First-time investor in SF Bay Area

[Anya Klymenko]

Hi Everyone!

I am very happy to have found BiggerPockets community! I am ready to make a first step and purchase our first investment property.

Would greatly appreciate your advice.

Areas of interest: San Francisco and Bay Area, possibly Napa area or Santa Cruz/Monterey

Idea is to start with house-hacking.

The price range we are looking for is between $1.3-$2M. (Duplex, triplex: with at least one 2-bd unit for us)

Naturally, I have lots of questions and hope to get some insights here.

I apologize if these questions are naive, trying to figure things out…

1. Is it realistic to have positive cash flow given the prices on properties?

2. Does anyone have good experience in successful house hacking in SF bay? Would love to know your experience and maybe math.

3. How do you see SF Bay during/after COVID - is rental income under risk?

4. How do Napa or Santa Cruz/Monterey compare to SF Bay in regards to occupancy, does it make sense even to look there?

5. Is it even possible to find good deals in the current market?

Thank you!

[Chris Gordon]

Hi Anya,

Congrats on taking a huge step towards purchasing your first investment property! I am a property investor and manager in San Francisco and to answer your questions:

1. It is realistic to have positive cash flow despite the high prices of properties in the Bay Area. This is helped in large part by very low expense ratios. I purchased two MFH in SF last year and they are both doing well (one is currently a 5+% cap and the other is a 6% cap). I don't live in either but if I did, they would both still have (significant) positive cash flows. This is more difficult with a duplex so I would recommend looking at 3-4 unit properties.

2. I have not personally "house hacked" but many of the contractors that I work with do and they make it work for them.

3. It's difficult to predict future rents and while I do expect some continued short-term pain in parts of the Bay Area, I think long-term, the Bay Area will continue to be an economic powerhouse, and rents will remain strong. I personally believe that venture capital will continue to concentrate here (VC funding data from Q1 and Q2 support this) and tech will continue to grow despite more remote work, etc.

4. Napa and Santa Cruz/Monterey will not have occupancy issues but the rents are significantly lower than SF (without property prices being low enough in my opinion). I looked into Santa Cruz last year as there is a lot to like (college town, weather, beach life, proximity to Silicon Valley) but I couldn't make the numbers work. I would suggest looking in San Francisco, the East Bay, and parts of San Mateo County like Daly City.

5. It's hard to say but with interest rates this low, there are some intriguing opportunities. I would recommend buying a property that has value-add potential (a large garage to add an in-law or ADU, etc.) Being able to add a unit (and thousands in income) make the numbers significantly better.

Let me know if I can answer any questions and I hope this was helpful!