Recommended Data Analysis for Investing in the Bay Area

[Jonny C.]

Hello everybody,

I live in San Francisco and have always wanted to invest in real estate since I was a kid. My grandmother owns some real estate and has always inspired me to want to do the same.

Right now, I definitely do not have enough to invest in SF, unless it was with some partners (which I'm open to). However, I'm tired of constantly taking about investing, studying, reading, etc. I want to finally act on it.

I know we're nearing the height of unaffordability in the BA, but if there's a deal out there I'd like to act on it. I'm trying to move around my work schedule (Realtor by day, bartender by night - my sleep schedule is a mess!) so I can make some of these networking events.

My question is, what is a good data analysis criteria that investors in the BA like to use when looking for an investment?

My goal is buy and hold with positive cash flow (hopefully built-in equity). Wait for 6 months of seasoning and then repeat it for another property. 

The 50% rule and the 2% rule just don't apply out here. The BA is like an island unto itself as far as RE goes. 

Any advice for a newbie trying to get his feet wet without going bankrupt the first go around? lol... seriously

I always looked outside of the BA and California because I thought it was too expensive, but now I just want to keep my money here as I feel it's a lot safer/lucrative of an investment.

My long-term goal: Net cash flow of 4K/mo so I can stop bartending and only work off of referrals for my RE sales job (if at all) because RE investing is what I've always wanted to do full-time. As a kid, I can remember my grandmother going across the street to one of her properties and picking up an envelope of cash from her tenants. To this day, I think that is the coolest thing ever. 

Thanks for your time everybody! Any advice helps!

[David Schach]

 @Jonny C.:

 I have been researching many options over the last few months here in San Francisco vs bay area, vs out of the area/state. I have built a huge majority of my working capital through real estate in the bay area and SF specifically. For me what it comes down to today is this, almost EVERYWHERE is over heated. All those markets you keep reading about at, are peaking in this current cycle. Any place you invest you need to have one of the following be true in my opinion:

1) purchase considerably below market value (very challenging in a red hot market)

2) force appreciation though increase rents or rehab (easier if you have skills/desire/patience)

3) be able/willing to wait for the next cycle (5, 7,10,15, 30 years, think Texas in the late 80s)

4) have great positive cash flow that you can weather rent loss or massive reductions in rent to the tune of 30-50%. (yeah, think 50% drop in rents on your cash flow statement)

5) not worry about losing all your money and going into foreclosure and starting over (hell, its only time and money)

Having said all that, I am constantly circling around to this: San Francisco in specific, NOT the bay area, is so unique and so politically and geographically constrained that if you live here, you would be foolish to not focus a HUGE amount of your REI time and energy looking right here. Fortunes are made in SF and can be made very quickly. Yes you can lose your shirt, but only if you are forced to sell on the dips, if you can ride out the dips you can break even at worst. And its SF, its the greatest city on earth. People WANT to live here, they come from all over to live here. Demand will always outpace supply, always. They aren't able to add much supply here, in most places we cant go up any higher. The only inventory is coming in SOMA and parts of mid-market where apts or condo developers are getting over 15+ stories. In contrast look at Denver, they can add 10s of 1000s of houses in a heart beat, all over Texas the same, Utah, Indy, Ohio, heck, almost without exception everywhere in the US you can add inventory and LOTS of it. Yeah, basically everywhere but SF and NYC. Here we are 75% an island. Take it for what its worth, I live in SF, I love SF, its VERY VERY expensive for three reasons. LOCATION LOCATION LOCATION!!!!