All Forum Posts by: Christopher L Jones

I would recommend looking at markets outside of SF. There are literally hundreds of micro markets around SF that will provide a much easier acquisition process and will, more than likely, look better on your ROI. As mentioned by other posters, tenants rights are the most progressive in SF, which could become quite an issue with your "friends."

Since you don't plan on renting out any unit that you purchase, why not buy on the low end of the market and add value while you're in possession. If you get all of your friends to apply some elbow grease with you, there is huge potential to manually push that equity.

That being said, you might also want to look into SFH or Duplexes that have ADU potential. That way, you buy into the market a lot lower and you'll also have the opportunity to add units in the longterm. It all depends on the specific neighborhoods you're looking at and how you plan on maximizing your ROI. Here in the Bay, you gotta get creative.

Best of luck!

Honestly, you shouldn't be worried about the fines associate with renting out an illegal ADU. Your real liability is when your tenant files a lawsuit against you. Do you know if the ADU is completely illegal, or is it just non-conforming use? My recommendation would be to speak with a local real estate lawyer, I can connect you with one if you'd like.

Also, I recently had a client that had tenants in two separate illegal add-ons on one parcel. They were eventually forced by the city(Menlo Park) to remove their tenants and acquire permits for every change that they made. When it was all set and done, they ended up at a huge loss for their illegal units. 

That being said, many people successfully operate illegal units, especially here in the Silicon Valley. But, I'd make sure you're in a good position with your neighbors and vet, vet, vet, those tenants. 

I currently live in San Jose and primarily operate in the South Bay. Reach out to me privately if you have anymore San Jose related questions. 

This seems, on the surface, like a great starter investment. However, your cash-flow margin may be quite slim depending on the actual vacancies, maintenance and turnovers. While your COC may seem like a deal-sealer, it could easily be diminished by a maintenance or tenant issue. That being said, the long-term potential of this property will be based on the local market and its progression.

To begin developing your portfolio, this is a great place to start. Hopefully, your local market will continue to shift upward over the next year while you're in possession. But, if the rents don't continue rising over the next year, your cash flow margin may be a little slim. Assuming that you already shopped all of your lending options and you're not keen on raising your down payment, be prepared to have very little cashflow. 

Depending on your local market progressions, I would consider performing a higher level renovation over the next year while you're in possession. Try to maximize your profit potential however you can. Because, on a small deal like this, every dollar counts. 

@Joe Colmen Sounds like you need to invest in another location! Lol

@Scott Lennon The data is showing that many markets across the US are starting to level off or begin to decline. The level of demand needs to remain to hold up the market. There will definitely be price drops coming over the next few years.

I’m not here to add kindle to the crash fire. But, if there is any market that’s not ready for a real estate crash, it’s the Silicon Valley. Let’s face it: values are inflated, techies are moving and investors are starting to restructure. So, what would happen if the market crashes in late 2020?

As you can see from the MSP data above, the Silicon Valley has clearly outpaced its national competition. Growing 47% in average value since 2010, there isn't any other market in the U.S. that rivals the tech mecca. However, this quick value appreciation has negative side effects that can really turn the tide.

At least, that question should have come up in thought over the last couple of months. We all know, when it comes to real estate, supply and demand dominates valuations. Luckily, the FED interest rates have kept demand at a steady high throughout the pandemic, especially in the Bay. Even better, those interest rates are supposed to remain low until late 2023. So, as long as interest rates stay low to the ground, we should be good right? Wrong. Here are three variables that we should all be worried about here in Silicon Valley:

The Whip Effect

When markets grow and inflate in value, less people can afford to enter the market. However, the overall demand doesn't get effected if there is a remaining large population of buyers that can still afford the sky-high prices. The value-bubble keeps growing and leaves many families unable to purchase a home where they work. Sound familiar? That's the exact situation here in the Silicon Valley. Ultimately, what happens? Well, those families choose to purchase homes outside of the community that they work in and place their bets in the growth of a new location.
You see, when a whip cracks it sends outward vibrations in equal directions. There is a similar effect in real estate when you see markets become bearish and grow exponentially. Not only does the whip-crack location sky-rocket in value, but it also positively effects the neighboring markets. That my friends, is The Whip Effect of Real Estate.

The MSP comparisons above show how the San Jose and Livermore markets moved together, almost parallel, for the early portion of the 2010's. However, San Jose experienced a very large jump around 2017 and left Livermore in the dust. As of lately, the markets have both experienced a cool-down and the hot markets have switched to a different area: The San Joaquin Valley. You see, if you follow the whip effect, you can almost always find the next great market. Modesto is now poised to appreciate more than 10% in value by 2022, all thanks to the flourishing nearby markets. If you are an agent out in the San Joaquin Valley, this information can definitely be useful to pull more buyers out to your location.

Working From Home

As you just learned, the markets that surround the Silicon Valley can be quite enticing for the buy-and-hold investor. However, that's not the only issue looming around the Silicon Valley real estate market. Working from home is the plague to commercial agents, investors and managers. With the lack of techies to fill the grand office buildings that have been recently developed, many Bay Area investors might be looking bankruptcy right in the face.
Check out this post of 100 different companies that are offering full-time remote positions.

Let's be honest, we are all jealous of the people that get to sit at home in their pajamas and earn a decent wage. Should we really be worried that these work place changes are going to trickle down to the real estate market? Well, right now i'll let you answer that, but there is definitely another variable that is exponentially effecting the property environment here in the Bay. It's the evictions.

The Eviction Wave Coming

There is no doubt that landlords here in the Silicon Valley are stressing over their tenants. Due to the eviction moratorium, evictions due to non-payment have been postponed. However, other types of evictions are still getting filed and placed in a pile of paperwork that the local governments are going to eventually have to deal with. That's when things are going to get really sticky in the tech mecca.
According to the SF Chronicle, more than 15% of all Bay Area renters have broken their leases since the start of the pandemic. Unfortunately, as the pandemic continues, that number will only keep rising.

At this point, nobody knows what is going to happen next. Here at BAIC, we will make sure to keep you updated on the market twists and turns as they happen.

The Best Bay Area Real Estate Markets to Start Investing Now

Wanna start purchasing real estate in the Bay Area? Well, don't put your hard-earned cash in the wrong location. Spoiler alert: It's not San Francisco, San Jose or the Peninsula. Find out why these specific markets are poised to multiply in value over the next 5 years.

Over the last decade, we have been absolutely spoiled with property value appreciation here in the Bay Area. But, some local markets have lagged behind the gentrified metropolis that the Silicon Valley has become. The Bay Area neighborhoods that got left behind are the next locales expected to jump in value over the next 5 years and as all savvy investors know; the next five years are paramount in comparison to the last five years. So, we should all be concerned about how our portfolios are developing and the fluctuations that are occurring in our investment locations.

Union City, Hayward and San Leandro Top Our List of the Best Bay Area Markets of 2020

The fact is that these three cities have a few valuable things in common. They are towards the beginning of the gentrification curve, their values aren't over-inflated and they are poised to attract more home-buying interest than their competitive counterparts. Let's talk a little about what sets these markets apart.

Union City

Is similar to many other smaller communities in the Bay Area in the sense of its culture and inhabitants. Unfortunately, the city never experienced huge hikes in population due to it's lackluster approach to business development within its city-limits. Larger, more sexy, areas nearby like Berkeley and Oakland stole the progress that could have gone towards this quaint community. Ultimately, Union City is behind its competition and that presents a lingering opportunity for an experienced or novice real estate investor. Here are the main takeaways about the market that you absolutely need to know:1. Union City has only gained 20,000 in population since 1990. That's a 37% Increase.

2. It's a staple in the asian community. With 54% of the population being of asian descent.

3. The poverty rate is a crazy-low 6.39%. Which is the leanest on this list.

4. Finally, the median home value sits around $850,000 and it's steadily increasing.

There is no doubt that Union City is poised to flourish over the next decade due to the amount of homebuyers that are pouring in from Fremont and San Jose. For all of these reasons, Union City could be the best place in the Bay Area to purchase a property.

Hayward

Is quite a bit different from the smaller community of Union City. Situated directly between Oakland and Fremont on the 880 freeway, Hayward has always been in a promising geographical location. However, due to it's lack of economical development, it's inhabitants choose to commute out of the city to work in places like San Jose and San Francisco. But, being the city that everyone commutes from isn't necessarily a bad thing. In fact, investing in a commute-focused city could be a great long-term investment strategy. Why did we put Hayward at the top of our Bay Area markets? Let's find out.1. The median home value is $630,000. Which is the lowest barrier to entry on this list.

2. Only 5.7% of residential buildings are two-to-four units. a.k.a. Huge opportunity.

3. It's a car-commuting mecca. So, demand for smaller units will keep rising.

4. Home of Cal-State East Bay, providing student-customers and stable employment.

Let's be honest, Hayward isn't the most luxurious or safe metropolis in the Bay Area, but it definitely carries great appeal for anyone looking to buy real estate here for a decent price. I mean, where else can you find properties for less than $650,000 in the immediate San Francisco Bay Area? Trust me, they are few and far between.

San Leandro

Is another East Bay city that is growing into a go-to suburb of Fremont and Oakland. With its great commutable location and bay-front land, San Leandro is a flourishing Real Estate opportunity. Similar to Hayward in low property value, at least for the bay, San Leandro is poised to gain more than 10% in value over the next 3 years. This is because of the low population, lack of economical gain and higher poverty rate. Now, that doesn't mean that the odds are stacked against this sleepy community. The thriving city-centers that surround San Leandro are still growing, even with the virus, and that is going to eventually result in higher property values in "the dro." Here are a few reasons it made it on our list of the top markets in the Bay: 1. Just like Hayward, the low barrier to entry makes this an avid contender for new investors.

2. Lower rents compared to neighboring markets. So, there is less rent-inflation.

3. 5 minutes to OAK International Airport, California's fourth largest airport.

4. Comprised of diverse neighborhoods, many investment strategies could apply.

With a lot of similarities to Hayward in property values, San Leandro sets itself apart with its inviting diversity and close proximity to the OAK airport. Unfortunately, San Leandro does have the highest poverty rate on this list, sitting at 9.9% according to NS. Which, in comparison to the rest of the nation, is still acceptably low. All aspects considered, San Leandro stands as a monumental opportunity in Bay Area real estate investment.

What do you think?