Can’t find a property whose calculation works fine in SF Bay area

[Saman Jafari]

I am a first time home buyer with pre-approved 5% down payment, and I am looking for a property in the SF bay area to live in and potentially rent in a couple of years. However, the dilemma that I face each time is when I run the numbers, there is between $1600 and $1900 difference between the mortgage+HOA and expected rent, before tax right off though. Thus, it has made me hopeless in finding a property with even $1000 negative balance. It somehow makes sense since I am borrowing 95% of the value from a bank. So, I am having a hard time to decide whether I should move on with this much of difference for the first deal as I search in hot areas such as Sunnyvale and Santa Clara, Campbell as I wanna live in these areas? I really need an honest response to tell me if I should wait longer to find something about 500,$600 cheaper per month or it is not a realistic goal ..

[Luis Cruz]

Hey @Saman Jafari! I'm an REI also in California, based in Los Angeles. Similar to SF area property prices here are very high, if you're looking at a pathway to cashflow then you will likely need to think outside the box, whether it's rent by the room, blend of STR or some form of value add (construction / ADU). Cashflow isn't impossible, but it's definitely way harder. The cities in CA are often viewed as an appreciation play.

My personal advice for you would be to house hack your next property for 2 years, look for something that has a bonus room or opportunity for a value add. You'll be saving money in rent while building equity in the property. When it's time for you to move on you can then utilize the 2 out of 5 rule for the sale.