Rent but bought a SFH you could afford elsewhere in SF Bay Area?

Question

Hi All,

I've been on the blogs and podcasts for a bit here and most of what is discussed is deals and strategies in the midwest and other areas where things are significantly cheaper than where I live, the San Francisco Bay Area. I would love to hear some success stories of the approach I am now considering.

Originally I would have wanted to buy a Duplex, live in one side and rent out the other. But to buy a duplex on the Peninsula is over a million dollars. Now I am considering finding a SFH at a more affordable price, possibly in the East Bay as strictly an investment. Renting that out and stay renting where I am now. Curious if anyone else has used this strategy in the Bay Area. All stories, comments and input are appreciated!

Arlen Chou · Answer

@Ben Rice if you do a search for me on BP you will find a few that I have posted with details of the deals.  One specifically applicable to your situation would be the 4 condos that I purchased in the NOBE area of Oakland this year for a total of $600k.  This was a deal I found on Redfin on the open market.  The property use to be a 5 (FIVE) unit apartment building that was converted to 4 condo's by the previous owner.  The property comes with its own set of headaches, but that is the trade off for a low price of entry.  I know of 3 duplexes and a triplex that are under the $500k mark that need help but I believe have potential upside.  They are all flying under the radar for various reasons.  I have been watching these buildings and corresponding neighborhoods for quite awhile and I am just waiting for a few more key indicators to flip my direction before making a move.  But the real key to this market is knowing how and what it will take to make a problem property into a gem.

Arlen Chou · Answer

@Ben RiceI would suggest that you expand your search area/criteria.  There are many duplex's and even triplexes under a million dollars.  Mater of fact, there are half a dozen in SF right now...  IF you are talking below $800k, you need to go to the other side of the Bay and BART into the City.  Once you are in the East Bay you can find duplexes for under $500k.  But then again, you have to look in the "up and coming" areas of the East Bay... AND to all of the haters of the EB you don't have to have a conceal and carry license where these properties are located.

Good luck,

Arlen

Franklin Romine · Answer

@Ben Rice  I'm not familiar with the bay area.  Whatever you buy find a property that will pay the bills, something that will cash flow the debt financing.  We are to early in the game to speculate.

Frank

Ben Rice · Answer

@Arlen Chou - Haha yes $800k ~ $1Mil to me, at this point. Just starting out.

$500k and under is more in my ballpark. Do you have any personal success stories that you could share, buying in the East Bay?

Ben Rice · Answer

Hey Sean,

Thanks for the response. Basically I live very close to work and enjoy the neighborhood and geographic location of where I live. If I were to look into buying a duplex on the Peninsula it would run you over $1 Mil. I currently pay $2495/month in rent. The general idea that I would be going for is purchasing a small SFH in the East Bay, or somewhere not TOO far away that I can actually afford and rent that out for hopefully at least a modest cash flow. So the play would be some cash flow and holding the property long term for appreciation as well. Because other than that, it doesn't appear that any other strategy is super realistic for someone like me starting out who doesn't have a ton of capital.

Sean Walton · Answer

Hi @Ben Rice I am doing similar to what you are thinking but it only makes sense in certain situation how much would your rent be? Most areas in the Bay Area rents are higher or equal to the mortgage you would be paying on your potential rental.

I live with my fiance who has a rent controlled studio in San Francisco she has lived in for 5 years so we are paying way below market rate. I bought my condo in the end of 2011 as a short sale. I rent it out furnished for 1 to 3 months at a time. I'm cash flowing about $1000/mo.

Right now I'm looking into cities that allow the construction of in-law units. This is a good potential to get a duplex of sorts that you can house hack. Most cities I've found have a requirement that the owner occupy the building so you couldn't rent out both.

Michael Boyer · Answer

great point, Ben...the sf and even condos in San Fran can be more expensive than large apartment complexes in the Midwest....crazy discrepancy and makes it harder to analyze some of the factors.. Start driving east and things, as you know, get slowly back down to earth. When I had a place in Stockton, all the neighbors got up a 4 am to commute in (bit much for me) but you may just have to drive to east bay as you mention to get numbers that work and I think that line runs as far as Dublin...for a simpler commute...but be sure the strategy fits your lifestyle...best of luck

Sherwin Gonzales · Answer

@Ben Rice, I'm going through a similar dilemma as you.

To open up my options, I have an idea to buy a SFH in the East Bay, perhaps with an in law unit or the potential to expand/ build/ convert an in law unit to rent out, while I live in the main part of the house.

It would be great to hear any opinions or advice on this strategy.

Another idea is to house hack and rent out the other rooms in your SFH if that matches your current lifestyle. Why would you stay renting at your current place?

Rahul Bhatt · Answer

Welcome @Ben Rice It is hard to make number works in the bay area. you can buy if you are buying here you are buying for appreciation.

Rent but bought a SFH you could afford elsewhere in SF Bay Area?

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