Newbie in San Francisco Bay Area, California

[Michael Martin]

Hello all. My name is Michael M and I currently rent an apartment in the San Francisco Bay Area. I have zero experience in real estate, and I'm interested in learning how to successfully cash flow buy and hold rental properties to supplement my income and provide for a quicker retirement. I currently work full time and am actually fairly successful in my "main gig" so do not want to let my work suffer.

Buying rental property in the Bay Area seems... impossible. Or at least incredibly difficult. I read Brandon Turner's "The Book on Rental Property Investing" and I do not believe I'd be able to find a place that would meet the 2% rule test or even the 1% or 0.5% rule test.

At this point I'm kind of "playing make believe" and researching different markets by going onto Zillow. Some markets seem promising (like Dallas) but long distance investing for a beginner seems daunting!

Anyways, that's where I'm at. Any other Bay Area investors here? Any words of wisdom? 

Thanks!

[Elaine Hester]

Hi Michael—welcome to BP!

My husband and I lived in the SF Bay Area for 13 years where we began investing back in 2003—more or less by accident you might say. Not knowing anything about what we were doing, we made many costly mistakes, but have still managed to come out on top so far. 

Like you, we were renting—first in the city, then in the East Bay. Determined to buy whatever we could afford in order to stop throwing away our hard-earned money on rent, we bought our first home—a 2BR condo in Walnut Creek. Four years later—at the very top of the market just before the crash, we ignorantly bought a single family home, also in the East Bay and rented out the condo. 

After the crash happened in 2008, many homeowners we knew at the time couldn't handle that their mortgage was higher than their home value on paper, so they purposely foreclosed. We were in it for the longterm though and, while everyone else was whining about their losses, we celebrated the fact that, due to the lower assessed values, our property taxes went down. ;D

We bought our third property in San Diego in 2011 while renting both the Bay Area properties. Yes—there were a few years of negative cash flow in there, but—against everything the likes of Robert Kiyosaki will tell you—we were banking on appreciation. We sold the single family home a couple of years ago for about $150K net profit, which allowed us to buy a couple of acres of land in San Diego County that we're now under development with for two new homes, and still own the condo which currently yields about $200/month cash flow and $200K in equity. 

This is NOT by any means meant to show you an example of a great SF investment, but just to offer you some hope. Personally, I still think there's nothing like the Bay Area for investing because of its strong growth potential that is backed by the highest salaries in the nation. I think no one can argue that, despite high prices and negative cash flow, investors WILL continue to make money there. 

My best advice for you right now would be to do what I wish we did when we were starting out and that is to find a duplex to house hack. Check out Brandon Turner's Top 20 best RE books ... a MUST READ for you is Scott Trench's Set For Life. Do everything he says and you'll be on your way in no time. :)

Please connect with me and let me know how it goes. Best of luck to you!!