All Forum Posts by: Scott Ozawa

@Xin Jin - That might be true.  East bay is still suffering from the effects of 2008.  I should've qualified that somewhat instead of making the blanket statement.  I didn't see anything in the lower end on the peninsula and SF get hammered that badly.  There were some vacancies but most of it got snapped up pretty fast.  Of course, at that time, I had my own problems, so I wasn't watching as closely during that time.  I was also focused in SF mostly at the time, so I wasn't watching East Bay or South Bay at all

I didn't read all the posts, but I have a few things here.  

I've been living in the bay area for nearly 20 years.  It's had it's ups and it's had it's downs.  But the lower end of the market hasn't gotten soft in the two downturns I've seen here.  If you can buy something that ISN'T a condo, you'll probably be fine.  I think the condos got killed in the last crash.  That said, I think smaller multifamilies are probably better investments as a whole.  I see a bunch in South San Francisco and Berkeley that are between 1-3m and while that is high, rents here are also high.  So, maybe you make something work through that if you do something like a 1031.  Provided your appreciation is sufficient to do that and you can sell your occupied(?) units for the prices you're looking for.  

As for buying in the bay or Sacramento areas(I grew up near there and invest there), both areas are super overpriced right now.  Buying single family or condos is not a great choice because it's going to be hard to get rents that will cover your expenses.  I'm presently considering selling my houses in Sac because they don't cash flow well.  They ARE accumulating appreciation, BUT, getting a bigger loan in a cash out refi basically sounds like I'll be cash flowing even less, so, that's not a choice for me.  

One thing I've been considering is that I think a crash will be coming soon, as in the next couple years.  You MAY want to just pull your cash from the market by selling off your places.  I would caution you that to do that, you'd need to live in them for 2 of the last 5 years to not get hit with capital gains taxes.  That will allow you to exit with the least damage financially.  

I do like the 1031 play as a whole, but in this market, it seems like a bad one.  You have to get something of equal or greater value which means it's tough to find stuff that works HERE.  That said, if you're going OUT of Sac/Bay then you can probably find something that really works financially speaking.  But the rub there is that if it's well valued today, when the market around the country is super high, why is that?  If a crash occurs, will you be able to float through it, or will you get stuck.  

Last, like someone else said, you've got something that is presently working for you.  If you sell, you lose that cash flow, you lose the asset, and any potential future returns it could provide.  So, selling now could be good if you want to hold cash, but holding now, assuming you're in a good cash flow position, would be wise also.

Actually, my folks need a GC for their place in El Dorado County too.  They've got some exterior stuff they need addressed.  Dry-rot, repaint, etc.  If anyone has a good one, please let me know

So, I've been poking around for a bit and trying to sort a few things out.   I'm looking into a multifamily in Berkeley and had considered that I could rent most units doing the basic stuff, but might be able to do a Short Term Rental in one of the units.  It looks like Berkeley has some new rules about it but does anyone know how strict they are that it "Must be your primary residence?"  That seems particularly restrictive and could change my mind about evaluating properties there.  If anyone's doing Short Term Rentals in Berkeley, can you point me to some great places to read up on things?  I'm mostly just reading the stuff in these links and any additional info would be useful:

• https://www.cityofberkeley.info/str/
• https://www.cityofberkeley.info/Planning_and_Devel...
• https://www.cityofberkeley.info/City_Manager/Press...
• https://www.cityofberkeley.info/Rent_Stabilization...

Thanks in advance!!  

I totally agree, Ben. It’s probably the only town in EDCounty I’d try to invest in. I’m sort of still looking in that area since that region has prices I can still somewhat afford. The bay is too crazy right now, but I’m not opposed to it either. Just trying to find what works with my finances

Whups, that was Walnut Creek with the crazy HOAs

A couple things to throw in here and FWIW, I’m definitely not the most experienced guy here. Definitely buy for cash flow. Unless you can do forced appreciation through the BRRR or flip rehab, buy for cash flowing rents. I bought two places in Sacramento that were minimally cash flowing because I thought I’d use the equity as I paid things off for other stuff as it became available, but that is a slow method and a poor choice, looking back a couple years now. I’d rather have the cash in hand and putting it into the next property or project. Instead, one eeks out a couple hundred bucks a month and the other actually loses about $50/mo. This helps offset my income taxes, but isn’t worth it. I also hoped they’d appreciate and the cash flowing one did. The dud, however, has been slow to appreciate. Both are nice and in nice areas. They’re low maintenance, but I’d rather have the cash now. As for the bad areas, I had purchased a TIC unit in SF’s Western Addition in 2005. It was fine to live there, but when I had to move away for work, the area went downhill. My unit got shot a couple years before I was able to sell it. No one was hurt, luckily, but the bullet cost me a couple hundred thousand off the selling price. I’d prefer not buying in a bad area again.

Oh, yeah, from what I understand, CA still charges you the 800 bucks for out of state LLCs and they still don’t protect much unless you’re actually investing mostly out of state and at that, it gives you little protection and n CA. So, let’s say you get a WY LLC and hold most stuff here in CA and you live here in CA, you’ll still pay the 800 for the CA LLC tax and if anyone from your CA properties sure you, you still have little protection from CA. Just what I heard, I’m not a lawyer, so take that with a grain of salt. :)

Not that I have a great deal of knowledge here, but from what I hear, just straight income properties don’t need an LLC. Maybe if you’re using the LLC for tax purposes, but if you’re only doing a couple it may not be worth it. For a smaller investor like me, I understand an umbrella insurance policy is good to have instead of the LLC. However, if you’re flipping the S-Corp LLC may be really useful to you.

Forgot to add a few things here that are important points. The first is that as a landlord, you’d better be really solid on tenant rights ESPECIALLY aim the Bay Area. I think SF just instituted a thing where rents cannot be raised by more than 2% a year? I’m not sure of local city/county laws that you’d need to be weary of, but just be aware the Bay is really bad for landlord rights. While I’d love to house hack here, I’d only do it if I had a property manager to consult. Realistically, you need someone who’s current on the laws and practices for your region. So, be careful there. Be aware that SF is both a city AND county so, their laws are gonna be different than Alameda, Santa Clara, San Mateo, and Marin counties as well as the various cities inside those counties. Also, I don’t see ANYTHING that meets the 2% rule. If anything, you’ll barely make the 1% rule here. That goes for Sacramento area as well. I’ve been watching the Bay as well as everything along Highway 50 all the way up to Tahoe, even though I probably wouldn’t invest past Sacramento county. El Dorado county (El Dorado Hills to Tahoe) is pretty rural and the incomes don’t justify the housing prices and it’ll be tough to get 1% rules there. I’m also not focused in that Vallejo area because I don’t know it well. Housing is more affordable there, but it’s a rough-ish area as a whole. Same with Contra Costa county, but probably it’s infinitely better than Alameda county in terms of price and profit potential. I did see that Concord has really low purchase prices on condos/townhouses, but their HOAs are insane. I’d advise trying to be striking distance from BART if you go Contra Costa county or Alameda county. I’d also check out Hayward/Castro Valley/Union City areas since they’re nice, relatively cheap, and fine as long as you have no need to cross 92 because it’s a bear for traffic. Again, BART is your friend. Hayward rents are a lot cheaper than San Mateo rents due to the traffic on 92 for the commute to San Mateo area.