8-unit, multifamily investment property in San Leandro. Any thoughts on this one?

https://www.redfin.com/CA/San-Leandro/14863-Bancroft-Ave-94578/home/967781

I wrote this summary for another thread for a purchase of a Single Family Home for rental. Not sure how much will it change for Multi-Family. Actually, I will be interested in know if anyone has an idea of how to analyze a multi-unit property for investment purposes.

Cross posting from my post in other thread

There’s a reason it’s so cheap. Rents are way below market. So the condition of the property is probably pretty bad. With rent control in place now, you are going to have trouble getting people out to update and get to market. don’t touch it unless you have a strategy for emptying out the place and cleaning it up.

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So the rent is about $90k currently?

3.66 % cap rate looks low?

Any Austin rentals have higher rate.

Isn’t that a given…

What’s the average for bay?

It does seem to agree with the equation I generally throw out when talking about SFBA realestate:

Long Term ROE (assuming 0 loan) 10 % = 3-4 % rents + 6-8 % appreciation

Not enough for the investors here.

If your theory doesn’t agree with reality, I’d take the side of reality any time.

And if it does agree with reality, will you still take the side of reality?

Long term California home prices double every 10 years. That gives us rate of appreciation of about 7%. And the income from rent comes about 3-4 %. Do the math yourself.

Don’t think so. Do the math yourself.

What am I looking at? I’m not good at math.

Can’t even count my rent money sometimes…

Case Shiller index for SF. It tracks resale value of houses so that’s the gold standard for appreciation. Usual disclaimers apply: it includes some part of East Bay like Oakland and Hayward, so it’s not exactly the same as SV.

The series includes 33 years, so you take the very last one, divide it with the very first one, and take the 33rd root. You’d get 1.054. So Bay Area RE appreciates at a rate of 5.4% over the last 33 years.

Thank you!

It’s a damn disgrace. I can’t do simple math sometimes.
Luckily, I don’t have to be good at everything to live a decent life.

S&P index returns about 11% long term, if you reinvest all the dividend. It has a lot more volatility than real estate, so common sense tells you it can’t also have a lower return than RE.

If you include a cap rate of 3%, Bay Area RE returns about 8% a year. Let’s call it 7% to budget for some margin of error. That’s actually very decent return for a “safe” asset. You can also use a lot of leverage in RE and still can sleep like a baby at night. Not true for stocks.

Huh? I slept well since 1997 investment. Far better than previously.

We are speaking in generalizations.

Regular people are not like you.

Fixed it for you.

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