Real estate newbie from San Francisco Bay Area

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Real estate newbie from San Francisco Bay Area

Brian Rinker
San Francisco, CA · Member since 2018 · 7 posts · 1 vote

Hey all at BiggerPockets, 

I am self-employed health writer and journalist living in San Francisco. I am looking to start investing in real estate as soon as I can. Like many here, I want to build long-term wealth with real estate and generate passive income through rental properties. BiggerPockets, in large part, has ignited in me a passion for real estate investing I didn't even know I had. But now that the passion is burning, it seems so natural, like it has always been there. 

For my first goal, I am pursuing an FHA loan for a multi-family property in the east Bay Area--Oakland, Berkeley, Richmond, Concord, Hayward, Castro Valley, etc. Basically anywhere in a 30-60 mile radius of Berkeley, where my wife goes to school. After that, my next goal is to invest in out-of-state rental properties or in more affordable areas in California, like Bakersfield and Sacramento.

As a newbie, I am looking to learn as much as possible. I am excited to connect with like-minded people, learn the ropes and start investing!

Best,

Brian

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Gene HackerPro Member
Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 969 posts · 488 votes
8y

Hi Brian,  I would be very cautious buying right now in the bay area.  Bruce Norris is a real estate forecaster (with a remarkable record) has been posting data showing that Bay area properties are extremely overvalued. 

I assume most buyers right now in the bay area are not overly excited about the low cap rates so they are primarily hoping for future appreciation.  At this point, I think there are many areas outside of the bay area with better cap rates which also have more potential for price appreciation.  

Bruce Norris listed the following CA areas which are still below the past peak and could have room for appreciation:

Riverside: +1.7%
Sacramento +5.4%
Fresno +5.7%
San Bernardino +9.1%
Kern County +11.8% 

In comparison here are the figures for the bay area:

Santa Clara County -43.6%
San Francisco County -64.0%

San Fransico County is seriously overvalued right now.  Could it keep going up? Sure but there is more risk than other areas which are priced more in line with historical norms.  The other thing that makes me especially worried about the bay area is that is tied so closely to the tech industry.  The stock market (specifically tech) has been on an amazing run and has had one of the longest run in history without a correction.  The stock market is overdue for a correction and a large correction in tech could be very disruptive to bay area home prices.  

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  • Ryan Cox
    Investor · Austin, TX · Member since 2015 · 263 posts · 186 votes
    8y

    Welcome to BP! @Brian Rinker  Lots of good conversation & smart people!  Make it happen in 2018!

    1Reply
  • Logan AllecBusiness Member
    Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
    8y
    Welcome, Brian Rinker My first deal was an FHA 4-unit down in the LA area. Feel free to reach out with any questions.
    Clarita CPA Group516 Reviews
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    1Reply
  • Max Gradowitz
    Bakersfield, CA · Member since 2016 · 378 posts · 307 votes
    8y

    Welcome!

    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    8y

    Welcome.

    0Reply
  • Brian Rinker
    OP
    San Francisco, CA · Member since 2018 · 7 posts · 1 vote
    8y

    Thanks everyone. Looking forward to connecting. 

    0Reply
  • Brian Rinker
    OP
    San Francisco, CA · Member since 2018 · 7 posts · 1 vote
    8y

    Thanks @Logan Allec I will for sure reach out. 

    And, @Ryan Cox, 2018 is going to be the year I buy my first property! 

    1Reply
  • Gene HackerPro Member
    Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 969 posts · 488 votes
    8y

    Hi Brian,  I would be very cautious buying right now in the bay area.  Bruce Norris is a real estate forecaster (with a remarkable record) has been posting data showing that Bay area properties are extremely overvalued. 

    I assume most buyers right now in the bay area are not overly excited about the low cap rates so they are primarily hoping for future appreciation.  At this point, I think there are many areas outside of the bay area with better cap rates which also have more potential for price appreciation.  

    Bruce Norris listed the following CA areas which are still below the past peak and could have room for appreciation:

    Riverside: +1.7%
    Sacramento +5.4%
    Fresno +5.7%
    San Bernardino +9.1%
    Kern County +11.8% 

    In comparison here are the figures for the bay area:

    Santa Clara County -43.6%
    San Francisco County -64.0%

    San Fransico County is seriously overvalued right now.  Could it keep going up? Sure but there is more risk than other areas which are priced more in line with historical norms.  The other thing that makes me especially worried about the bay area is that is tied so closely to the tech industry.  The stock market (specifically tech) has been on an amazing run and has had one of the longest run in history without a correction.  The stock market is overdue for a correction and a large correction in tech could be very disruptive to bay area home prices.  

    3Reply
  • Leslie Pappas
    Professional · San Francisco, CA · Member since 2014 · 876 posts · 301 votes
    8y

    Welcome @Brian Rinker, sounds like you are doing pretty well with taking all the right steps. This site is great for networking and getting a ton of real estate information. 

    When you are ready to invest out of state there plenty of other opportunities elsewhere. My clients are involved in institutional grade properties across the country. My recommendation is to choose cities in safe and economically diversified areas with above-average income and population growth. It can also be safer to diversify your investment properties across the country.

    Best of luck!

    1Reply
  • Brian Rinker
    OP
    San Francisco, CA · Member since 2018 · 7 posts · 1 vote
    8y

    @Gene Hacker Yeah, I hear ya. My initial thought was to invest in Kern County or out of state. But when I learned about the FHA loan, I got excited that with the low down payment I might actually be able to move into a multi-unit this year in the Bay Area. Of course it would still have to be a fixer-upper out in the cuts. Now I am not so sure I could even get loan large enough. It is so expensive here. I will message you to discuss further if you're interested... plus i have some Lake Isabella connects.

    0Reply
  • Brian Rinker
    OP
    San Francisco, CA · Member since 2018 · 7 posts · 1 vote
    8y

    @Leslie Pappas Great recommendations! I am scouting cities right now. Thank you so much. 

    0Reply
  • Cody Evans
    Wholesaler · Fairfield, CA · Member since 2017 · 472 posts · 145 votes
    8y

    Hi Brian,

    You made a good choice getting started on Bigger Pockets because you can learn so much from here. Hopefully we see each other at a Meet up some time

    1Reply
  • Jonathan PfluegerPro Member
    Ben Lomond, CA · Member since 2016 · 338 posts · 337 votes
    8y

    @Brian Rinker

    Welome to BP, by far the best decsion you made today!

    1Reply
  • Gene HackerPro Member
    Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 969 posts · 488 votes
    8y

    @Brian Rinker , Sure, feel free to message me anytime.  I always enjoy discussing the California real estate markets.  

    2Reply
  • Ethan Cooke
    Rental Property Investor · San Francisco, CA · Member since 2016 · 227 posts · 365 votes
    8y

    @Brian Rinker - Welcome! I encourage you to go the local Meetups hosted by Ryder Meehan & his business partner Chris (Virtual Investors Group) in San Francisco, and Michael Morrongiello (Bay Area Wealth Builder's Association). Both venues are excellent. Michael, who has been investing in real estate in the Bay Area and out of state for decades, is hosting a 1-day "Crush It!" RE investing seminar next month for $199. He really knows his stuff--how to find deals, how to finance them, how to find partners, etc.    https://www.eventbrite.com/e/crush-it-learn-the-se...               

    Have you considered house-hacking? Check out the BP podcasts on the subject and read some of Brandon Turner's books. Recently I was reading a BP post about a woman who bought a 3BR/2BA in Pittsburg, CA and the rent she collected from her 2 roommates paid the mortgage and all expenses right off the bat. She was living for free AND gaining all the appreciation on the property. I'm doing something similar: In addition to a couple of properties I own in the Bay Area, I recently rented a 3/2 San Bruno house with an in-law unit downstairs (effectively 2 units). I then painted the inside and furnished both units. I'm paying about $4000/mo in rent and another $500 in expenses and now I am renting them out for about $6000/mo combined. Similar upside as house-hacking in terms of nice cash flow, but without the big risks or big rewards of long-term property ownership. 

    Enjoy the wealth of info on BP and at the local meetups!

    1Reply
  • Brian Rinker
    OP
    San Francisco, CA · Member since 2018 · 7 posts · 1 vote
    8y

    @Ethan Cooke I  have never house hacked, but it sounds like a wonderful strategy! I am a big fan and hope to house hack soon. Those numbers are promising. Local meet-ups sounds like a good way to get connected. I am definitely interested in meeting up with like-minded people for coffee or what not.  Thanks!

    0Reply
  • Sanjeev Advani
    Investor · Bakersfield, CA · Member since 2015 · 483 posts · 234 votes
    8y

    Hi @Brian Rinker

    I have been looking at property up in the Bay and it all seems to be very overpriced, even in the smaller cities in the East Bay. With your FHA loan, it definitely makes that goal a much more feasible option, but I'm sure you would still have some payment left over after get your other units rented out.

    Like @Gene Hacker said Kern County is well below its peaks, and our updated numbers look as though Bakersfield specifically is still 20+% below its previous peaks, and is growing at a steady rate with new developments coming on line in the near future.  

    My two cents on this would be to consider looking into properties in Kern County which could start earning you cash flow today, versus waiting longer to save up more money to buy a property in an area which many people view as grossly overvalued at this time.  

    Warren Buffett's biggest lesson in investing was compounding, and the immense value it has in the long term.  If you were to start earning the cash flow and using the compounding method sooner rather than later, it could be a good choice for your pocketbook in the future.

    Wish you the best!

    If you would like to chat further feel free to PM me as well!

    0Reply
  • Brian Rinker
    OP
    San Francisco, CA · Member since 2018 · 7 posts · 1 vote
    8y

    @Sanjeev Advani wonderful advice! I will definitely PM you to discuss Bakersfield's real estate market.  

    0Reply
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