All Forum Posts by: Sudeep Jain

@Sudeep Jain,
"The rents just about cover the mortgage and taxes. This means I will only have internal returns for a while, and Ill have to rely on appreciation for the investment to make any sense. Am I missing some crucial piece of information here?"

@Andrew Muff,
"The condo we have just appraised for slightly less than your target for the SFR and as that neighborhood improves we expect the appreciation we've experienced to continue."

Hard to decide which signs are the best indicators of the beginning of the end of this cycle: the data, or the speculation and optimism! (it's different this time! ;) @Account Closed - which do you think? hehe 

Andrew, you expect condo appreciation since 2012 in West Oakland to continue? 
Sudeep, we are in the late phase of an expansionary cycle, and appreciation rates are slowing. In addition, West Oakland has some of the more volatile prices in the SF Bay Area, which is why I bought a duplex up by Andrew's place in 2014 for $300K. You will be negative cash flow on your SFR as it sits after paying for maintenance, even more negative cash flow if the significantly increased rents in West Oakland soften, and are buying at a time of the economic cycle that tends to produce the least large appreciation gains, based on history.

The best appreciation gains tend to come after the unemployment rate hits a peak, and the economy starts to improve. They tend to be lower or negative after the unemployment rate hits a low. Look at which years in history have the same jobs characteristics as today and ask yourself if you would have also liked to buy in those years. If your answer is you're a baller tech employee who can afford whatever monthly shortfall, and are holding for 20 years and you don't care, then go for it..

Hey Sudeep. Welcome to RE Investing. I've owned a condo in what I think is the exact neighborhood you described since 2012. It's on the Target end of Mandela Parkway and my wife and I lived there for 3 years before moving to the Oakland Hills. It's just over a mile from the W Oakland BART station and I can say from experience that it's close enough to walk if you have no other choice, but a mile is too far to do every day for your commute. My wife just weighed in on this and said a 10 mins walk (about a 1/2 mi) is acceptable. That said, if someone was less lazy than I am, a mile is an easy bike commute and there is plenty of secured bike parking at BART.

Other than that I think you have your bases covered. The condo we have just appraised for slightly less than your target for the SFR and as that neighborhood improves we expect the appreciation we've experienced to continue. It was a VERY rough neighborhood when we originally purchased, but now most of the homeless are gone, they knocked down the abandoned warehouse they were living in, and some of the recycling centers are closing up and leaving. There is a lot of new construction going on there and in another 1-2 years it will be a completely redeveloped area close to BART and freeways.

I say you'll do just fine on that purchase although I can't imagine that rents can continue to climb. But then I've been saying that and have been wrong for years as well.

I could go on about tenant selection as well, but I think that is enough for one post. Best of luck!

"I'll have to rely on appreciation for the investment to make any sense" is a recipe for disaster, my friend. We are quite possibly at the top of the market, so relying on appreciation, especially in an area like West Oakland which has seen values double over the last 5 years, is extremely risky and irresponsible. 

There are plenty of multi family properties that will provide cash flow in West Oakland that will give you a return on Day 1, or perhaps with a value add component to give you double digit CoC returns.

Keep looking.