
There is opportunity out there for sure, but it is a fascinating and challenging market to be in, as well as super rewarding.
@Mary Griffin I am exactly in the same boat as you at the moment: Area, intention, reading the same book and the 2021 timeline as well.
Would love to connect and learn more as I am also pretty new in this especially to the country itself.
As far as I know, California has some tax benefits schemes like Opportunity Zones and Installment Sales that I need to look into but as far as entry price, although high, I feel there's some leverage with the industries established here.
As with most developed area, yield will not be as great as I've researched but I'm still working on laying out my plans too. Is the Multiplex you're thinking of a new establishment or already built?
Hope you and your family are well with the Covid situation too
@Sid Naik Hey, Sid. I don't doubt your returns! Like I said, the appreciation in the Bay Area has been phenomenal, so I don't doubt your returns one bit. My point was that basing an investment purchase PURELY on future appreciation is "speculative investing" by definition https://www.investopedia.com/terms/s/speculation.asp as opposed to "value investing." They are just different approaches.
Speculative investing in real estate is buying something with the hope or expectation that it will increase in value, and derives all or most of its returns from that appreciation alone. Value investing is buying an undervalued asset and improving the performance of that asset and realizing untapped equity from the beginning. Any future appreciation is just icing on the cake.
The benefit to value investing is that you're more protected from downward market movements, and you potentially make profits sooner. Investing based solely on future appreciation is inherently risky, because you're essentially betting the market will go up -- and even in the best markets that's not a sure thing or something you can predict or control. NYC is a perfect example. Everyone was jumping in on the condo market here thinking "NYC always goes up." Except when it doesn't... It's been a buyer's market here since 2018, and many condo units have lost over 25% from their peak values. Then along comes a global pandemic, which nobody could predict, and makes it even worse! Those investors who bought here banking on future appreciation are now in a deep hole. I talked people OUT of doing business with me based on that investment strategy, and now I'm glad I did. I sleep well at night. Sure, the Bay Area is a different area with different economic drivers, but that doesn't change the fact that buying on future appreciation is still speculative investing.
Don't misunderstand -- I wasn't being critical or dismissive of your approach or your results. I totally congratulate you on your results. It's not something I would recommend to most people, especially a newbie, but I think it's awesome you've made it work. It's just a totally different premise to the one I was using when I posted previously.
Originally posted by @Daniel Akerman:
@Sid Naik Hey, Sid. I don't doubt your returns! Like I said, the appreciation in the Bay Area has been phenomenal, so I don't doubt your returns one bit. My point was that basing an investment purchase PURELY on future appreciation is "speculative investing" by definition https://www.investopedia.com/terms/s/speculation.asp as opposed to "value investing." They are just different approaches.
Speculative investing in real estate is buying something with the hope or expectation that it will increase in value, and derives all or most of its returns from that appreciation alone. Value investing is buying an undervalued asset and improving the performance of that asset and realizing untapped equity from the beginning. Any future appreciation is just icing on the cake.
The benefit to value investing is that you're more protected from downward market movements, and you potentially make profits sooner. Investing based solely on future appreciation is inherently risky, because you're essentially betting the market will go up -- and even in the best markets that's not a sure thing or something you can predict or control. NYC is a perfect example. Everyone was jumping in on the condo market here thinking "NYC always goes up." Except when it doesn't... It's been a buyer's market here since 2018, and many condo units have lost over 25% from their peak values. Then along comes a global pandemic, which nobody could predict, and makes it even worse! Those investors who bought here banking on future appreciation are now in a deep hole. I talked people OUT of doing business with me based on that investment strategy, and now I'm glad I did. I sleep well at night. Sure, the Bay Area is a different area with different economic drivers, but that doesn't change the fact that buying on future appreciation is still speculative investing.
Don't misunderstand -- I wasn't being critical or dismissive of your approach or your results. I totally congratulate you on your results. It's not something I would recommend to most people, especially a newbie, but I think it's awesome you've made it work. It's just a totally different premise to the one I was using when I posted previously.
Hi Daniel,
I think you're spot on regarding value vs. speculative investing however I would like to point out that there are markets that inherently lean towards cash flow and others that lean more towards appreciation. There is definitely a spectrum and personally if I had to choose I'd rather be in a market that has consistently over a long period of time, even through the ups and downs, seen significant appreciation. The people who invest in these markets seem to witness a more substantial growth in their wealth versus those who solely rely on cash flow in markets that have super slow appreciation rates. While we cannot predict something like what we saw with NYC, we can say that's true for any market. That's why it's also a good idea to buy wedge deals, even in expensive markets where there's room for some forced equity I.e. cosmetic updates, etc which will help insulate your investment. As you pointed out there isn't a right answer, but they are different approaches to REI.
I live in the Bay Area (Marin) and have invested locally as well as out of state (Las Vegas, Rochester NY and coastal Florida). I have also closely studied additional markets like Toledo Ohio (where I used to live). If your goal is to earn a few hundred extra dollars a month, finding depressed distant markets in the Midwest makes sense. If you are interested in real wealth building, stick with high growth markets like the Bay Area, especially as you live in and know the area well. It sounds to me, Mary, like you are pursuing the best strategy by doing a local house hack in a multi-unit property. Good luck.
Originally posted by @Kenneth Mooney:
@Mary Griffin there are many markets you can invest in. I'm biased because I am from here, but I love Augusta, GA. Tons of job growth and they are jobs in secure markets (military, medical, cyber). Many markets in Ohio and Indiana are good. Majority of states in south are very affordable and are great for cashflow.
I'll jump in and say that OKC is one of the markets worth exploring. I talk to probably an investor per month from the bay area. Happy to send them your way if they have any local connections/house hacking experience. Good luck getting started!
Hey Mary,
It's crazy that we would reconnect on a BP Forum since our SMASH Stanford days. I recently purchased a duplex in North Oakland in 2018 and would be happy to share with you my strategy (BRRRR). I haven't quite gotten to the repeat step, but can certainly provide you my 2 cents on the buy, rehab, rent, and refinance.
DM me if you want a follow-up. Hope you're staying safe during these strange times
Quote from @Will Dixon:
@Remington Lyman
Since we're talking FHA purchases for sub $1 million, can you direct me to the Columbus investment that's going to net $3k a month off of a $50k investment? You have my attention.
$50k investments ??!? Can you direct me to such properties?