Is it crazy to think about commercial MF in CA Bay Area in this market?

[Sateesh Kumar]

Hello, 

I am new member to this forum although I have been following the BP platform and the great insights shared by other members here.

I currently own a small investment multifamily (a triplex )but still consider myself noob in the RE space. I was looking to expand my portfolio and started looking for a multifamily upto a 4-plex a realtor brought to my attention a 10-plex over 2.5 million that requires at least a million down payment and for a moment it seemed doable because I have up to 700k equity in my residential but it seemed risky, then I started thinking of not 10 plex why not 5 plex or even 7 plex in the 1.5 mil range? I was initially contemplating buying a single family in the Bay Area which are already over 1.5 mil and it’s not making any financial sense to me, with a commercial multifamily there is at least a possibility of cash flow without speculating appreciation but I am not too sure how to best analyze a multifamily especially in this market,to begin with I would like to ask the experienced members here if I am crazy to even think about commercial MF in CA Bay are in this market?Can I do much better in other markets?Appreciate any guidance you can provide.

Thanks

[Carlos Ptriawan]

Quote from @Sateesh Kumar:

Hello, 

I am new member to this forum although I have been following the BP platform and the great insights shared by other members here.

I currently own a small investment multifamily (a triplex )but still consider myself noob in the RE space. I was looking to expand my portfolio and started looking for a multifamily upto a 4-plex a realtor brought to my attention a 10-plex over 2.5 million that requires at least a million down payment and for a moment it seemed doable because I have up to 700k equity in my residential but it seemed risky, then I started thinking of not 10 plex why not 5 plex or even 7 plex in the 1.5 mil range? I was initially contemplating buying a single family in the Bay Area which are already over 1.5 mil and it’s not making any financial sense to me, with a commercial multifamily there is at least a possibility of cash flow without speculating appreciation but I am not too sure how to best analyze a multifamily especially in this market,to begin with I would like to ask the experienced members here if I am crazy to even think about commercial MF in CA Bay are in this market?Can I do much better in other markets?Appreciate any guidance you can provide.

Thanks

The structure of the residential and commercial market in Bay Area makes this area is more rewarding for owner occupant and for short/long term appreciation play rather than cash-flow. Thus BRRR can work but investing my own money to Class A-C Apartment for cash flow ? Heck no, I would run away from those especially in 2023 (and forward), this asset class IMO is too saturated with institutional-level ownership. I would however, may be interested in Class B Bay Area apartment, if it's syndication with 10 year GC track record in the area and they have vertical Property Management.