patrick.net

Thanks SF Ace,
I was also thinking of buying a Condo/TownHouse in 95133/95131 zip codes of San Jose. BART is going to come there and it's arrival would jack up the rents if i buy within 1-2 block from it' future station.
I'll explore Hercules also.

Try my data service:

http://patrick.net/housing/worth.html

It's $7/week, first three days free trial. Cancel in three days if you don't like it and pay nothing.

Covers the whole US now, and explicitly calculates the "Fair Value" where rent covers expenses. Happy to answer questions about it.

But you already know the basic answer: the far east bay has houses that are cash flow positive.

Thinking of getting an owner-occupied duplex/triplex in this price-range also.

I've been looking at areas of Oakland.

My first choice is around Lake Merritt/RT 24 or downtown/chinatown Oakland, second choice is just below or above 580 between the Park and 35th Street exits.

I believe that as gas prices and inflation grows that the closer to urban centers the better. Also would rather spread my risk with a duplex or triplex (mult tenants) as opposed to a SFH (all income dependent on one tenant).

Possible drawbacks I can identify are: most properties will be ~100 years old, thus requiring maintenance, crime problems in Oakland make certain areas very undesirable, some parts of Oakland have rent control.

Comments? Anyone else looking for a multi in OAK?

Hate to sound like a broken record- but honestly you'd do a whole hell of a lot better investing in stocks and other traditional investments versus housing. Stocks tend to gain 7-8% per year over the long term. That's about 50% better than what real estate does over the same period.

Edvard - thanks for your input but would you care to put down some detailed numbers about this?

For the housing example figure a duplex purchased for $300K with 20% down. PITI would be ~$1K and rents would be $3K ($1500 per unit).

Trying to understand how investing $60K in stocks would bring a better return. Project this out 30 years.

Sure. So let's assume you put 60k into the stock market right this minute. Assuming you invest broadly and diversify what you invest in, you would only have to invest a little under $300 a month in order to have a million dollars in 30 years. This assumes that the stock market performs much the same as it always has- which is that it would give you a long-term return of 7-8% per year- again- over the LONG term.

The saying these days goes that by the time current workers retire they should have at least a million dollars on hand. Double that amount if you live in a pricey area like the Bay Area.

Anyway, this is not advice but my opinion. If you wanted to get more definitive answers you'd probably need to discuss this with a financial planner. Then again- to each his own. I probably wouldn't be making a decision on serious financial concerns via a forum- my advice included. Good luck.

An individual has a lot more control over the return of their rental property than of the stock market. However, you're stuck with it long term. I have been wanting to sell a rental duplex in Whistler BC for several years, that has a decent gross return of 5%. However, once occupied by tenants it is very difficult to sell without tenants moving out due to the uncertainty and agents traipsing through, so there would be no rental income while up for sale. I will probably have to move into it and sell it myself one unit at a time. In this regard a SFH is better.

cloud13 says

Thanks SF Ace,

I was also thinking of buying a Condo/TownHouse in 95133/95131 zip codes of San Jose. BART is going to come there and it's arrival would jack up the rents if i buy within 1-2 block from it' future station.

I'll explore Hercules also.

BART will come to San Jose at roughly the same time the high-speed rail line comes through, which is to say, don't hold your breath for less than 10 years, and I'll be surprised if it happens within 25. California is going to spend 10-15 years coming to terms with and executing on the need to rewrite the constitution to make the state governable.

Not trying to dissuade you from buying a place, just saying that you might assign less weight to things that won't really matter before your grandchildren graduate college. =)

Ducky, Are you going to the auction for this one?
http://www.redfin.com/CA/Concord/1111-Victory-Ln-94520/home/1854147

EBGuy says

http://www.redfin.com/CA/Concord/1111-Victory-Ln-94520/home/1854147

The pricing history on Redfin is not accurate. The 2001 "sale" is really a transfer among the owners. There were 4 owners on the title in 2000, and only 2 of those remained after the 2001 transfer.

Sep 04, 2001 Sold (Public Records) $143,318
May 16, 2000 Sold (Public Records) $208,000

Bordering on the 2000 price at $199K is impressive. They must have pulled a ton of money out of this to be in a short sale situation. Do you know the loan amount, EBGuy? This place already dropped out of escrow once.

edvard2 says

Sure. So let’s assume you put 60k into the stock market right this minute. Assuming you invest broadly and diversify what you invest in, you would only have to invest a little under $300 a month in order to have a million dollars in 30 years. This assumes that the stock market performs much the same as it always has- which is that it would give you a long-term return of 7-8% per year- again- over the LONG term.
The saying these days goes that by the time current workers retire they should have at least a million dollars on hand. Double that amount if you live in a pricey area like the Bay Area.
Anyway, this is not advice but my opinion. If you wanted to get more definitive answers you’d probably need to discuss this with a financial planner. Then again- to each his own. I probably wouldn’t be making a decision on serious financial concerns via a forum- my advice included. Good luck.

Evard,

Thanks again. I will be the first to admit I am not a financial genius.

I am already investing quite a bit via my sep IRA and a short-term and fairly liquid investment (for my down).

Again, my plan is to buy my first place, owner occupy it. With any luck have my tenants pay most or all of the mortgage.

Considering I pay close to $2K a month for rent I am having a hard time finding anything wrong with my plan.

Assuming a property of $300K with 20% down and 100% cash flow positive and 5% appreciation a year and discounting my rent of $2k/mo. I am looking at a free $1mil after 30 years without having to contribute $300/mo and saving $2K mo (not paying rent).

Only drawback is I will be living in Oakland = )

Am I missing something here? Thanks for any worthwhile comments or info.

Malkovich says

Again, my plan is to buy my first place, owner occupy it. With any luck have my tenants pay most or all of the mortgage.

Considering I pay close to $2K a month for rent I am having a hard time finding anything wrong with my plan.

Assuming a property of $300K with 20% down and 100% cash flow positive and 5% appreciation a year and discounting my rent of $2k/mo. I am looking at a free $1mil after 30 years without having to contribute $300/mo and saving $2K mo (not paying rent).

I'm confused. How is your place both owner-occupied and cashflow positive? Also, where is your cost of capital (i.e. interest)?

Forgot about the cost of capital. In regards to the cash-flow positive I am referring to a duplex or triplex where the rent cover the mortgage.

Clearly I am new at this stuff. Thanks for pointing out the things I am over-looking.

controllio asked: Bordering on the 2000 price at $199K is impressive. They must have pulled a ton of money out of this to be in a short sale situation. Do you know the loan amount, EBGuy?
I just checked Property Shark's entry for 1111 Victory Lane and it shows a refi with Option One Mortgage for $459k in March, 2007. Impressive! PS also shows an auction date of June 22.

West Oakland ;-)

I think one of the benefits of investing in real estate is that you have more ways of writing off the rental income and you have none in stock.

cloud13 says

benefits of investing in real estate is that you have more ways of writing off the rental income

The passive activity rules limit your write-offs. If you don't qualify as a "real estate professional" via the tax rules, you are limited to a maximum of $25K in write-offs if you make $100K or less in AGI, which phases out to zero if you make $150K in AGI. A lot of people don't know this.

cloud13 says

I think one of the benefits of investing in real estate is that you have more ways of writing off the rental income and you have none in stock.

A lot of people simply don't declare this income until IRS shows up at their door. Some do get away with it though.