All Forum Posts by: Becca F.

My first property was by accident also. I decided to rent my house out instead of selling it when I moved. This property is not in the San Francisco Bay Area but in the Midwest. My purchase price was such a good value for a low interest rate and it appreciated quite a bit especially over the last two years since single family homes were in high demand - I was tempted to sell it to realtors with buyers lined up but decided to keep it. 

I had just replaced the AC/Furnace unit before I moved and the water heater was about 3 years old so my renters are enjoying the AC/furnace more than I did lol. It's cash flowing and I've acquired two more properties since then. 

@Matthew Crivelli

Thanks for your advice. I bought it as a primary residence and was intending to live in it for at least 5 to 7 years. I was not happy living there at the 2 year point and kept analyzing whether I should stay for the long term or look for something else. My reasoning was that generally home prices continue to go up so I wound up making an offer on another place. This was still during the sellers market. It was going to be extremely difficult to show the condo while I was living there with a pet so it was easier to move out then have it on the market. In hindsight some of the renovations recommended by the realtor probably weren't necessary (new baseboards, maybe the new laminate floor) cost me valuable weeks before the interest rates went up and buyers started getting scared. It was still in the sellers market stage when I put it on the market at the end of the April but rapidly shifted in a matter of weeks. 

Most of the advice about being an Oakland landlord from a few landlords I've communicated with is don't do it unless you have high risk tolerance. I've heard other landlords say they had tenants stop paying rent and it cost them thousands of dollars in legal fees to get those non-paying renters out. Oakland is very tenant friendly. Now you can't discriminate against someone with a criminal background (with the exception of sex offenders) unless you're living on the property like a duplex. This is in the city ordinance, which is pretty crazy to me. 

The other opinions I hear are: Bay Area properties appreciate over time, you're being a pessimist and you could get a good tenant in, etc. Just wait it out and you'll start cash flowing but wait it out for how long? 

Operating at a $300 month loss is going to affect my daily living in 2 years. I won't be able to pay the the mortgage on an existing rental property (not in California) that I have that's cash flowing. I own another rental property with lots of equity but I have a HELOC on it to pay for renovations. I was half joking with a lender friend- I'll be out on the street with a cardboard sign like the homeless people in the Bay Area while I own 2 rental properties.

@Paul Merriwether

I appreciate the feedback. I know some people buy rental properties (and primary residences) remotely. I would never buy something without going out there to look at in person. To me a plane ticket, hotel stay and car rental are well worth the money. 

That's true about California appreciation but $650,000 is a large amount to finance and right now I couldn't come up with 25% down for that property. 

What I've seen is in the Midwest I could buy a fixer house for $100,000 to $150,000. That's much more do-able for me but again I don't know much about these areas so I'm not jumping into any purchases for now. My rental in Indiana was my primary residence and it appreciated quite a bit, still not as much as a Bay Area house in a 5 year time frame. People pay more for Teslas (the more expensive ones not the lower priced one) out here than I paid for my Indiana house so that was a good purchase for me and a Tesla doesn't bring in passive income :) 

@Orr Kichin

You bring up some great questions. I'm also renting out a SFH, not quite as big as your house, 3 bedrooms, 2 bath (one is a master bath) and 2 car garage. I have one tenant who will move in soon. I'm covering utilities and water for now. I was also thinking about adding a line in the lease, if utilities and water is over a certain amount, the renter would pay for the additional costs - this would be challenging with more than one tenant though. As the other posters pointed out: who used up more water and more electricity? I would cover basic internet but I don't want to pay for a renters' cable TV or other services. I was also wondering also how to divide up rent if I get other tenants since the one with the master bedroom would have a private bathroom and who gets to park their cars in the garages.

Do you already have the tenants lined up to sign lease agreements? Keep us posted!

@Erick De casas

It scares me that so many people are living in older homes with bad electrical wiring. And that many people focus on how pretty the house looks (nice floors, cabinets, etc) when buying but there could be major problems underneath. The electrician gave me lots of helpful advice and that I could buy an inexpensive tester and that electrical outlets should be three pronged. I would have never known this - I almost decided to just have the kitchen cabinet doors refaced. Good thing I didn't. They did a new electrical panel also. Now the house is safe for renters and future buyers, if I should sell it in the future. Thanks!

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.