Sell triplex and buy 12 plex in Oakland good idea?

[Sateesh Kumar]

Hello,

A relocation to CA bay area seems imminent due to job and therefore selling an owner occupied triplex also seems imminent. I was initially considering selling my triplex and buying a single family in the bay area for the sake of aggressive future  appreciation while also giving a comfortable living with family but being a single W2 earner the numbers are still not making any sense besides future appreciation is highly speculative.

So I was thinking if it would it make sense to buy a 12 plex in places like Oakland for around 2.2 mil using the sales proceeds of the triplex perhaps do a 1031 exchange. I am expecting to sell the triplex for around 1.2 - 1.3 mil and there is about 500k in loan balance so there is up to 800k in equity. Appreciate your inputs

Thanks

[Axel Meierhoefer]

@Sateesh Kumar I have worked for clients in Oakland and Berkeley and lived near by for three years. I always avoided Oakland and a 12 plex for 2.2 mil is probably a really scary area.

It all depends on what your goals are but if I were I your shows I would buy probably 6+ SFR properties for cash right now, get about $8K in income/month, and when reates come down, I would put nonrecourse loans on them, use the remaining $400K and get another 3 SFR units. With 9 properties, 4 paid and 5 financed, you could clear a bunch of cash flow, pay for rent in SFo area or almost and if you buy something in SFO, you could do the home buyer jumbo loan thing and pay the mortgage with the passive income your tenants give you each month.

Keep in mind that a 12plex is a commercial real estate property that does not apply for traditional residential financing and the only way to increase value is by improving the rent roll. I would be very careful about that in Oakland.

One indication, just to give you something to ponder:

When I worked in Oakland in 202 they had the Warriors (basketball), A's (baseball), and Raiders (NFL football). For 20 years the teams tried to get new stadiums but the city refused.

The Raiders are in Vegas, The Warriors are in SFO, and the A's will be in Vegas soon as well. THat's not a place I suspect will appreciate much. The Bay area has also been the one area where property values are declining the last few years and work from home has driven a lot of people out of the overpriced Bay area markets.

I would work there, rent, and invest in much better-paying locations.

Happy to help you if you are interested.