Northern California Rental Properties

[Grant Smith]

Hey everyone, I am a new prospective investor seeking primarily multi-family homes in the greater Northern California area; I'm looking for feedback from anyone on this platform regarding their recent experiences with rentals of this category. I have scoured 50-60 possible properties in a number of cities to no current avail. Obviously, it isn't a cake walk finding deals especially in semi-coastal areas and California in general, but if anyone has any insight or if anyone is willing to share their experiences with the current climate I would be really appreciative. Thanks in advance for your guys' input, this is my first forum post so I am also looking to connect with many of you and especially any users in my area.

[Brian Burke]

@Michelle C., I'm curious what you think will be the catalyst for a decline of prices in the north bay?  I think we'd all like to invest in a dip, so I hope you are right that it is coming. 

From where I sit, I see tight inventory, very little construction, an incredibly unfavorable political climate for developers (thus not much hope for relief from the supply-side) and enormous demand from not only local residents but also from much higher priced neighboring counties (who actually see our astronomical prices as a bargain, imagine that!).

The two big headwinds I see are affordability (not so much of an issue for folks migrating here from San Jose, for example) and lack of investment returns (specifically referring to rental income versus price).  These factors seem to be an obstacle for continued rampant appreciation, and will likely lead to slowing price growth or a plateau.  But could it or would it lead to a dip?  I'm not so sure, at least not anytime soon.

My advice for people wanting to invest in rentals in the north bay?  If you have boatloads of cash and are parking money into real estate, fine (although I would argue there are better options for those people).  But if you are a beginner just trying to get that first investment?  It's a real challenge.  You probably won't get the huge appreciation you are hoping for, and you probably won't get much cash flow, either.

Five years ago I bought around 120 rentals here, and now I'm selling them.  I wouldn't buy them again today.  Nor do I expect to ever have the opportunity to repeat this trade in my lifetime.  So for those of you eyeballing the north bay (or any bay area county or coastal area of CA) as a place to start your investing career, tread carefully and don't expect "deals", just consider yourself lucky if you find something that pencils.  Or wait for that dip, if you aren't retired by then.