Multi-family homes in bay area

So I have seen a number of comments to not purchase multi-family properties in the bay area. Trying to understand the rationale behind it (as the cashflow seems to be much better). Why is this a risky proposition other then potential for rent control and intrusive city regulations in some counties. thanks in advance for the enlightenment

Unfortunately, our Fearless Leader and Creator is against multi unit building owning because of the fear of rent control. No rent control, I suppose @manch would consider it. But again, others here own multi unit buildings (rent control or not) and are doing fine. Yes, you are correct, the cash flow can be indeed much better, but the potential for more headaches is there I concede as well. Again, real estate investing has its inherent risks and pitfalls. No one ever said making money was easy. So, just because of rent control, are we to run away and hide? Heck no. Like I said before, I don’t know any multi unit owner who is doing absolutely lousy financially, even despite one or two sub market tenants. And if multi unit buildings in rent controlled areas like SF and Oakland were so bad, then why are investors wanting them so much? Exactly, because the prospect of making good money (via positive cash flow) is stronger than the fear of rent control and the headaches.

I don’t like rent control and headaches. So I stay away from multi fam in Bay Area. It’s mostly a personal choice. Many thrive in it, but that’s not my cup of tea.

Depending on where you are, it is very likely that tenant demographic can be different between multi-family and SFH in the bay area. Just to keep that in mind. One of my friends was looking for Spanish speaking property manager for the 6-plex he acquired in San Learndo, for example.

IIRC, every rental is controlled in San Francisco. Most of your postings (or focus) are about San Francisco SFH. Are they (SF-SFH) not under rent control?

Right. There are two defenses to rent control. One is type of housing, the other is age of the building. To be on the safe side I typically buy newer SFH’s and condos.

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Even single family houses, condos and newer building are not safe from rent control.

There are most risks for rent controlled property other than a low rent. Once rent control is in place, many other follow-on regulations will come to choke you

Nothing is guaranteed to be safe. We can only improve odds in our favor. My feeling is that there will be more political blowback if they try to mow over the small landlords who rent out one or two houses. Versus the fat cats like @sfdragonboy who owned apartment buildings. I can be wrong though.

Uh, noooo…small timer here… I still drive my Honda CRX Si (clean though) to stay humble…

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Nobody will be fooled. We all know fat cats drive beat up cars to fly under the radar… Be ready when the pitchforks show up at your door. :smiling_imp:

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Well, it is all relative. My contractor was repairing/repainting my Fremont home roof today. Money comes in…money goes out. I don’t know about you, but it is only March and I have spent quite a bit on rental repairs and stuff already…

Just came across this one in Oakland… 5 apartments for $649k (not on MLS)

4048 sqft living space for $649k… our 4plex in Santa Cruz has 4400 sqft and is worth ~$1.4M… seems like a good deal in Oakland. “Three units are occupied and two are under repair from fire damage.” (check out the photos)
How much can it cost to finish those 2 apartments? $100k? Add that to the price, seems like a great deal.

Cap rate is noted at 7.16%, I guess that’s based on 5 occupied units.

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A fire in Oakland. .what a surprise. .You need higher caps in Oakland. .more tenant damage and rent collection issues…I own property in Oakland but it is professionally managed…Dont want to deal with myself

If I am not mistaken that part of Oakland is pretty rough…

The fire proves it…High caps can mean high headaches. .plus after spending $100k the cap will be 5…

I am getting 8 to 11 caps in South Lake Tahoe…better quality tenants than East Oakland

How much would a 5plex in that rough area sell for after repairs?

It depends on how many units are vacant. My 4 unit building, which is fully loaded with semi low to medium rents in a decent part of Oakland appraised out slightly under 1M. Now, I am selling to my neighbor so open market could be higher. Why am I not going to market? Well, my neighbor knows the warts of the building and the area and he has a legitimate need for the building so if he is good with it, I am good with it and I am saving off the full 5% comm. Oakland is fairly hot though. I will be there tomorrow and plan to check some open houses just to see what is happening. From what I am seeing, SFHs in Oakland are going for 600s in just ok areas.

So if 2 units are vacant, isn’t that an advantage? You can place the new tenants at market rate after the remodel.

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Absolutely! More vacancy MAY mean one can get of course market rents or at least do some projections on future rent income and thus decide how much to spend on said property. My property, well, rents are what they are and we are talking rent control jurisdiction in Oakland. Maybe my neighbor has some scheme on driving the folks out. Hey, he does live next door. It does seem like more buyers these days are not looking at historical or present rents at a building. They are willing to take a shot at raising them (legally or not…).