Is House-Hacking Impossible in Bay Area, CA? I want your opinion!

[Alliya Pinckney]

What's up BP family!

I know many of investors that search for out of state opportunities if they live in Bay Area, CA, or California in general. Especially for beginners. Myself included. But what I'm interested to know is what my experienced and informed BP people think.

I'm currently stationed here with my spouse on military orders and we're going to be here for a while. I wouldn't hate to use a house-hacking option for my first deal, as it would serve multiple purposes for us at this time. My thoughts naturally lean against it due to the property values in this area. But I would love to hear from some of you that have experience in this area or any expensive area.

Are there some hidden gems of neighborhoods to look out for in The Bay that DOESN'T cost $700k?! 

Anyone currently house-hacking in an expensive area? 

Any active duty members here that are using their VA loan and can provide any insight?

Anyone in the area part of a mastermind group they would recommend? 

Any and all recommendations and insight is appreciated you guys; I'm ready to WORK!

Much love everyone, thank you in advance!

[Johnny Hoang]

Definitely  not impossible! I’ve done it more than once and have helped others do is. Here is a response I gave in some other threads. Hope this helps! 

“ It's definitely feasible in the bay area market. That's where I primarily invest/ house hack in addition to out of state. We've helped many people house hack in the SF market but it is a little harder as its competitive and price points in SF are well above a million. Not saying it is impossible in SF because we have done it many times but it's easier in the smaller sub-markets close to SF like Oakland or the surrounding areas. Primarily, it's where you can do a low 5% owner occupied loan to stay in the confirming loan limits( 765K). Here is an example of a house I just helped my buddy get into in Oakland. I replied back to someone else on the forum and thought this may be of interest to you.

Out of state is good for sure as I have done quite a few there but I've realized, the cash out lay is almost the same. 200K on a 20% down is equivalent to 5% down on an 800K purchase. The cash out lay is both going to be 40K however, you will have more upside in appreciation and higher rents in the bay area from my experience. And as long as you can offset the costs by renting out the bedrooms, you can see it is very effective.

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I always recommend house hacking as that's how I started and got my feet wet. In the bay area markets you can house hack and have a pretty good ROI. I've helped many friends and clients down here that has done it successfully.

For example:

Purchase price: 800K

Downapyment: 5% = 40K cash outlay

Monthly mortgage(PITI) = $4,500 on a 3.5% owner occupied 30 year mortgage.

Typically, I will just rent out bedrooms to offset the mortgage cost. There was a Oakland CA property that I just helped my client get into with the numbers mentioned above. It was close to Bart/ public transportation and the average room rents go for $800 for a room with a shared bath and $1200 for a private bathroom. This home was a 5 bed 4 bath and had a 1 bed 1 bath ADU in the back that hes going to live in.

He rented out the main house using the room rental model.

2 bedrooms with a shared bath at 800 each = $1600

3 bedrooms with a private bath at 1200 each = $3,600

Total rents: $5,200

5200 ( total rents) - 4500 ( monthly mortgage) = 700 cash flow

700 cash flow x 12 = 8400 / 40,000( cash out lay) = 21% ROI

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But the kicker is when he moves out the following year to buy another one and rents his ADU out for $1500. Then his cash flow will be $2,200 a month. So on year 2, his cash on cash looks like this: 1500 + 700 = 2200 x 12 = 26400 / 40,000 = %66 ROI

Hope this helps! DM me if you have further questions, glad to help! I can send you some break downs of the previous SF ones I've done to show you what that looks like as well.

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