East Bay (such as Milipitas, Fremont) and Santa Clara

[myo]

@manch

Has that creek flooded before? I didn’t realize there is a small creek there…
I think Milpitas and Berryessa are perfect areas to take advantage of the North San Jose development.

I think there were couple of flood in the history of Milpitas, not sure what was the source. I agree for North San Jose development, it has good schools 8/9/10. And probably < 5 miles to the happenings in North San Jose. I prefer Berryessa and Milpitas near that area is more desirable too.

[hanera]

@myo

This might be where the disconnect is, I just signed one year lease back in June for $3550, for 3/2 1400 sqft where I can buy today with 900K.

Better than what I got for a SV house bought in 2011! $3000/month for a $1.2 mil house. I think there is a rent ceiling, hard to increase after that. Could be limited by salary or the thinking that might as well buy a house or move to a cheaper neighborhood.

[myo]

@wuqijun

Still underwater even at $3550. Property tax at 900k will be $12k per year. That means $1000 per month. Your extra $550 per month in rent will not cover! And that is before you even take fire/flood insurance into account.

Sorry, my calculation was set at low interest rate when I cash-out refinanced as primary, yes, it is more negative cashflow than I was stating.

@wuqijun

same story with Daly City. Its median sales price at 900k. No, you will not generate any kind of positive cash flow at 25%.

Unless you want to be a slumlord and convert your 1200 sqft house into 10 bedrooms. But why go to such extreme when you can do better elsewhere.

No need to slum lord. There are places that you can get 5 / 6 bedrooms out of over 2000 sqft. You do need to rent to two families / two groups and can generate upward of $6000 / month.

[wuqijun]

Is your home in West San Jose? Rent is $4000 per month in that area for a normal home. Can go higher if it’s a bigger home/better school.

[wuqijun]

Yes, but 5/6 bedrooms at 2000 sqft will also not be at 900k anymore. You can only buy about 1400 sqft with 900k… but I think if you look hard enough and cut enough corners, yes, it can be achieved.

[myo]

@wuqijun

You can only buy about 1400 sqft with 900k… but I think if you look hard enough and cut enough corners, yes, it can be achieved.

Why do you assume that you have to cut corner?

Yes, those are not at 900K today (was last year), but you can still find around 1.05M, and still can generate about $1000 in cash flow with 25% @ 6 CAP. They are not there waiting for you, but they are there. On top of that market is quite hot now, so there are a lot of appreciation potential. But why am I saying this, you don’t should totally not buy in Daly City! Stay way from this foggy place.

[hanera]

@myo

market is quite hot now

Haven’t been checking market in Bay Area for a long time, just checked, hardly any houses for sale in SV, wow, from memory inventory has not been that low. In certain neighborhood, no condo and townhouse for sale!

[wuqijun]

LOL. Yes you should not consider Daly City. If you can manage to generate positive cash flow in this place with 25% down, then I will treat you to a fancy vacation to the Bahamas. Because you deserve it!

[myo]

@wuqijun

If you can manage to generate positive cash flow in this place with 25% down, then I will treat you to a fancy vacation to the Bahamas.

What proof do you need? I won’t turn down free vacation.

[Jil]

@myo

@wuqijun

Rent is $3000 per month.

This might be where the disconnect is, I just signed one year lease back in June for $3550, for 3/2 1400 sqft where I can buy today with 900K.

You are assuming Yield as CAP rate.

Yield is $3550.

Property tax appx : 940/month, Insurance $40/month, Management+Maintenance 10% = 355

Your pre-tax profit is 2215, Yearly = 2215*12 = 26580.

Cap rate = 26580*100/900000 = 2.95%

You remember my statement “Milpitas might be more of 3 CAP”

[wuqijun]

That means you cannot get it. Why would I hand out free vacation for no reason? No such thing as free lunch!

Please don’t mislead people into believing that they can buy million dollar homes and get good cash flow out of them. You can’t! Please always do proper research and due diligence before posting. If you don’t have the facts to back things up, they are probably too good to be true.

[Jil]

@hanera

@myo

market is quite hot now

Haven’t been checking market in Bay Area for a long time, just checked, hardly any houses for sale in SV, wow, from memory inventory has not been that low. In certain neighborhood, no condo and townhouse for sale!

There are two homes I see good cash flow, both are redfin hot home. Other than these two, better cash flow, market is pretty competitive.

https://www.redfin.com/CA/Hayward/980-Cheryl-Ann-Cir-94544/unit-41/home/1663116

https://www.redfin.com/CA/Morgan-Hill/18210-Hale-Ave-95037/unit-A/home/1272420

[wuqijun]

Yes, to generate good cash flow in the Bay Area, purchase price has to be $450k or under. Anything over that amount will result in suboptimal outcome.

That why, if you are looking for cash flow, forget SF, South Bay, or peninsula. East and North Bay are the areas to go.

[myo]

@Jil

You are assuming Yield as CAP rate.

Yield is $3550.

Property tax appx : 940/month, Insurance $40/month, Management+Maintenance 10% = 355

Your pre-tax profit is 2215, Yearly = 2215*12 = 26580.

Cap rate = 26580*100/900000 = 2.95%

You remember my statement “Milpitas might be more of 3 CAP”

@myo

I was referring to Daly City for 6 CAP today. Milpitas might be more of 3 CAP.

@Jil, Yes, Milpitas is 3 CAP, never said differently.

[hanera]

@wuqijun

East and North Bay are the areas to go.

Totally not familiar with these areas. Need you to conduct a tour When are you free?

[wuqijun]

PM me

[myo]

@wuqijun

That means you cannot get it. Why would I hand out free vacation for no reason? No such thing as free lunch!

Please don’t mislead people into believing that they can buy million dollar homes and get good cash flow out of them. You can’t! Please always do proper research and due diligence before posting. If you don’t have the facts to back things up, they are probably too good to be true.

Sorry, I don’t normally go back and forth on side topic, but you are saying I am making empty claims. I am talking from my own experience which I shared sometimes last year too. Bought it with 838K + reno 50K. Financed 75% out of 837K. Rent 6500 to two groups (there were 2 maintenance call last year - and both of them renewed the lease for one more year with the same rent). Cash flowing $1800 with CAP rate of 6.8%. This come out to about 30% down due to renovation out of pocket, but If you strictly put down 25% of total amount , you still cash flow about $1600 / month.

Today purchase price is changed from 900K to 1.05M, and your return reduced to $1200 / month and 6 CAP.

Maybe you should do your proper research and due diligence before posting. I am here to learn and share, so please let me know if I am over simplifying it.

[BAGB]

What’s the mortgage rate you used for calculation?

[myo]

@BAGB

What’s the mortgage rate you used for calculation?

Not sure question is for me? If it is, 4.625%.

[wuqijun]

Ok, the question is whether you can actually get $6500 monthly rent with a million dollar purchase price. Answer is that you can’t under normal circumstances. Your purchase could’ve been an exception rather than norm. If you go to Craigslist and check postings, you’ll see that for Daly City SFH rent averages around $3500. Your rent amount is double the average. Does that sound normal to you? What makes your home so special? Why are the other landlords only charging $3500 if they could charge $6500 like you?

So if I were to go and purchase a million dollar home today, I’d rather go with the expectation of renting it for $3500 rather than $6500, which is not a realistic expectation here in the Bay Area.