All Forum Posts by: Robin J.

Hey Stephen, in this scenario aren't you missing operating expenses?

You basically have $700 of debt service plus additional operating expenses to account for. I'm not sure what the typical expense percentages are for a typical multifamily residential property, but I think in this case it may be negative cash flow. However, I'm not saying that this is a bad investment per se but that it doesn't quite meet the cash flow from day one rule a lot of buy and hold investors use (may not be realistic for certain locations here in the Bay Area).

Welcome your thoughts here

Thanks everyone! A few things have changed since I posted this (can't say I am fully surprised!). I've changed my focus from Los Angeles to East Bay (Oakland, San Leandro, Hayward, etc.) out here in NorCal. I'd like to stay more local, since I work in San Francisco, and get more hands-on experience for my first purchase checking out neighborhoods, being closer to my potential investment, etc.

More than willing to connect with people part of this community. Thanks everyone

Wow nice looks like a great buy for the person who bought it. To recap and make sure I'm understanding your example here - at 953K, at 5-10% down you're looking at about 4.4K-4.7K in debt service (including PMI). The two units cover the majority of your debt service and you're paying for operating expenses and insurance/tax expenses with cash out of your own pocket. However, you get to live in the property, "rent expense" goes towards building your own equity, and you build more cash flow over time as you pay down debt/take advantage of rent control rules. Is that the right way to look at this?

It doesn't seem like it's a "cash flow from day one" property, but I suppose for a neighborhood like this, you're paying some for that premium? Would love to know if I missed something here though.

Hi all,

New Oakland investor here and was hoping to get some advice/thoughts from experienced multifamily experts in the Oakland area. I've been looking to house-hack my first investment, as a means of utilizing max leverage, and looking for properties where cash flows cover debt service and operating expenses. However, unsurprisingly most properties in generally nicer/safer areas don't meet these cash flow requirements for me to house-hack and the ones that DO have cash flow are generally run-down and in lesser housing quality neighborhoods. 

My question to folks here is: if these multifamily properties meet cash flow requirements, should I forego owner-occupant/first-time home buyer benefits and buy them at 20% down? I'm excited by the prospect of buying a cash flow positive property out in Oakland, but I'm well aware that there is no such thing as free lunch and that these properties are priced like that for a reason. My thoughts organized below and I'd welcome any input or challenges against my assumptions/questions:

Key Question: "Should I invest in a positive cash flow MF rental property in a C-class Oakland neighborhood (where I'm assumed to not live in the unit)?"

Cons:

• C-class neighborhood and the downsides of having to get involved as an owner, even with a property manager
• Risk of rent control expansion, limiting upside
• Unknown tenant quality --> assumes greater vacancy risk/lower stability/increased maintenance costs
• Using 20% down, rather than owner-occupant 5% down, limiting ability to utilize leverage for additional investments sooner

Pros:

• Cash-flow positive at day 1, even at current rent control rates and assuming property manager expenses
• Speculation: Bay Area macro-trends where housing supply is limited in the Peninsula, driving renters and homeowners eastward --> long-term Bay Area appreciation bet

Ultimately, I know for deals I find on the MLS, most properties will cost me more and provide less cash flow for the benefits I'd want:

• Better neighborhood and more appreciation potential
• Better quality tenants and less management headache
• Lucky to hit breakeven on operating expenses and debt service

Given this, should I be focusing my efforts on finding better deals in B-B+ neighborhoods, rather than trying make the sole criteria "cash flow from day 1"? I'm leaning towards being patient with deals rather than pulling the trigger on a C-class neighborhood because I do understand that I'm purely speculating an appreciation in neighborhood/tenant quality. I'm also aware of a case where I'd have to sacrifice cash flow and optimistically hope that even making $1 per unit in a great neighborhood is better than making $300/unit in a C-class neighborhood out here in Oakland.

Welcome, again, any thoughts/challenges you'd have on my thought process. I'd love to have an active and productive discussion amongst the BP community. Thanks for taking the time to read this post.

Will be attending for my first time. Looking forward to meeting everyone here!

Hi Cameron - would you be open to sharing your thoughts on these markets that you invest in? From your profile, it looks like you're based in Corona and I'd love to learn more about your investing strategy for these locations.

Hi BiggerPockets!

I've always been surrounded by family and friends who advised me to get into real estate investing early in my career, but never quite took the plunge. However, over the past few months, my interest in real estate investing grew as I learned more about the potential for financial freedom via real estate and how I could use this freedom to better support my family and goals. Since this realization, I've been actively analyzing deals for my first purchase and trying to learn as much as I can. Given all the amazing people and success stories from the people on BP, I figured it was time that I introduce myself to the community.

Brief introduction:

I was born and raised in Los Angeles, but currently live in the SF Bay Area in my mid-twenties. I currently work for a Silicon Valley tech company and previously worked in investment banking, where my initial interest in finance and investing began. I'm looking to make my first real estate purchase this year, despite being a "new investor", as a means of learning as quickly as I can by getting my hands dirty and having skin in the game. A large part of my motivation for joining BP is to meet other like-minded investors, both new and experienced, who I can learn from and hopefully team up with in the future.

Real Estate Investing Goals:

My longer-term goal is to have a portfolio of managed rental properties that brings in enough cash flow to have the option to retire from a typical 9-5 career job and pursue my goals in tech entrepreneurship with financial freedom.

My strategy and path towards my longer-term goal begins by starting with residential multifamily properties. By starting in multifamily investing, I believe that this initial experience will lay the right foundation for the necessary skills to grow and manage the large number of units for my longer-term goal. I also believe that MFRs pose less risk (compared to SFRs) due to better cash flow and less vacancy risk that will allow me to buy and hold with positive cash flow long enough for appreciation.

I'm starting with Los Angeles because I am partnering with a family friend who is acting as a mentor and is more comfortable investing in Los Angeles. I am hoping that the experience of my first purchase will give me the confidence and knowledge to eventually pursue deals in the markets of my choosing (whether it be in LA, SF Bay Area, or out-of-state). For now in the near-term, I am focused on learning as much as I can about the market and location I'm most familiar with, Los Angeles, to build my foundation. My ambition is to continually invest in properties with more units/doors as I progress in my journey and eventually own commercial properties. Given the capital-intensive requirements of my longer-term goal, I believe the key to my success will be to build my own knowledge and credibility to become a trusted investor with whom others would partner with.

Current Progress:

I've made a goal to analyze 5-10 MFR deals per week as well as focus on certain locations within Los Angeles. I've made my very first offer just a few days ago (made a ton of newbie mistakes on the purchase agreement my mentor quickly pointed out!), but understand that this is just one very tiny step of the larger journey. As of today, I'm continuing to ramp up on the South LA region (near USC, Inglewood, Vermont-Square, Vermont-Slauson) as this falls within the budget range (less than $1M) of where I'm comfortable with. Couple key questions I have include:

1. For Los Angeles investors of property sub <$1M, why do you choose Los Angeles over other markets (e.g. out-of-state)?
2. What are the key metrics and characteristics you look for? Can you share specific numbers or benchmarks you use (e.g. certain cash flow per door, cash on cash return %, etc.)?
3. What is the best advice you have for beginner investors investing in residential MFRs in lower-income neighborhoods?

Any advice of investing in residential MFRs in Los Angeles would be very much appreciated. I'm always eager to meet new people and helping in any way I can. I believe genuine relationships are built through providing help and knowledge to others, and started by reaching out to people who are willing to share their stories and advice. If you are a local investor who would not mind sharing your story over a quick coffee chat/lunch, I'd be very interested in meeting and hearing about your experiences.

Thanks for taking the time to read my introduction, and am looking forward to becoming an active part of the BP Community!