All Forum Posts by: DG A.

That's fascinating. I'm in contract in San Antonio Park. 

It says the area is at risk of gentrification. But it's between 2 advanced gentrification areas. 

I wonder how/what they define as gentrification. I live in east lake and all that area seems to be well on its way with gentrification. 

How did you come across the study from UC Berkeley?

I found this awesome article:

https://medium.com/@andersem/a-guy-just-transcribe...

TL;DR:

It’s a chart that almost perfectly predicts the San Francisco housing market using only three variables:

1. The number of jobs located in San Francisco County.
2. The number of places in San Francisco County for people to live.
3. The total amount of money that is paid to everyone who works jobs in San Francisco County.

What do y'all think about these as predictive variables for what direction rents are going?

I found this awesome article:

https://medium.com/@andersem/a-guy-just-transcribe...

TLDR:

It’s a chart that almost perfectly predicts the San Francisco housing market using only three variables:

1. The number of jobs located in San Francisco County.
2. The number of places in San Francisco County for people to live.
3. The total amount of money that is paid to everyone who works jobs in San Francisco County.

What do y'all think about these as predictive variables for what direction rents are going?

hey post the results of the meeting with the attorney! 

I came super close to buying a duplex I'd have to OMI. I'm very curious to hear what you learn. 

2 big problems. 

For tenants in illegal units,  they can literally sue you for all the rent they've ever paid and win.  I'm not sure if they can win all rent ever paid,  or just rent paid to you after you take ownership.  Either way,  it's not worth it. 

OMI could work if it eliminates tenants from all illegal units. But there's 2 illegal units.  I'd say pass on it. 

If you're willing to OMI find  duplex with market rate rent on one side and low rents in the other.  Then OMI the low rent unit. 

A problem specific to the next 60 days in oakland is that OMI is not allowed under the 90 day rent increase moratorium. 

I negotiated and got in contract on a duplex with a tenant paying below market in one of the units. As luck would have it, when the tenant learned that the duplex was going to be sold to a new owner, they decided to move out. That happened after we were in contract. So, as luck would have it, that opened up some value. The duplex will be totally vacant when I get keys. 

I had another lucky break when someone here on BP hit me up about a low down payment mortgage with better terms than FHA. I've gotten really lucky!

My PITI will be 3350/month. I put an ad up to rent the top unit (3be/1ba) for $2,700 and I'm getting some interest. I plan to live in the bottom unit, and get a room mate who I charge $1,000/month for the room. I should be able to get $3,700 income from the property while I live in it, and again PITI is $3350. I feel pretty well hedged. But, I'm worried about a drop in rent.

We're getting out there into touchy-feely-land now, but I feel pretty good about rents staying high in Oakland (Oakland specifically) because of a few things:

1. Under-supply of housing. 

2. Moratorium on rent increases, which will probably result in more restrictive policy around rent control, which will in-trurn (Ironically) put upward pressure on rent during the down cycle.  Tenants will be harder to evict, market rate rent will be harder to come by for landlords in Oakland, and that will keep inventory low... thus upward pressure on rent. 

3. Uber is moving their HQ to Oakland. That's at least 1,000 new high paying jobs in Oakland Proper. And those young tech workers will probably flock the neighborhoods around lake merit. Just my observation from running the lake a couple times a week, and seeing tons of hipsters at the lake, and at Portal for Brunch on the weekends. I'm excited, because the owners of Portal just opened Philomena Pizza on 14th ave in eastlake. That pizza place serves fancy pizza, and craft micro-brewed beer. That firmly extends the "trendy" place to live pretty far towards Fruitvale. My duplex happens to by 4 blocks from that pizza joint. 

This is interesting stuff. What do folks predict rents will do in the flatting/down cycle? 

Something that confuses me about Bay Area economics is this... Home prices and rents are driven by the large incomes from people who work in Tech. This is causing some interesting pockets of appreciation and gentrification in Oakland, specifically I'm looking at West Oakland, and I personally live in East Lake in Oakland (this neighborhood is WAAAY different than when my aunt lived here in the 90's).  For example, a guy like me, I make a good salary, but I don't care to blow 50% - 60% of my income on an apartment in San Francisco. So, I choose to live in a "transitioning neighborhood" and spend 20% of my income on rent. 

Then you've got smart guys like Ken Rosen from UC Berkeley's Fisher Center for Real Estate and Urban Economics talking about 2 Big Threats. He's placing the timing of the correction at 2-3 years:  http://www.bizjournals.com/sanfrancisco/blog/2015/...

1. Being that the financial markets are so intertwined... he's saying that if China takes a dip, we take a dip right along side them, here in the USA. 

2. We've got these "Unicorn" startups with 1Billion+ valuations, but that are not turning a profit. 

I'm most concerned with the impending correction in startup valuations, but the truth is I don't clearly understand what the down-side to over-valued startups is. At least when it comes to rents and sales prices for Bay Area real estate. There's a few scenarios I've thought out, but it's hard to see how the people getting hurt by the over-valued startups affect us here in the Bay. Investors want to get their money out of these startups, so that means the start ups need to have an exit. For the unicorns ( startups valued 1 Billion+) specifically, they most likely go the route of IPO. But, the thing is, if these startups go IPO, and the stock flops over the medium term (6 months to 1 year), which it typically does, the people left holding the bag are retail stock market investors. In my mind, those guys taking the loss are not going to be the same guys paying rent and buying homes here in SF, Oakland, San Jose.  So, if retail stock market investors get hit, I don't see how that affects us here in the Bay Area. We are insulated from that specific type of problem. 

The other possible outcome is that VC and Angel investors get hurt, so they stop funding startups. This is already happening actually, startups are having a harder time raising money. 

So, let's follow this train of thought. That means it's harder to get funding to keep running/growing your un-profitable startup. That can in-turn mean lay-offs, but I don't see any lay-offs above and beyond normal market churn for the Bay Area. 

I know from friends working inside of other startups in SF that VC money is drying up, and that some layoffs are happening. Twitter laid off 7% of people, but by the same token they're hiring lots of developers right now. Optimizely just laid off 5% of it's work force, but the CEO said in an email on the topic that it was what they needed to do to be profitable. Now Optimizely is profitable, and if VC money drys up, they don't care, because they can use their profits to grow. A lot of startups right now are aware of the tightening of VC and Angel money, and they're adjusting course accordingly. Some are doing what they need to do to get profitable. Others startups will stop the "growth engine" and turn to maintenance mode on the VC money they have already raised. I know Fundbox has 51 Million in reserves from money they have raised, and they're hiring with the intent to grow right now.  Other startups that have a lot of cash reserves, and know they are a long way from profitable, will simply keep the cash reserves, continue to build their product with the team they have, and "weather the down turn" until VC money flows again. 

There's definitely a strong correlations between rent and VC deals, see below. 

Which brings me back to my question. What do you guys think rents will do in the coming years?

I'm working on closing on my first duplex, and I'm somewhat concerned. I bought in a blue-collar/transitioning neighborhood. I'm in Oakland, in the 94606, about half way between East Lake and Fruitvale. But, I got an amazing deal on my mortgage, a 3% down loan with no PMI. And I'm planning to rent out one of the units and get room mates in my unit. I'm probably going to be living for the cost of utilities for a while. But, if rents go down I could get F*********CKED.

So who's got a guess as to what rents will do and why?

http://realestateconsulting.com/tech-buyers-only-a...

 Hey @Michael Delper  ---- What loose lending practices do you think have come back specifically?

Peep craigslist for rents. In the east a 2-bed is about $1,300 a month in rent. A 3-bed is 1500 to 1700 depending. I offered on a duplex out by 73rd and lost out. I went 80K over list and it still cash flowed. There's deal lurking out there...