I don’t have any section 8 tenants. And many landlords up here actually brag about not having them on their sales brochures. Might be a negative for resale. I am just trying get the price up for sale. The extra $600 rent is peanuts compared to extra $40-50k increase in value.
Well, wouldn’t a vacant unit instead be better at sale? Buyers would project what they think they can get in terms of market rent, and let’s be honest, most people in error perhaps like to think high numbers. Also, there might be someone who wants to actually live in the unit while renting the rest out.
This is where SF/Oakland and other rent-controlled municipalities are different from the rest of the world, and our views are distorted too because of it. Blame it on rent control.
Lenders don’t like vacancies. They want to see the building fully rented and rents collected from each unit. If some unit is vacant, they will discount the income from that unit, or do not count it at all. Only in rent-controlled areas can a buyer get excited over vacancies.
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That is a fair statement. Unfortunately, yeah, SF and the Bay Area is all I know re: RE…
Could be right. No rent control. Don’t need to be vacant. I will just give buyers the performa projected rents and let them imagine future high caps
Attractive cap rates are hard to estimate. But my competition is 5 and 6 caps. I put the building out at $1m at very competitive 8 cap. Luke warm response, not listed. So I raised it to a 7 cap more interest at $1.2m
Now I am thinking 6cap at $1.4m
Of course in the BA it would be a 3cap… $2.8m
Sacramento is now a 4cap town for prime property. It is amazing how cap rate is totally location dependent. Of course condition matters too
If your buyer needs a sizable commercial loan then vacancies definitely will hurt. For cash buyers or 4 units and below it’s not an issue.
I once considered bidding on a 16-unit apartment complex in east bay that was owned by the State of California. The state is a lousy owner because it doesn’t care about making money. When units become vacant they just let it sit, and they only give out minute rent increases regardless of where the market is at. So at the open house I asked state agent to show me the rent roll, and it took him a few days to dig it up from the property management team, and it looked horrible. More than half of the units were vacant, and the remainder way below market. The thing is the state was actually quite greedy in terms of setting the auction initial bidding price. From the way the state managed the property one would expect a low number that reflects the current state of the property, but they priced it as if the property were fully rented at market (well, a little less than that). When I took the rent roll data to commercial lenders they all politely told me to (go f* myself and) come talk to them one year after I buy it and rent out all units and increase rent on occupied units. Since I couldn’t get financing it was no deal for me, but I went to the auction anyway just to observe. I was surprised to see multiple parties bid up the property in earnest and eventually someone won with a price way above what I would have paid even if I could get financing. After auction was over the parties who lost out all congratulated the winner and everybody was saying it was a steal, and the winner acted accordingly. Well I guess they are in a completely different league then.
They are using partners or hard money. I loan hard money all the time. Just approved a deal today. Duplex in Alameda 8.5 % 65% Ltv first. I will take a small piece.
That building is worth $1.4 m 7900/m gross
Go for Tahoe or Sacramento get double that return. The biggest returns I have made are on multi family in the first two years while rents are getting stabilized. After that they just bumble along…
As far as managers. I think the key is getting units rented fast. I show units that are still occupied. Cutting your vacancy rate from the standard 5-8% to 0 is huge on your bottom line. As much as most profits or management fees.
Also the maintenance costs. Managers don’t care. But I can cut the maintenance costs by 80% compared to management companies
Ok, Oakland is finally getting it. You punished the criminals and also hurt them in the pocket book. Want to do doughnuts in the street again? I don’t think so… Let the gentrification of Oakland continue!!!
My property is like 2 blocks away. Sigh.
Let’s get it together Oakland!
My walking-distance-to-Fruitvale-BART rental is not too far either.
I signed up on NextDoor a few years ago at where I live. It’s a good platform for neighbors to communicate as long as everyone respects each other. Last year some time it suddenly hit me that I could sign up on NextDoor for all of my rentals too then I can be updated on neighborhood issues which I wouldn’t otherwise learn since I don’t live there. So I proceeded to doing that, and now I am in the know, especially for Oakland. I didn’t expect much from my East Oakland neighborhood groups initially, but I was pleasantly surprised how active they are. I know when and where gunshots have been fired, where prostitution is rampant, where car theft is taking place, where mail theft is happening, where there are scary dogs loose on the street, on and on. Ask me anything and I will tell ya …
For this particular sideshow neighbors have been discussing it since they started hearing the PA from the helicopter hovering above the area, which was around 1am.
This is nice. Over 1000 residential units and only 8 parking spots? Do they expect to put only homeless people in there so no parking is needed?
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I know right. It’s not That transit friendly!
For the Fruitvale village II project that is supposed to be going on right now, I haven’t studied to see how they will replace the current surface parking. They must still maintain parking for the BART station, right? Will they build enough underground parking to satisfy BART needs plus their residents’ cars?
Isn’t the reason why these are located near transit stations so that one doesn’t need a car? With Uber and self driving cars coming soon, fewer parking spaces are needed. If you need a car, then you probably shouldn’t live there…
I agree with fewer parking but none (ok fine 8… good luck right?). Come now now.
Can you really live without a car now if you are next to BART?
It is a tad extreme I would agree but that is the purpose of transit villages no? You are supposed to use the transit system!!! Come on, after paying for rent and those high transit fares, does one really have any more money for a (gasp) car??? No!!!