All Forum Posts by: Hayden H.

I agree with @Brian Garlington. Teddy where do you live? If you live close by, I would certainly look at pockets of Oakland that you think has potential because not all parts are made the same. Some areas may have higher quality tenants who will behave differently regardless of laws in place. I've seen landlords in Oakland be successful in all different classes of neighborhoods ranging from ones with section 8 to high end. Oakland is too big to just bucket. Now if your main goal is cash flow, then yes I would invest elsewhere. But if your goal is appreciation, I still believe in the Bay Area regardless of city laws. In some ways, the laws have caused the appreciation. 

Hi Alex, If the duplex is vacant, you can raise rents to market rate. If market rent grows at a larger pace then the 2.7% annual increase, then you are out of luck. But that's the way it has always been in rent controlled cities. You can buy out your tenant if they agree. Its probably better for you to move in as well so that when you sell you can have 1 unit vacant at least and get the 250K tax exemption.

Hi All,

My 2 partners and I completed my second fix and flip in Berkeley. One partner is a real estate agent and one is a general contractor. I'm just a guy who likes real estate but has a full time job. This deal, similar to my last deal, was found off the MLS. Unfortunately I don't have any better leads than the MLS but so far it has worked out. The property is a triplex which consists of a duplex that has 2 bedroom 1.5 bathroom each and a single family home that was called a 'teardown' that was 4 bedroom 1 bathroom. The listing agent would not let us into the single family home as it was structurally unstable and would only open the front door for us to look inside. I don't know if I'll invest in something like this next time around as its a big project but I tried to budget for the worst scenario, replacing basically the whole single family house. We bought the property with all cash for 1.05M and initially budgeted 350K for the rehab. Unfortunately, the sellers were right about the property being a teardown and all we were able to salvage was the roof joists and foundation.

The rehab process of the single family home was intense and the permits took months to approve. Delays of permitting, materials and labor all hindered construction and drove costs up. Just the single family home probably cost upward of 250K to rehab and it was a small home (~1,100 sq ft 3 bedroom 2 bathroom). My partner complained that building a house from scratch was easier than rebuilding this. We used similar finishes to my last fix and flip and there was also a 550 sq ft basement that was only 5'10 inches tall. The duplex rehab was more reasonable and cost ~120K and the landscaping was ~45K. Yes, we were over budget by 65K mainly due to more landscaping than I wished and a roof replacement. I'm still learning to be better there and am convinced I can get things done cheaper on my next project.

The selling process was interesting. We staged 2 of the 3 units and my realtor put the property on the MLS as 'coming soon'. An agent saw it, brought the buyer, and they put in an offer which we accepted. This means the house never really got onto the market. Maybe I shouldn't take a pre-emptive offer next time around. There were a few minor financing hiccups as triplexes are harder to finance than single family homes or even duplexes for some reason. We closed on election night to my relief as I didn't know how the market would react.

Lessons learned:

• 1. I should hire an actual architect instead of using my partner/GC as the architect as they can probably get the permits approved more quickly
• 2. Landscaping can cost a lot of money but does add a lot of value
• 3. Work well with the neighbors as their opinions matter but make sure they understand that we have different goals and try to compromise.
• 4. Weird things can happen (COVID), so don't bet the farm on every project or go for properties that are too high ARV or out of the neighborhood norm.

I'm hoping my experience can help some others either pull the trigger in fix and flips or at least provide some entertainment. 

$1,050,000 - Purchase Price - funded by 3 partners in cash.

$415,000 - Total Cost (Renovation Costs)

$185,000 - Commission/Taxes/Fees/Escrow/Holding Costs (Took 1 yr 4 months)

$2,000,000 - Sale Price

$350,000 - Profit

Thank you BP community for always providing help when I need it and sharing knowledge graciously.

https://www.redfin.com/CA/Berk...

If you are trying to sell for the highest price I don't think now is the best time to sell. With 2 vacant units, it looks nice on paper but the next owner will realize they cannot evict anyone for probably the next year with COVID-19. Since all investors know this along with pretty steep rental price drops (1 month free rent, 10-20% decrease in rental price is now pretty common), you may not get the price you are looking for. I would first confirm rental prices on Zillow to see if there is any interest, you may be surprised to find there isn't any since inventory is so high since everyone who can is moving out. However, if you do sell, I think you would get a higher price from someone like you who is house hacking. Personally, I would see if you can do a short term rental and hire someone to manage, that way you dont have to worry about no eviction and can get the unit back on the market to rent when rents go back up. 

I agree with Arlen, David you are way ahead of the curve and doing fantastic. What part of Oakland is this? Duplexes for 1.1M would usually mean both units are vacant, in a good part of Oakland (claremont, temescal, oakland hills) or the one unit you is renting for 3K+. I wouldn't just take the word of a realtor, use comps to see if the selling price is accurate. I just sold a vacant triplex in Berkeley for 2M but this was a fix and flip from the beginning so location is pretty important. Both @Arlen Chou and @Ori Skloot own many rentals in the East Bay so I would overweight their advice. The Bay Area is about appreciation more so than cash flow and while 10K a month cash flow is a great goal, the appreciation may net you 500K tax free if you sell later on after marrying (while still living like a monk). 

If you are open to not as upscale areas of Oakland (East) there are duplexes for 400-600K. They are likely occupied so you would either need to do cash for keys or owner move in eviction. Both of these options would still cost 10K or more and take time. It may not work either depending on your tenants status (disabled, been there 10yrs + 60 yrs old etc). With your savings, you would only be able to do 3% down or less. With COVID-19, banks are getting more strict with lending and require more down payment so it would be unlikely to secure a loan with such low down payment. Further, owners probably don't want to sell to someone who is only putting 3% down payment as they know the likelihood of closing is slim. One alternative strategy is to rent a home with an empty ADU and then sublease that ADU out. You may not own property this way but it may solve your issue of having your relative and yourself into a 2 bedroom while coming out of pocket for not too much more than you currently do on a monthly basis.

nvm i see it now 650 is a good price! I think you'll need to spend 250K on the rehab if you want to change all of the plumbing and electric and layout for option 3 - 2 bedroom on 2nd floor. But then again, if this house is 100+ years old and you don't change all that, it will probably just be an expense down the line anyway. Looking at the photos there appears to be water damage so you might as well take out the dry wall or plaster and start it from the studs. 

the bedroom next to the living room that was originally a closet looks tiny, I don't think its a practical. I like the separate stair case option. I remember seeing this home on the MLS but can't find it anymore, how much did you get it for? I assume you've closed by now.

You're welcome. When I worked for the City of Berkeley, we used Rex Key & Security. Good luck!

https://www.rexkey.com/ 

https://www.yelp.com/biz/rex-key-and-security-berkeley

If you just need a lock installed, might as well ask a locksmith from yelp or thumbtack. It will be more pricey than a handyman but there wont be any issues with the handy man not having the parts or knowing the complexity. If this is just a basic schlage lock, you can probably do it with youtube :).