cash flow in the bay area

[Alex Aguilar]

With prices so high is it possible to have positive cash flow in the bay area?

[Leslie Pappas]

Hi @Alex Aguilar, the Bay Area is a fantastic place to invest if you have the capital. Now is not the time to buy here, however. And whenever you invest here, you must be prepared for your investment being entirely correlated to the tech industry. I would wait for the next major downturn if you are wedded to investing here, however, I think it would be good for your to at least consider to sell some now and diversify.

I've posted this bit elsewhere and I'll share it again:

I live in Silicon Valley, and I'm an investment advisor who specializes in real estate. I can tell you what people here have done to set themselves up for retirement. There are two types of investors here:

1. Buy or inherit and hold for a long time, then cash out and redeploy equity into potentially higher cash flowing properties or other investments.

2. Buy or inherit and hold all their lives while working the properties for income.

I've seen teachers, firemen, software engineers and all sorts of people utilize both strategies successfully. One way or another, however, the investors must work to pay down loans, increase rents and decrease expenses wherever possible. One way or another, they are building their net worth.

Building net worth is how you may possibly retire with fewer worries. If your retirement utterly depends on having adequate cash flow from your properties, any downturns will cripple you. AND you must maintain adequate reserves to take care of the disasters that may happen.

Most of my clients fall into the first group above. If you are or become an accredited investor, you can buy into institutional grade $50-125M projects with as little as $100,000 and diversify. Professionals with decades of experience and very impressive track records do all the heavy lifting for you. You get potential cash flow, tax shelter and appreciation. Loans are non-recourse. This is the world of Delaware Statutory Trusts. 

So my advice- build your equity.

Best of luck! Leslie

[Alex Aguilar]

Thanks for the info Leslie!

[Anthony Addessi]

Hi Alex,

Yes it is and there has been a number or debates on this topic on the forums.  

There are investors that are still buying multifamily investments producing a good return.  You have to really know your market and it takes work to find the deals and get them stabilized.  Most of my deals are in very poor condition and need a lot of work, but after the work is done and they are leased they produce 6-10% cash on cash.  Like others I am still buying even at this point in the cycle.  The key is to structure your deals so you can weather a downturn.  Here are couple links to the discussions.

https://www.biggerpockets.com/forums/223/topics/35...

https://www.biggerpockets.com/forums/223/topics/35...

Cheers,

Anthony