Investor on multifamily in bay area seeking advice

[Arthur Yu]

Hi all. I'm a long-time lurker and the real estate books got me onto this forum. 

i'm doing a 20% convention loan on a owner-occupied triplex in hayward(a suburb in san francisco bay area), the cap rate is about 0.04 including the costs to fix the house up front. i'm also including $300/month(please let me know if i am underestimating this) in addition for all the units for repairs etc. 

This is not an area with quick gentrification, nearest BART is 1.5 miles away. So i doubt this will appreciate too much.

Is 4% cap rate in hayward or suburb of bay area worth the hassle of maintaining 2 units worth of tenants? 

Anybody interested, this is the house:

https://www.redfin.com/CA/Hayward/21498-Oak-St-945...

[Jerome Kaidor]

Hi Arthur.  I'm a multifamily investor (& resident ) in Hayward.   

Hayward has seen some pretty good appreciation over the past 5 years.  It has recovered from the 2008 slump and then some.

That upper Grove St. area is pretty nice.  Grove St is a bit of a secondary route to get from Hayward to Castro Valley.   It's uphill from nasty things that happen down on the flats.  I don't remember seeing any serious multifamily up there.  That's a good thing, because it only takes one bad landlord of a big MF to make a bad neighborhood.

All this being said, 4% is pretty low, and I would not expect you to make any money, cash-flow-wise.  So the question is - how much upside is there in the rents?  Which leads to another question:  Is it inside the City of Hayward?  If so, you might be limited by Hayward Rent Control.   Which limits you to 5% a year.  IF you are subject.  You may not be subject to rent control if you have less than 5 units in Hayward.  Go look up the ordinance; it's on line.  It contains other annoyances, such as Just Cause Eviction, and Interest on Security Deposits.

On Grove Way, you might be outside Hayward.  Go look up the exact city boundaries.  Don't take the escrow company's word for it; they do make mistakes.  If it's outside the City, there is no rent control.  Well, I've heard that there is a rudimentary control in unincorporated Alameda County, but you need to check it out for yourself.  Somebody told me there was a $100/year limitation.

Over the past 5 years, asking rents in Hayward have risen to the point that I am guaranteed a 5% increase for most of my apartments for the next decade.