Why Househacking n SF Bay Area is not for me

[Susan Tan]

Only from experience of walking around quiet suburbs and touring properties did I finally realize that house hacking in SF Bay Area is not for me. This month, I've toured a number of condos & single family houses in the Far East Bay suburbs of the SF Bay Area with my realtor. All of them are $500k+ properties and above. Real zoned duplexes and multifamily apartments start at $800k+ in SF Bay Area, which is beyond my budget. Each time I tour a property in either Hercules, Richmond, El Sobrante, or Pinole, I came away feeling more and more disappointed.

There were so many big tasks that come with house hacking in general. I had to think creatively about converting the bonus room or dining room into an extra bedroom and creating new drywall to partition extra space into a new bedroom. And even then I'd still have to share the same kitchen and living room with potential tenant roommates. To think about screening tenants myself & creating house rules for potential roommate tenants seems like a big task. To further go shopping for furniture & interior wall decor & interviewing a contractor also seem like big expensive tasks. The responsibilities of a property owner who does house hacking does not end on the closing date of the property. 

None of these quiet safe suburbs are in walking distance to grocery stores and shopping centers. I don't drive nor own a car so living in a quiet isolated suburb would mean relying heavily on Uber each time I am outside of the house. I love using Uber & Lyft to get anywhere but I also like walkable cities a lot more.

I'm also amazed that an exact 1,500 square feet single family home is orders of magnitude more in SF Bay Area compared to the Midwest. Putting a $200-$300k downpayment on a negatively cash flowing property in SF Bay Area would easily cover at least 10 down payments on 10 different Midwestern properties that each have a CAP rate of 8% or more. I don't want to play the appreciation game in CA; I invest for positive cash flow on every property I buy. CA is not a cash-flowing state. Combined with strong tenant protection & no eviction laws, this seems like investing anywhere outside CA or HCOL coastal cities is the better investment decision.

I decided I don't want to drastically alter my lifestyle from living in a walkable urban area to living in a car-based suburb. Sure, I may have thrown away the massive investment gain that a negatively cash flowing CA property would appreciate 2x or 3x more in future. I'm sure a LOT of CA-based investors primarily bet on appreciation and pay out of pocket for the expenses & mortgage. I don't believe in being house rich & cash poor. I'm going to continue to rent in SF Bay Area and continue to invest in the Midwest as I've been doing for the past year. To help me stick to the plan, I made a post-it note on the wall in front of me that states my investing goal this year. None of them have anything to do w/ the SF Bay Area.