Where to Invest: SF Bay Area or Out of State

Question

Hi All,

I'm a newbie to the real estate game, trying to put together my first deal.

I'm using an FHA loan, and I am looking to buy a multi-unit in Oakland, CA. I've got a deal I'm looking at right now that would cash flow once I move out after the first year owner occupancy requirement goes away (even with about $800 in mortgage insurance).

However, I just talked with an eviction attorney, and he basically advised me to stay the hell away from Oakland and surrounding cities as they are so tenant friendly and therefore made it seem like it's a nightmare to be a landlord in Oakland.

This conversation has left me with some hesitation about investing in Oakland, and it has me thinking about investing in out-of-state turnkey rentals, in either Florida or Texas.

Does anyone have a helpful opinion or advice on this?

Hayden H. · Answer

I agree with @Brian Garlington. Teddy where do you live? If you live close by, I would certainly look at pockets of Oakland that you think has potential because not all parts are made the same. Some areas may have higher quality tenants who will behave differently regardless of laws in place. I've seen landlords in Oakland be successful in all different classes of neighborhoods ranging from ones with section 8 to high end. Oakland is too big to just bucket. Now if your main goal is cash flow, then yes I would invest elsewhere. But if your goal is appreciation, I still believe in the Bay Area regardless of city laws. In some ways, the laws have caused the appreciation.

Brian Garlington · Answer

@Teddy Smith

As a Realtor who also owns rentals in Oakland as well as out of state I get this question all the time. Ask your attorney if he/she owns rentals. If they don't.......

Yes Oakland is tenant friendly and the eviction attorney you are speaking with has some merit. However, there are certainly things you can do when screening potential tenants that can mitigate a lot, bot not all of the foolishness some of them try to pull on you.

Without stepping on any toes, what sort of things has your current realtor shared with you that can help you out with this?

@Teddy Smithundefined

Hayden H. · Answer

Hi Teddy, I totally get where you are coming from. If you can live for free that would be awesome and totally worth the drawbacks. West Oakland is definitely working class. There is crime but mostly vandalism, auto theft, etc. It doesn't get dangerous usually but not a place you want to be outside after 10pm or just wandering around after dark. The tenant base can be difficult to work with since I'd bet most are working class but shouldn't be something you can't handle. I think  once covid is over, multifamily prices should recover assuming the bart station is being used. So it might be a good time to get in if its a good price.

Teddy Smith · Answer

@Hayden Hsu thanks so much for your response, Hayden. Much appreciated.

Teddy Smith · Answer

@Hayden Hsu thanks for the input, Hayden. Much appreciated.

I live in Redwood City, so close by. I'd plan on living in one of the 4 units in the Oakland property for at least a year, maybe longer.

Cash flow is not my top priority, but I do want it to cash flow at least not require me to come out of pocket each month to cover PITI and hopefully enough to cover O&M expenses (e.g. new roof when the time comes, new appliances as needed, etc.)

This property is in West Oakland, within 10 mins walking distance to MacArthur BART. It looks like you're quite close...do you have an opinion on that part of Oakland?

Teddy Smith · Answer

@Brian Garlington yes, that was my thinking. He doesn't own rentals in Oakland, he was speaking from experience of dealing with different legal cases in Oakland as an eviction attorney. And as has been said, don't take advice from someone who has not personally done what they're advising you on...I think there's a lot of truth to that, so I'm glad you responded.

My realtor has been quite helpful. He does own a 4-plex in Oakland and has given me a pretty objective view of the situation, but being a first time buyer, I simply wanted to get some more input.

That being said, do you plan to continue investing in rentals in Oakland?

Where to Invest: SF Bay Area or Out of State

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