I recently had an investment question posed to me and thought I would share…
The question was a general one, asking where in the Bay Area I should invest.
My answer…Depends on your investment strategy, location and goals.
First of all, you need to get your financial house in order, see what purchasing power you can leverage, and have a solid down payment.
Your total equity invested will affect your purchase power, so get a financial read on what the price ranges will be for the purchase.
Lenders will look at this as an income property, so will likely require more down payment vs. a traditional owner occupant. Lender will also determine the approval of the loan based on the property, the condition and income the property is generating.
Location maybe based on your price points and purchase power, that will help narrow the field into various areas and neighborhoods.
You need to understand rent control and eviction control, the limitation of city ordinances that will bring to the city you are looking to invest in.
SF, Oakland, Berkeley are all a little different in that regard.
Many of my clients don’t want to deal with rent control properties, so they buy newer built condos that are not subject to rent or eviction control. Condos close to jobs and transportation is always key to my strategy.
Prop 10 that is on the ballet can also change the game in various cities in CA, so need to watch what can adversely affect you. If Prop 10 is passed, then local governments can change rental laws at future dates.
Make sure check out options also in other markets to compare values. Ideally you want a good mix of appreciation and cash flow.
Many investors in the Bay buy on appreciation only, which is somewhat speculative, other markets can offer cash flow but less upside appreciation. So timing of the market is also key.
Evaluate the opportunity, The GRM – Gross Rent Multiplier (which people use typically for small multi-units) changes per city and the level of risk, demand, etc.
For commercial property use the CAP rate.
Remember, markets go up and they come down, those who believe the SF Bay market is only going to get better, failed to have lived through 2007-09 in the Bay, it is more volatile than other markets, more risk and more reward.
Last, buy into equity, you make your money in real estate when you buy, not when you sell.
If you have any questions/comments…don’t hesitate!