All Forum Posts by: Laura M.

In these situations, the owner sometimes offers 'cash for keys' however that is typically in cases where the owner wants to move back in, not because they want to kick out the tenant and charge higher rents. You do need to live in the unit for 3 years or you can get in trouble. There was a recent case in SF where the owner offered cash for keys to a tenant to move into a rent controlled unit. After several months, he had a change in employment, moved to San Jose and then rented out the unit at market rate. The old tenant sued. However, the tenant lost because the owner had a 'cash for keys' agreement signed with the tenant that was very clear. So, it's important to cover yourself and be a stickler about the specifics.

Hi Victoria -

I have rented out the property. My decision came down to not having alternatives as to where to put that money and to work against my inclination to always sell at the 'high' vs. long term strategy. I'm going to see what land lording is like and then evaluate later if it's not for me. The house is a really nice property in a solid neighborhood (not one of the highly coveted neighborhoods, but those have higher crime than my neighborhood so I'm okay with that) so I know I can always find renters, even if I have to drop rent from time to time.  It's so hard to imagine that the property will ever be worth more than it is now at this peak, but I'm okay with that (i.e. no appreciation) as the rental income is just really nice and I imagine that will bump along a bit over time.  I don't have the stomach for a lot of risk and I only want to deal with A+ tenants so this seems like a safe easy investment with a good return. It's a solid asset that throws off cash and won't have wild swings like the stock market. I also fixed the property up really nicely as I don't want to deal with hassles and want the tenants to know that I care about the house and so I want tenants who will too. In fact my current tenants applied for our house because of the fact that we cared so much for it (there are many unresponsive property management co.s and landlords). I decided to follow Anish's advice to do my analysis and then kind of ignore it.  Higher returns really do encompass more (often unstated) risk and I think one has to have a 'win some, lose some' mentality to survive with those deals. That's not me- peace of mind and quality of life matter too much- but we'll see how it goes!

@Simon Stahl Buildings with 3 units and under with an owner occupant are exempt from rent control (rent can only increase by the CPI, currently at 2% in Oakland) but are NOT exempt from just cause eviction. SFHs are exempt from rent control and NOT just cause eviction. You are allowed to increase the rent by more than 10% if exempt from rent control, the notice is 60 days.

Good luck!

@ Leslie Bandy

Thanks for that extra bit of information! I agree - it's a tough market for renters as well as buyers. I can't tell you how many awful homes I have looked at in the last 2 years that sold for too much. There just aren't a lot of great options in Oakland - inventory has been super tight for a couple of years now.

@ Chris M.

Thanks for your input. I get that the Bay Area in particular is an appreciation play - hence buying when the market is down and then capturing that appreciation is key. Because I've held my primary residence for so long (15 years) the cap rate is quite a bit higher than 2% looking only at my loan value.  But it seems fairly evident that the best idea to optimize rate of return (I have yet to crunch numbers on this) is to sell when the market is clearly overvalued and then buy in cheaper neighborhoods when the market is low to capture that appreciation as well as high rents in Oakland in general. 

Small houses are commanding high enough rents now that renting out a bigger house is not necessarily going to give me that much more marginal rent/house value.  That's my thinking - I'll see if the numbers agree!

@Jd Martin

I agree - some investors buy low and then sell high and rent in between (and fix up). Some just hold on to their properties. My first residence will cash flow no matter how low rents drop (they wouldn't drop below my mortgage because it is that low), but I am always wanting to put my cash to it's best use. I guess that it depends on how active an investor I want to be. 

@Leslie Bandy  

I think it's a lot easier to get the market low right than the market high. I did not want to buy in this market but I have kids and other considerations and the right property came along and for some odd reason we got it at a good price and no bidding war even though there were multiple offers (saying this after having lost out on other offers because they went into a bidding war). Why do you think there will be no bubble burst? I'd be concerned about the condo market in SF and SFR's in more marginal areas in Oakland. I've heard various scenarios about what people think will happen in this next down cycle, but one thing I'm sure of is that it won't be the same as the last one.

@J. Martin

Thanks for your thoughts!  Your formula makes sense but it would also indicate that a home that has a lot of built in appreciation will always give a low return.  Would you agree?

Thanks for you responses - good to get your inputs~

Hi all -

I hope I've posted this in the right area. I've just purchased a second home in Oakland, Ca as my primary residence. I now am trying to decide whether to sell or to rent my current primary residence (also in Oakland). I want to get started being an investor (currently I have only done passive investments) but I want to do this right. 

On the one hand, it would make sense to sell at the peak - my current residence is in a desirable neighborhood. But because I've owned my home for 15+ years the mortgage is low enough that there is a healthy spread between rents and my total expenses on the home (including maintenance, insurance, property taxes, etc.), giving me a good monthly income.

How do I value the buy vs. rent when the property has appreciated healthfully? How does rate of return get calculated? Or at least, how do YOU factor this in - you have a nicely appreciating property that is producing income and you are at the peak of the market? How do you decide to sell vs. keep renting?

Do you just ignore the appreciation and factor that in as covering your exit (i.e. owning in the Bay Area is a safe bet as it's an economic engine and inventory is usually low in more desirable areas)?

Thanks!

Agreed with some of the other comments on this post in that you might want to make sure you can come back if you want to. I've lived in the Bay Area for over 20 years and many of my friends have left for affordability, better schools, etc.. I would say 1/2 of them wanted to return but couldn't. The other 1/2 were happy with the tradeoffs. I think it comes down to whether you will miss the vibrancy/craziness of the Bay Area. There really is no place like it anywhere, and I've traveled a lot. Not to say there aren't better places given your individual preferences, just that this is a unique place, both good and bad.

I own a home here so I'm pretty happy with what home prices have done and I like that I can pull equity out of my home at low rates when I want to. Don't forget you can use self-directed IRAs for specific investment purposes if you want to.

Thank you both very much for the responses!  Mike, I looked into CCIM and there are some great offerings there - what a fantastic resource. Thanks for turning me on to them.  I will definitely look into their courses. 

Stephen, I am very interested in your investor tab. I've been trying to send you a message but your name isn't coming up in the message tab here on BP.  Would you mind sending me a message as I can't seem to get one to you.  Thank you - I very much appreciate it.

I'm looking for resources that will walk through several rental property analyses: SFR, small multi, commercial. I'm interested in any and all resources: books/webinars/articles/seminars, etc. I have downloaded several files off of BP and I've listened to several webinars, I've also read Frank Gallinelli's book on key financial measures for RE analysis. I've attempted to do my own analyses, but nothing I've used incorporates depreciation, taxes, any holding costs, and so on. They seem to be fairly cursory. I don't mind paying for something, but I really want to know what I'm getting before I do so.

What I could really use is something that will really drill down on the numbers and calculate ROI, IRR. I am interested in fixing and renting for the long term.

Thanks for any and all suggestions.