~$400K good cash flow properties in the Bay Area

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~$400K good cash flow properties in the Bay Area

Peter Yang
San Mateo, CA · Member since 2016 · 6 posts · 1 vote

Hi folks, I'm looking to purchase my first investment property in the Bay Area. Looking for positive rental cash flow for about $400K purchase price.

I know that's a tough ask given the inflated prices in this market, but having gone through the forums it looks it's still possible to find properties with good value in places like Richmond, Hayward, etc. 

Any tips to get started or areas to look into are welcome!

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Robert Marston
Real Estate Agent · San Leandro, CA · Member since 2016 · 46 posts · 71 votes
9y

If I do a straight up "Active Residential Income" search with a max of $425k I see 15 listed, almost all of which are duplexes in Oakland or Richmond that appear in need of extensive maintenance! Got a couple in Antioch too. Most would probably need to be cash deals and even state as much in the listings. 

East Oakland is a fascinating neighborhood, much like Richmond, these neighborhoods have not been overrun with big amounts of Bay Area Money, or at least yet. If you have the stomach for buying a property that needs some(much) attentive care and the patience to deal with a changing environment you might find some nice long-term wealth investing in these cities. If West Oakland is any indicator of the growth we can expect in East Oakland properties should appreciate well (Ah! I have to say though, investing with a big expectation on property appreciation is a gamble! Be safe with your monies!) 

If you choose to invest in these regions expect to bring your properties fully up to code if they are not already. The fire in Oakland shook the box and now code violations will be synched up to limit liabilities going forward(My opinion). Closing costs are high here too as point of sale requirements state Sewer Lateral must be in good order and auto gas valves must be present.(there is a small part of unincorporated Richmond that is excluded from this) High Transfer taxes in Oakland and you have to pay a city tax on your rental incomes($89 once then $13.95/$1,000 each year). Now, most of these closing costs are negotiable however even 50% of this could be more than 100% of costs in regions with less point of sale requirements. Just more things to consider when looking at the bottom line!

I'd be happy to discuss East Bay investments with you more if you'd like! Let us know of all your questions! =)

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  • Umar JavaidPro Member
    BiggerPockets Support · São Paulo, São Paulo · Member since 2015 · 548 posts · 79 votes
    9y

    Welcome to BiggerPockets @Peter Yang

    BiggerPockets
    0Reply
  • Wes Blackwell
    Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
    9y

    Hi @Peter Yang! Great question!

    The last time I ran the numbers, there were only like 11 small multifamily properties under that price point. Slim pickings. If you have $400k down that's a completely different story. Most of these properties were in Oakland or Richmond, with 1 or 2 in places like Antioch and Pittsburg.

    But, of those 11 the average purchase price was around $350k with gross monthly rents of $2,000. So If you've got 25% down with a 5% interest rate you're looking at an average PITI of ~$1,850.

    Your cash flow on average is only gonna be $140 per month BEFORE CapEx, vacancy and utilities. Ouch. But it gets as high as ~$660 per month though, so there are deals to be found.

    If you're willing to look at little further out at areas like Sacramento and the Central Valley, the options are really going to open up and your money will go much, much further. Have you looked into investing in areas within driving distance just outside the Bay?

    0Reply
  • Jeff Wallenius
    Specialist · Indianapolis, IN · Member since 2014 · 670 posts · 352 votes
    9y
    Peter Yang welcome to Bigger Pockets! This a great resource to network and find assistance with your investing needs. Wes Blackwell has a nice handle on the Central Valley and is very responsive in communication. Have you thrown around the idea of investing out of state?
    0Reply
  • Robert Marston
    Real Estate Agent · San Leandro, CA · Member since 2016 · 46 posts · 71 votes
    9y

    If I do a straight up "Active Residential Income" search with a max of $425k I see 15 listed, almost all of which are duplexes in Oakland or Richmond that appear in need of extensive maintenance! Got a couple in Antioch too. Most would probably need to be cash deals and even state as much in the listings. 

    East Oakland is a fascinating neighborhood, much like Richmond, these neighborhoods have not been overrun with big amounts of Bay Area Money, or at least yet. If you have the stomach for buying a property that needs some(much) attentive care and the patience to deal with a changing environment you might find some nice long-term wealth investing in these cities. If West Oakland is any indicator of the growth we can expect in East Oakland properties should appreciate well (Ah! I have to say though, investing with a big expectation on property appreciation is a gamble! Be safe with your monies!) 

    If you choose to invest in these regions expect to bring your properties fully up to code if they are not already. The fire in Oakland shook the box and now code violations will be synched up to limit liabilities going forward(My opinion). Closing costs are high here too as point of sale requirements state Sewer Lateral must be in good order and auto gas valves must be present.(there is a small part of unincorporated Richmond that is excluded from this) High Transfer taxes in Oakland and you have to pay a city tax on your rental incomes($89 once then $13.95/$1,000 each year). Now, most of these closing costs are negotiable however even 50% of this could be more than 100% of costs in regions with less point of sale requirements. Just more things to consider when looking at the bottom line!

    I'd be happy to discuss East Bay investments with you more if you'd like! Let us know of all your questions! =)

    4Reply
  • Peter Yang
    OP
    San Mateo, CA · Member since 2016 · 6 posts · 1 vote
    9y

    Thank you all for your responses! 

    Being new to this, I'm hesitant to buy a property that requires a ton of upgrade or is in a neighborhood I'm less familiar with. Although it does seem like buying a fixer upper / a property in non-Bay Area markets is a better investment right now.

    Definitely willing to consider Sacramento and other surrounding areas though. 

    0Reply
  • Wes Blackwell
    Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
    9y

    @Peter Yang

    Here's a couple posts I've written about the Sacramento area and the potential opportunity. Feel free to reach out if you have any questions or want to know what kind of properties are currently available. Best of luck no matter which area you go with! :-)

    1Reply
  • Sandeep S.
    Investor · Cupertino, CA · Member since 2012 · 118 posts · 121 votes
    9y

    @Peter Yang

    I would recommend buying in Hayward which is quite close to San Mateo and one of the lowest price points for bay area.   You can still get condos there for your price range.

    I have been buying in Hayward (for _cash_flow_) for 8 years now..

    2Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    9y

    Possibly in Gilroy South Bay for a solid town home. Or an average 2/2 condo in 95123 for mid 400K.  Rent is about 2 grand +350 hoa due.

    About two thirds of properties closed last three years in Gilroy are by investors. Most were multi family, single family home. For $400K SFH is out. For Oakland Richmond SFH may be section 8 clients. These depressed neighborhoods home prices have appreciated 2.5-3X from the through do not expect any bargains anymore.

    Buy one is rentable condition as one can not get mortgage(FHA, low down) on the dumpy homes as slumlord.

    1Reply
  • Alexander Price
    Investor · Gilroy, CA · Member since 2016 · 255 posts · 195 votes
    9y

    @Sam Shueh

    I live in Gilroy.  Not sure what properties are going for 400K in Gilroy, but they are likely not in good neighborhoods. There is a condemned house in a good neighborhood I know of that might go for that price. That is the exception. Also, cash flowing these after all expenses is rough. I was looking into renting out my primary residence because of a potential move. My loan is sub $400k on it. Considering all expenses, reserves and using a PM, it cash flowed a whopping $80/month. The average gross rent per month versus cost for this area seems to hover around 0.6%. I am new to the game so understand my perspective and experience is limited.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    I have been investing in richmond this year.... were else can you buy homes for under 200k 20 minutes from downtown SF.... its just got to move and the only move its going to make is up ..

    at least thats what I am thinking.... LOL  

    I remember buying in East palo Alto in the early 80s for 15k a house.. it was a true war zone.. everyone told me i was nuts I flipped them for 20 to 25k and thought I was the smartest dude on the planet

    I lived in PA at the time so it was ony 10 minutes to drive over and pick what I wanted to buy.. just needed to no go there at night... day time was fairly safe but still dangerous place back then.

    Richmond it seems the real ghetto areas have shrunk and you just have a lot of blue collar type home owners coming in... 

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  • Diane G.
    CA · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Jay Hinrichs

    I am going to look at Richmond since you bought there... How do you like your new purchase so far?...

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Diane G.  there are pockets of Richmond that are just fine.. there are plenty of SFRs for 200 to 250k

    I am buying lots and will be building starter housing. 

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  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    9y
    Originally posted by @Alexander Price:

    @Sam Shueh

    I live in Gilroy.  Not sure what properties are going for 400K in Gilroy, but they are likely not in good neighborhoods. There is a condemned house in a good neighborhood I know of that might go for that price. That is the exception. Also, cash flowing these after all expenses is rough. I was looking into renting out my primary residence because of a potential move. My loan is sub $400k on it. Considering all expenses, reserves and using a PM, it cash flowed a whopping $80/month. The average gross rent per month versus cost for this area seems to hover around 0.6%. I am new to the game so understand my perspective and experience is limited.

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    9y

    Gilroy Town home or condo..... NOT SFH......

    Another suggested areas are Hollister or Salinas.   I will not venture into Central Valley as the time distance to take care them is too time consuming.....

    1Reply
  • Alexander Price
    Investor · Gilroy, CA · Member since 2016 · 255 posts · 195 votes
    9y

    @Sam Shueh SFHs All the new stuff going in is town homes.

    @Jay Hinrichs East PA is still a war zone. Only reason to go there is Ikea for the meatballs. I did some work on a rental property for a friend of mine a few years back. The amount of people who swung by to scope our tools was insane. What a pain in the butt to pack them out everyday. 

    0Reply
  • Diane G.
    CA · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Alexander Price

    I am totally with you... I go to East PA for the exact same reason as yours... Lol

    That said, if Jay still has those property there, he would be looking at $500K a piece now I think, from his $15K purchase price

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    @Diane G.  but at the same time I bought a new construction in Milpitas for 80k  a shapel home

    I owned 3 homes in regualr Pa that I paid under 200k for.. 

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  • Ori SklootPro Member
    Investor · Berkeley, CA · Member since 2016 · 242 posts · 304 votes
    9y

    I agree with @Jay Hinrichs about buying in Richmond.  Many people are afraid of buying in a rougher area but I see lots of opportunity for growth.  Plus there are still some great deals to be had.  I bought a fully rented 4-plex last month with awesome cash-flow for just over $400k   Its not without issues, but so far all the tenants are great and have paid on time. 

    Jay - If you need boots on the ground or if there is an opportunity to partner in Richmond please let me know. 

    0Reply
  • Jana CainPro Member
    Enrolled Agent · Richmond, CA · Member since 2016 · 225 posts · 148 votes
    9y

    @Peter Yang Richmond definitely has bright pockets (at least when compared to the common expectation), and geographically, it's actually fairly big. I have my eye on a couple of neighborhoods that, if I'm successful in buying my primary residence in the next few months, I will be looking to make my first investment within the following 12 months. I'm happy to let folks who are unfamiliar with the area think the whole city is a war zone, though. :-)

    0Reply
  • Greg Hamer
    Real Estate Agent · Carmel, CA · Member since 2015 · 193 posts · 128 votes
    9y

    in reference to Salinas, the rental market is crazy.  prices are going through the roof (in comparison to the median income levels).  Unfortunately the folks with cash have already snapped up a large portion of "deals" to rent out again.  there are some deals to be had, but if you come in with 20% the math doesn't quite pencil out.  you really need to come with all cash offer and bet on appreciation.  which sucks for an investor that is starting out.

    1Reply
  • Greg Hamer
    Real Estate Agent · Carmel, CA · Member since 2015 · 193 posts · 128 votes
    9y

    oh, and there are SFR's in salinas for 400k or less, but it is like EPA; a warzone for most of those properties or they need a lot of help. any "desirable" areas are 500K and up.

    0Reply
  • Diane G.
    CA · Member since 2016 · 1k+ posts · 1k+ votes
    9y

    @Greg Hamer

    I agree with you 100% on that unless you are all cash, there is no point investing in RE today, as the 4% you will be making, after all the hard work, goes to paying the bank....That said, this indicates a peak to me.....SO be patient, and keep your powder dry.... You wont be waiting forever... i suspect you wont be waiting for more than 12 months....

    0Reply
  • Eric Clayton
    Real Estate Agent · San Jose, CA · Member since 2016 · 12 posts · 4 votes
    9y
    Contact me
    0Reply
  • Andrew Brewer
    Developer · Austin TX - San Jose, CA · Member since 2016 · 66 posts · 45 votes
    8y

    @Jay Hinrichs

    where are you finding these under 200k deals in Richmond? Are they all offmarket?

    0Reply
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