All Forum Posts by: Becca F.

Hi Erick,

I'm also in the Bay Area. My real estate investing started in Indiana. I rented out my house instead of selling it when I moved to California. You have great goals and allotting time to study markets and analyze deals is so important. 

Your experience and knowledge as an electrician will be really helpful when you look at potential rental properties. I just did a 4 month long renovation on a house in the Bay Area which initially was supposed to be mostly cosmetic. The contractor uncovered major electrical wiring problems after the demo. The electrician did a walk through with me and showed me all the problem areas (burn marks in the wood beams behind the sheetrock from the old knob and tube wiring in an older home). All the electrical wiring was updated in every single room and the proper number of smoke detectors and electrical outlets were also installed and it passed inspection. 

I also read Rich Dad Poor Dad. I get a lot of information on YouTube. I watch Morris Invests. InvestWithAce (Elliot@InvestwithAce) and Sam Primm have lots of free information. Ace talks a lot about tax benefits of owning rentals and how to register an LLC on Instagram. I would ignore the parts where they try to get to buy products and a mentorship program and listen to just the free information in their videos.Good luck!

@Theresa Harris

I looked up rents in that area on Rentometer and average rent is $2032 and median is $2050 for a 1 bedroom, 1 bath. I see some listings for $2500 on Zillow Rents but they've been on there for 30 or more days. I going to assume that I wouldn't be able to get $2500 to $2600. I see new apartment complexes asking up to $3000 a month but they have all the amenities - in unit washer/dryer, gym, etc. If I were to get $2050 a month, I'm operating on a $250 to $300 month loss to cover my monthly payment and HOA fee. For 12 months that wouldn't be that bad. Beyond that, that loss would start adding up if I can't raise the rent a significant amount, assuming no other problems with the tenant or major repairs.

I asked the property management company and there is a 1 to 1.5 month relocation fee to get a tenant out if I want to sell the unit. That fee depends on how many people are living in the property. I would assume that no more than 2 people would live in a 1 bedroom - hopefully there's not 4 people living in that small of a space.  It's worse for people renting single family homes. Sometimes they need to pay $10,000 to $20,000 to get a tenant out of a house, if for example the owner wants to move back in. I just keep hearing the horror stories so I don't know how successful Oakland landlords are. 

@Kenna De Guzman

I asked the management company for the HOA and she said rentals have to be 30 days or over. As far as travel nurses or professionals, it sounds like a good idea. I did take a look at FurnishedFinders. There's a hospital within a few miles. I have a full time job so I'm not sure how much time that would take to manage a mid-term rental with more frequent turnover. If I was renting out long term I would definitely go with a property management company.

@Joe Homs

I agree with you about the home appreciation in California being much larger than other states. I know people who bought properties in the Bay Area before 2010 or way back in the 1970s to 1980s. They're cash flowing really well if they have rentals. A few people sold their homes, took the cash and moved out of state. As far as buying a duplex or single family home in the Bay Area, a house that needs work will be at least $650,000. This house a realtor told me about has great potential as a rental or flip but it would be difficult to finance that much, for me at least. And the property taxes would be high as a rental. In contrast I could buy a duplex for $290,000 in Indianapolis - my property manager keeps me informed about how the market is there since I have a rental in Indiana. Indiana is much more landlord friendly than San Francisco, Berkeley and Oakland (not sure about the rest of the Bay Area or California).

I love California but I think the Midwest and parts of the South are the hidden gems for rental property. I went to an investment seminar and there was a California couple buying property in Tennessee. I'm guessing Kentucky and Ohio are landlord friendly? Sorry for my rambling lol

@James Wilcox

Thanks. I’m trying to sell a bad purchase (a condo) I made in California. If I can net some proceeds out of that sale I can look at properties out of state. 

@Taylor L.

Thanks for the reply. I don't believe the HOA has rental restrictions but I will double check. About 30% of the units are rentals. The Bay Area has been in a seller's market since 2018 (when I moved here) with the market peaking in 2019 for condos. I had to bid over another buyer for that unit. Homes would get multiple offers with sometimes the first day they hit the market with buyers waiving inspections and appraisals. It's not uncommon for all cash offers. A 3 bedroom 2 bath single family home is around $800,000. So condos were in the $750,000 (for a 3 bedroom) and under range.Condos were getting offers within 2 weeks if it was in a highly desired area or renovated condition up until late March/early April 2022. It slowed down considerably when the interest rates increased and condos seem the hardest hit, although home prices are still high even with the price reductions. Many condos are on market for 30 days or longer now. People who have lived in their homes for a long time, prior to 2008-2010 saw their homes appreciate a lot so they do well financially when selling or renting it out at market rate.

My goal is not to keep losing money every month. $2300 is a large amount of money to be out each month and now I'm making double mortgage payments (my current home and this condo) in addition to my rental property in the Midwest (which is cash flowing so renters are paying my mortgage payment) and a HELOC payment (HELOC used for a renovation on a California rental). If I leave the condo vacant the city of Oakland has a $3000 vacancy tax a year. I need sales proceeds in the short term and could probably do 6 months more of monthly payments but that will sting financially.

I currently have a 1 bedroom 1 bath condo on the market. It's near Lake Merritt in Oakland. It was my primary residence (I moved and bought a different home). My listing expires on August 23. I had lots of showings and a few near offers. It's in a walkable location to the lake, shops, restaurants, great for commuting (near freeway and bus stop). The main comments were buyers like the unit but not the freeway noise from I-580 (I have double paned windows and I hardly noticed the noise when I lived there with the windows closed) and the high HOA fee. There is a gated garage with one assigned parking space, a small storage unit/locker, pool, outdoor community area with tables and chairs, on-site laundry facility. I had new kitchen cabinets, quartz countertops, built in microwave, new bathroom vanity installed. Before I put it on the market on the advice of my realtor, I had the old living room carpet and kitchen linoleum removed, laminate floors installed and new baseboards in living room, kitchen and entry way. A new stove was also put in. For those not familiar with the Bay Area, the HOA fees are high in Oakland and in the Bay Area (ranging from a low of $240 that I've seen to over $735).

Here are the numbers:

Purchased in October 2019: $360,000 (not renovated)

Current list price: $345,000 (initial list price $395,000 on 4/26)

Mortgage left: $267,794 (before I make the August payment)

Monthly payment: $1687 (includes insurance and property tax)

HOA fee: $605 a month

My renovation costs: $17,726 (already paid off over 2 years ago)

The renovations realtor had done recently: $11,742 (to be subtracted from the sale or I pay the renovation company that amount within a year)

There was a special assessment last year of $1600 for elevator repair. The complex was built in 1968 so I anticipate more repairs in the future.

From the numbers the lender ran, if it sold for $350,000 I would have netted about $50,000 to $51,000 (after commission, mortgage pay off and the renovation costs). Since it's now at $345,000 I would be netting less. My rough calculations show if I sold at $320,000 I would net about $24,000. 

If I rent it out:

To cover my monthly payment and HOA minimum rent: $2300 (exactly $2293 rounded up, not including property management fee)

Potential rent $2000 to $2600 (from talking to property management company and photos I've sent, who can't do anything until the listing expires). 

Management fee: 8% (about $194)

I don't want to post the listing on a public forum since it's still on the market. Should I continue to lower the price, have a fire sale and extend my contract with my realtor, go with a different realtor when the listing expires or rent it out (until the condo market improves within the 5 year time frame so I could still use the 2 out 5 year capital gains exclusion since I lived in it)? My concern is there are no guarantees with rent and that it could sit vacant, especially if I'm trying to get $2500 to $2600. I appreciate any suggestions. 

Hi Osazee,

Ace's course program is $495 and he offers products a carte such as a spreadsheet to analyze potential rentals for $40. Sam's program is $6000 and has lifetime access to his video courses. That's very pricey and I could use $6000 towards a downpayment on a property. Both of them have a lot of free videos on Instagram and Sam has many videos on YouTube. I'm still getting used to all the terminology: CAP rate, cash on cash return, DSCR (debt service coverage ratio) and how to analyze properties.

I pulled out money from a cash flowing rental (did a cash out refinance) to help me pay for a major renovation for a single family home. I also did a HELOC against this property owned free and clear. I didn't want to finance it but if I didn't my savings account would have taken a bit hit - the renovation cost a lot more than the original estimate since all the electrical wiring was old. I will have one tenant in soon and will need to get some roommates for my tenant in order to start cash flowing paying off the HELOC. I'm looking to possibly do future purchases in Indiana since I already have a property manage there. I've also heard Ohio, Kentucky and Tennessee are also good markets. With California I'm thinking Central Valley past Tracy into Modesto or Fresno (I don't know anything about those areas and if they are good rental markets, just brainstorming).

I'm seeing a lot of investors say they use Other People's Money, which is usually private lenders or hard money loans. The private lenders gives them a loan, do the rehab, rent it out then refinance at the appraised value of the home (mortgage would be about 75% to 85% of appraised value). This seems to work well with lower priced properties like in the Midwest or the South in the below $200,000 range so pretty much nothing in the Bay Area. I was messaging a realtor and he had a motivated seller in the East Bay (San Pablo) but the house was $649,000 - I saw the pictures but didn't see the house in person but it look like a house with a lot of potential. That would be a lot of money to finance. I'm also concerned with being over leveraged. If I have too many loans, won't a bank say no? How are investors financing 20 properties? If the tenants don't pay the rent or major repair costs come up, isn't that risky? 

Thanks for your help.

@Jenny Perron

What areas of Kentucky? I've heard good things about Kentucky as a rental market. I live in the San Francisco Bay Area and own a rental house in the Indianapolis metro area. I bought the house for a very reasonable price and am getting decent rental income. My investor friends who bought property before 2010 in the Bay Area are cash flowing nicely. I made the mistake of buying at the peak of the seller's market in 2019 (my previous primary residence) and I wouldn't cash flow but break even at best on my Bay Area property. It's also not landlord friendly in this part of the Bay Area. I'm trying to sell and take whatever proceeds I get to invest in a better property, mostly likely not in California. I'm a beginning investor and getting used to all the terminology and how to analyze if a property would cash flow. To me Indiana, Ohio and Kentucky seem like great rental markets.

@David M.

@Andy Sabisch

Thanks for the information. I'm still trying to figure out all the terminology: CAP rate, cash on cash return, etc since people have different ways of analyzing a property and whether it's a good purchase and will have good cash flow.

@Ricardo Hidalgo

I appreciate the advice. My property manager who is managing my out-of-state rental (Indiana) owns duplexes and an apartment building. He's been a good mentor so far.  I know a few experienced realtors in the San Francisco Bay Area although properties are expensive here. I know two realtors in the Indianapolis area - I think the Midwest is a really good rental market since it's landlord friendly and home prices are much lower than California. As far as realtors, would they charge me a fee for finding and analyzing deals especially if they're spending a considerable amount of time helping me?