Buying a Beach-Front Condo in Alameda 2023 -- is it a good investment?

Question

Hi there!

I am seeking advice for whether to go through with my first home purchase. It's the biggest purchase I'll have ever made, and I want to do everything I can to make the most informed decision possible. Here's the context:

Details of the home:

2 bed, 1.5 bath Condo

1100 sqft

1 garaged parking space

Views of the bay from the living room

~10min drive from airport

<10min walk from grocery stores, restaurants

Across the street from the beach. <5min walk to be on the sand

Condo amenities include swimming pool, jacuzzi, gym, and sauna.

Safe and charming neighborhood

Location: Alameda, California

Details of the costs:

Purchase price: $835,000

Down: 25%

Interest rate: 8%

Principal and Interest per month: $4,600

Estimated Taxes + Insurance per month: $1,280

HOA: $465

Total Monthly: $6,345

I am considering the intangible benefits of upgrading my living situation from being in a rough neighborhood in Oakland to a safer, beautiful place by the water. I'm hearing pros and cons from different people.

I am hearing encouragement and discouragement from lots of folks I talk to. The yay-sayers encourage buying in the Bay Area as (1) a great long-term investment, (2) suggesting this purchase would be an appreciation play over 5 years, and (3) that the high interest rates are keeping the property prices lower and the bidding competition down. On the other hand, many speculate the market will drop significantly in the next 1-3 years and suggest it's a poor time to buy because of the high interest rates. Granted, no one has a crystal ball, but both sides resonate to me as reasonable.

I am in a position where I can pay for these living expenses, but my finances will feel significantly tighter doing so (for reference, it increases my spending by almost 3x). I am in the software space, and while this field tends to have jobs readily available, I also have some slight concern around shifts in the job markets affecting my ability to hold for 5+ years.

I want to have both a better living situation and invest in my future, however I feel very conflicted about whether this purchase is a sound choice. I'd love to hear from the community hear to help me make this big decision. Thank you in advance for your time!!

Zach DeRossette · Answer

If possible, buy a SFH. SFH's appreciate faster and hold their value better in a downturn. I would also encourage you to think about house hacking. It doesn't have to be a multifamily home, I have a friend who rents a room in his house to help with the mortgage payment. This could be a way to increase your budget a little and help keep your costs low.

As others have said in this thread HOA's can be a problem, due to the fact they can increase their dues. In my opinion, this is not necessarily a deal breaker and you can review all of the HOA documents in the disclosure packets to get an idea of how the HOA is run.

While nobody can predict the future, I'm optimistic about the future appreciation in the Bay Area, including Alameda.  I think if you hold the house/condo for 5 years, you are very likely to get the benefits of appreciation. The bay area has appreciated, on average, 4-5%/yr over the past 30 years. I believe it will continue to do so despite some of the problems we are experiencing now.

Naomi S. · Answer

Hey, I have a couple multifamilies recently purchased in Alameda and have lived here for 10 plus years. I also invest out of state. Just wanted to speak up and offer a different perspective because I actually invest here. Pros and cons of Alameda of course, but I love this island. I do agree that the area you speak of is quite crowded. If you think that proximity to the beach will greatly enhance your life, by all means. But it wouldn't be my first pick. It might be a good idea to rent or airbnb out there for a little while to see if you truly like the vibe before taking the leap. Also another important reflection point for yourself, what are your long term plans for the purchase?

Chris B. · Answer

I could rant here about why I don't think Alameda is a desirable investment location, but lets say just about every single quality of living aspect of life is better elsewhere out of the immediate Bay Area and away from Alameda/Oakland.  I'm not saying you should move to Compton, but suburbia across America has a lot to offer for a quarter of the price and many locations are very close to big cities.  Or you can get something 4 X larger for the same price if you want to look at it that way.  California has a great track record of appreciation which is well worth considering, but I question if it will continue as strongly as it has historically.  I don't think so.  Given your your field, you are ideally positioned to work remote and can have the best of everything.  I wouldn't settle for a condo in Alameda at that price.

I feel SFHs are generally a better investment option over condos also but with that said, many condo owners appreciate not being required to take care of the property.  The HOA will do that, just not cheaply.   A SFH is probably out of budget in the Bay Area, but quite affordable for you elsewhere.

I had lived in the Bay area for about 10 years and I was shocked with how many people I knew that had never ventured out of it to experience the rest of the country.  It was as if the area was a prison people refused to leave.  I encourage anyone who has grown accustomed to their community to go explore and see what's out there.  Sure, do some research first to identify interesting places, but go do that if you haven't yet.  Comparing NYC or Chicago to the Bay Area and Alameda won't do the most good.  Similar issues.  Try something near a big town, but not in it.

Navid A. · Answer

As an investment point of view buying a  condo would not appreciate like a Single family home. The HOA will only go up and you have no control over it..I would ask yourself would you have bought this condo if you lived in a better area and not a “rough” area? I think the motivation to get out of a rough area would be an emotional decision. Specially moving to a property that is next to water.

Cutting your expenses by 3 would most likely bring down your quality of living.

I understand your budget in the 800s may not go far in Bay Area but have you looked at house hacking? You maybe able to afford a MF in a descent area (not as nice as Alameda but not as rough as where you live now). If your job allows you to move (or even work from home) say move to North Bay, you maybe able to buy a MF or SF that would appreciate more and you won’t be squeezing yourself financially.

Matt K. · Answer

One downside to that area can be parking, it'll be crowded often and annoying. The Alameda cops are also very strict with enforcing the speed limit and all the limits in Alameda are low haha.

As a rental you'll never really be able to compete with the old time landlords at low price points. As a primary I love Alameda and that area is pretty nice.

I used to live out there, feel free to message me with questions or you want more feedback

AJ Wong · Answer

I asked my mentor if he would buy in this market and he said if there was something I HAD to have and it was a great deal, yes. If there is a time to be selective, it's now. I imagine there are plenty of condos on the market? Personally, if possible, first investment, buy something with land and make it your own. You'll need less down, get better terms and have more reserves to breath or make improvements. A client with your profile has options.