New member looking for pointers in San Francisco market

[Saikat Bhadra]

Hello!

I've been living in San Francisco for the last 6 years, and have recently decided to buying my first property in San Francisco so I joined BiggerPockets. Given that the market is extremely expensive and competitive, I would like to try to house hack to bring down my mortgage costs by either:

1. Purchasing a single family home with the opportunity of renting out a portion of the house (i.e. renting out an in law)
2. Purchasing a duplex and renting out the other unit

I've started the research process over the last few months and needed some help. I've come across this listing which seems underpriced even though it its been on the market for 2 months: https://www.redfin.com/CA/San-Francisco/30-Patton-...

I found that the listing is under conservatorship sale which after doing some research is a pretty convoluted and lengthy process which can deter some buyers. Does anyone have experience with conservatorship sale? Does this listing price look fair or is this one of those listings that will end going for significantly higher than listing at court? I'd love to get some help understanding if this process is feasible and if this listing price is "too good to be true", and any buyer's agent recommendations for conservatorship sales.

Outside of that listing, I'd love to get advice for those who have house hacked duplex or triplexes in the city. I've come across some interesting properties but the key issue I've found that is usually there are no vacant units and the units are paying rents that are rent controlled and severely below market (for example, tenant paiyng $1000 for a 2 bed!). 

1. Since I plan on living on the property and most properties don't vacant units, how difficult is the owner move in eviction process (or a buyout)? Should I only look for duplexes which have a vacant unit to not deal with the hassle?
2. What % of rent can I reasonably expect to net after expenses for the unit i rent out? I've been budgeting a 50% margin (so a profit of half of rent after maintenance, insurance, etc) but that seems low.
3. Has anyone house hacked a unit using short term rentals (for example Airbnb)?  Is that feasible given San Francisco new laws regarding Airbnb? Is this a method to avoid rent control?

Looking forward to hearing about anyone's experience in house hacking in this crazy market!

[Leslie Pappas]

Hi @Saikat Bhadra , the Bay Area is a fantastic place to invest if you have the capital. Now is not the time to buy here, however. And whenever you invest here, you must be prepared for your investment being entirely correlated to the tech industry. I would wait for the next major downturn if you are wedded to investing here.

I've posted this bit elsewhere and I'll share it again:

I live in Silicon Valley, and I'm an investment advisor who specializes 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.

Most of my clients fall into the first group above. If you are or become an accredited investor, you can buy into institutional grade $50-125M projects with as little as $100,000 and diversify. Professionals with decades of experience and very impressive track records do all the heavy lifting for you. You get potential cash flow, tax shelter and appreciation. Loans are non-recourse. This is the world of Delaware Statutory Trusts.

So my advice- build your equity.

Best of luck! Leslie