Newbie from Oakland, CA

[Scott Kinney]

Greetings all,

My girlfriend and I want to start acquiring rental real estate. Maybe start with single family homes. We live in Oakland, CA. I'd love to find something local, house hack or what-have-you but this market just seems too overpriced and I'm hearing rents are starting to cool or drop. If we buy something at these prices based on currents rents then rents drop we're gonna have a bad time. Is that a good way to look at it? 

So we are looking out of town or out of state, maybe Tulsa (my brother lives there). Any advise on Tulsa specifically or how to find good areas in general would be appreciated.

Thanks everyone!

Scott Kinney

[J. Martin]

Originally posted by @Scott Kinney:

Greetings all,

My girlfriend and I want to start acquiring rental real estate. Maybe start with single family homes. We live in Oakland, CA. I'd love to find something local, house hack or what-have-you but this market just seems too overpriced and I'm hearing rents are starting to cool or drop. If we buy something at these prices based on currents rents then rents drop we're gonna have a bad time. Is that a good way to look at it? 

So we are looking out of town or out of state, maybe Tulsa (my brother lives there). Any advise on Tulsa specifically or how to find good areas in general would be appreciated.

Thanks everyone!

Scott Kinney

 Hi Scott, 
And welcome to the game! I have a couple single family homes in Richmond, and some 4plexes and duplex in Oakland and Richmond. The 4plexes definitely make more cash flow. The SFH has appreciated more.. I don't think that's unusual. So consider your cash flow goals when comparing SFH to small multi-unit. Out of state, you'll also get a different tenant base between the two. You mentioned maybe house hacking or going out of state if you can't find something. If you like living in Oakland, you should utilize the most advantageous loophole in Oakland's rent control rules - the owner-occupant exemption for triplexes and duplexes. This is a way to transition a property and unlock higher rents and value over time. I highly recommend considering it.

Regarding your rent question..  I wouldn't be surprised to see higher-end rents fall by 10-20%. My thought is that with any multi-year double-digit year over year increases (with rents up ~50-100% in the Bay Area over 7 years), it's not that unreasonable to give back the last couple years of increases, at the end of a cycle. I think it's highly unlikely it would drop back to where it was. But I wouldn't be surprised to see it give a little back. 

I haven't invested out of state yet. But I think we've already experienced most of the run-up we're going to get in this real estate cycle, so I'm not bullish on RE prices in the Bay Area. Could keep going, but most of the gains have already been had IMHO. This is different than unlocking value by transitioning a building, as referenced earlier... You'll see lots of debates on here about Bay Area appreciation vs cash flow out of state. 

@Katie P. just announced a meetup in Oakland if you can make it. I'm in Seattle for the summer, but will be back in Sept. Hope to meet you then! Good luck Scott! :)