Any advice/tips for a real estate newbie that is starting out in Bay Area, CA?

Question

Hi everyone! Newbie here to the real estate investing world, but really eager to get my feet wet.

I currently live in San Jose, but am deciding to move to a cheaper location where I can get my first property. As much as I would like to stay around my hometown, houses here are not cheap. I am thinking about moving out to Sacramento, as I see some duplex’s around 500-700k range.

I’m planning on house hacking my first property, which would be a multifamily, and build a portfolio of multi-families within the Sacramento area. Planning to buy a new property every 1-2 years and repeating the house hacking strategy until I have enough capital/experience to start the BRRR strategy.

For the investors that are in Sacramento/Bay Area, I would love to hear about your stories of how you first got into real estate investing. As you can tell, this is a very big step for me and is quite nerve racking trying to make my first purchase as smooth as possible. I would appreciate any tips/advice/books that you can provide me to help jumpstart my real estate journey!

Kenny Hoang · Answer

@Scott Scoville

Hi Scott, I completely agree that the prices in California such as San Jose has completely sky rocketed, which makes it impossible for me to get my foot into the door comfortably. The main reason I chose Sacramento is because I could find a nice duplex/triplex for a portion of the price of a SFH over in San Jose. Also because my partner and I have family here, so we do not want to venture too far for our first property.

We want to start off house hacking to reduce our living expenses, but specifically looking for properties that will cash flow once we move out of that unit. We're currently saving up enough for a 20% down for a conventional loan to bypass having to pay for PMI and MIP, as these 2 additional monthly expenses are a "make it or break it", in finding a cash flowing property in California.

I would love to know what your story was like when you first started your real estate investing journey!

Leslie Pappas · Answer

Hi Kenny,  I live in Silicon Valley, and I specialize in real estate. I can tell you what people here have done to set themselves up for retirement. There are two types of investors here:

1. Buy or inherit and hold for a long time, then cash out and redeploy equity into potentially higher cash flowing properties or other investments.

2. Buy or inherit and hold all their lives while working the properties for income.

I've seen teachers, firemen, software engineers and all sorts of people utilize both strategies successfully. One way or another, however, the investors must work to pay down loans, increase rents and decrease expenses wherever possible. One way or another, they are building their net worth.

Building net worth is how you may possibly retire with fewer worries. If your retirement utterly depends on having adequate cash flow from your properties, any downturns will cripple you. AND you must maintain adequate reserves to take care of the disasters that may happen.

So my advice- build your equity.

Most of my clients fall into the first group above. If you are or become an accredited investor, you can make straight cash investments into funds, which are small portfolios of properties.

Best of luck!

Jake Andronico · Answer

@Kenny Hoang

Congrats!! I grew up north of San Francisco and moved just over the hill to Reno to live and invest. I've house hacked twice here and now run them as full time rentals.

Sac is great market as well, but a little less favorable for taxes, landlord laws, etc. which is what attracted me to Reno.

I decided to focus on renting 4/5 bedroom houses and renting by the room to help to offset the mortgage significantly while living there and then cash flow when moving out. There is significant room rental demand near the University especially.

Multifamily can be awesome as well but there is very limited inventory and sellers know this.

From what I've learned house hacking multiple times, the more uncomfortable you're willing to live the better the deal will likely be on paper.

Best of luck to you no matter what/where you decide, and always happy to provide any insights I can!

Scott Scoville · Answer

Yeah, house hacking is a great way to get the ball rolling. We should see rate cuts in 2025, so there should be relief on the way. Small multi family inventory is low, so it does make that asset class more expensive and competitive, but there's always deals to be found. I started out as an investor, focused mostly on value add, adding square footage, beds/baths. I've done a handful of flips, but mostly focused on buy and hold rentals. I am also an investor friendly agent and have a wholesaling business. Be happy to chat anytime:-)

Scott Scoville · Answer

Hey Kenny, Sacramento is a solid market. Barrier to entry is better than much of CA, rents are high, inventory is low, jobs market is solid. I'm mostly buying value add properties in Sacramento, focusing on Class A and B locations. It's a good long term market, with steady growth. If you're looking for the 1% rule, it will be tough in this market. Let me know if you'd like to chat more about this. Best of luck.

Kenny Hoang · Answer

I would love to connect! I am still learning about the market in Sacramento, and would love to gain any insights that you can provide to help me through the start of my journey.

Wale Lawal · Answer

@Kenny Hoang

Starting a journey into real estate investing with a house hacking strategy within Sacramento may prove a rewarding venture. Therefore, link up with local investors, understand local market dynamics, and keep informed about investment plans, sources of finances, and how best to manage your property. Use people specialized in this field so that you are not caught up in any unnecessary details but can always make simple transactions without any difficulty. Initiate from somewhere small then let it grow—in terms of experience one may have something like house hacking in mind for a beginning. To lead this process of decision-making, formulate distinct preconditions for investing, among them cash flows, expected returns, tolerance of risks and investment timelines.Good luck!

Julio Gonzalez · Answer

Welcome to BiggerPockets, Kenny! Planning to house hack in Sacramento and grow your portfolio with multi-family homes is a smart choice. Best of luck with your first purchase!-Julio

Clayton Silva · Answer

Sacramento and Stockton are both pretty good markets for that strategy.  I have worked with a number of investors in both markets and have a number of great realtors I work with in both markets.  I personally specialize on the financing side of the house and help people get from where they are to where they want to be in regards to lending and financing these deals!  Let me know if you'd like to connect (I also live in between Sacramento and Stockton, so very familiar with both)!