All Forum Posts by: Stephen G.

Purchased in a desirable part of Oakland (Glenview area) as an owner occupant in 2019. Put 20% down @ 4.125% and refi'd in 2020 to 3.25% so my PITI is around $7k/month. My gross income is a bit less than $7k (and I'm renting near top of market rates) with minimal repairs ($2k/y), but...

1. Property has appreciated 10-15% since purchase.

2. Principal paydown is now around $2k/month

Tenants are great. No evictions, no turnover, and have not raised rents (honestly feel like I'm near the upper end already). 

Assuming the Oakland rental market continues to remain stagnant/competitive with newer buildings going up, is property appreciation the only way to increasing wealth with my building? In retrospect, did I overpay or make a mistake with the purchase? If I threw the money into SPY, it would be a 104% gain compared to walking away with an 80% gain after fees/commissions. I don't plan on selling; I'm mainly just curious how people make $ in these markets when rental rates are on the decline since COVID.

Great question. If I were considering a 7 figure home purchase with tenants in place already, I would call Daniel Bornstein for his legal guidance here. He is the most up to speed on current policy with COVID, etc. 

I did exactly this for my duplex purchase and his time was invaluable. 

If the units are identical, you're going to have next to an impossible time evicting the current tenant. 

If the vacant unit is too small to occupy (eg I have 2 kids; I need to occupy the 3b unit instead of the vacant studio) you have a case. 

I do wonder if you can OMI and then evict to OMI a family member same year. 

Looks like it's based on comp sales and not underpriced. You should get an agent from the same office (Andres Restrepo •DRE #02059106 • Compass) and get their feedback. 

Sandy - be prepared that Oakland realtors typically lis 20-50% below expected close price to drive buyer anxiety and competitive bidding. My building closed 40% over list price. 

Assuming you're used to this already, pricing depends on the exact location, unit mix (two 1b units vs two 3b units?), vacant vs protected tenants, etc.

No. Here are the quotes I received 2.5y ago.

Ultimately I decided that unless it's >8.0, the damage likely won't be greater than the deductible + premiums paid. 

Also I heard from a friend in construction that non-insurance claims would go faster in a really bad scenario compared to homes waiting on insurance - conjecture so who knows. 

Interesting. My friend pays 1-2k/month for a $2m property in marin since Lloyds of London was the only insurer willing to take him on. It seems to be much lower in SC which is awesome!

Fire risk is a real threat and will increase over time. I never thought South Lake Tahoe and Heavenly would burn, but here we are. 

If this is your only Bay Area property, it’s hard to say. If it’s not, I’d be very inclined to sell and reinvest in something else (1031 into a beach duplex rental in Capitola and stay there for free throughout the year, multi family in another fast growing metro like Denver or Austin, cash flowing building in South Chicago,  etc). It really depends on your goals. 

I’ve been told by other investors that the “like-kind” aspect of 1031 is intentionally grey so you can likely fold into a quad without breaking any rules, but this is a conversation for your real estate attorney. Also see if you can transfer your property tax basis.

If you don’t sell, your insurance costs will eventually climb to 1-2k/month which simply isn’t worth it imo. You can find strong yields elsewhere.

Varun - what are your goals? 

Do you want to plant roots in a better school district with better weather? Do you want to retire in 10 years off of passive income? Do you want to be worth $10M by the time you're 60? 

Each of these goals require very different strategies (buying a Fremont/UnionCity SFH for #1, buying out of state income-flowing property for #2, buying a Menlo Park SFH for #3).

Folding a SFH into MFH will pay down the debt service faster through rental income but your equity won't appreciate as fast as a SFH in San Francisco, so it might net out. And then you'll be living in a 100 year old duplex and your wife is going to be asking you for a backyard for your kids and tell you to turn down the music when you're cooking dinner on Sunday night. I don't love this strategy, tbh, because it doesn't really spike on any single strategy (cash flow or equity).

Really think through your goals and build a strategy around it. For my wife and I, we are focused on retiring in 10 years so we can be full-time parents and volunteer. In order to accomplish that, we have a blended portfolio of an Oakland duplex that appreciates but doesn't cashflow, a SFH that appreciates (and wouldn't cashflow if we moved), and a low-income apartment complex in South Chicago that cashflows (15-25% cash on cash return if you do or don't factor in the debt service being paid down) that is unlikely to appreciate more than 1% YOY. We will likely acquire a new cash-flowing building every 1-3 years over the next decade and hope to retire off of the rental income while our stock portfolio grows until we are 50, then we will untap those until we are 60, then we will untap retirement accounts, etc.

I don't disagree with Paul, fwiw. I would not sell a SFH with that much equity in SF, especially since HELOCs and refi's are dirt cheap right now. If your goal is #1 or #3, just borrow cash for a down payment and don't sell.

Wow great numbers!

Triplexes are going to be harder to find but I’m of the mind that you should go as big and expensive as possible since debt is cheap and you are (assuming) a dual income high earning household. 

Those rental estimates seem high but they might not be for markets like Palo Alto or San Mateo. Is Craigslist showing you they exist? Is Zillow? One thing I did to “test” the market before buying was copying all the pics of a unit I was considering buying, then posting an ad on Craigslist/zumper to get a pulse on demand. That gave me a far better indication of reality than anything else.