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Where would you invest in Northern California today with the highest return?


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2012 Aug 30, 10:13am   22,102 views  45 comments

by BayArea   ➕follow (1)   💰tip   ignore  

Hi folks,

For the past 9 months or so I've been hunting for real estate rentals in the Bay Area. I've primarily been looking in the Concord/Pittsburg/Bay-Point areas.

My criteria is less than $250K, near a BART Station, 3+ bedrooms. 9 months ago it seemed like there was more inventory and recently the prices have really been squeezed up discouraging me from continuing to look in these areas. As a result, I've started looking at other areas but could use some guidance.

I know the investment gurus typically don't like to share their secrets, but I'm wondering if anyone can recommend any areas in northern CA. I'm looking at this from two angles. The first is return from rent and the second is equity upside (ie: a house in Concord will appreciate faster than a house in the central valley for instance).

From this Redfin plot, it's indicating a market surge of ~16% in 2012 for Concord, CA.

#housing

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1   EBGuy   2012 Aug 30, 11:52am  

Read this article first to get psyched about West Oakland.
http://www.sfgate.com/business/ontherecord/article/Rick-Holliday-king-of-the-condos-3824246.php#photo-3362069

Then try this one on for size:
http://www.redfin.com/CA/Oakland/1627-11th-St-94607/home/1364261
Or for a little more elbow grease:
http://www.redfin.com/CA/Oakland/1730-8th-St-94607/home/1755919

For West Oakland BART properties, though, I think you need what they call the 'long view'.

2   Biff Baxter   2012 Aug 30, 12:00pm  

Sacramento (central valley, I know) has taken a beating and there are some very cheap houses there. I don't love the area but I think you might make some money. Nearby Elk Grove has many houses that are nearly new and absolutely dirt cheap. I am not terribly familiar with the area so I can't tell you about crime, schools or rental demand. Also nearby, Roseville was an up and coming community before the crash. There might be less dirtbags there but I’m not sure about prices.

If you can stretch a bit, you can pick up a decent 3 bed 2 bath townhome in Danville for around $350k, maybe lower. There is low crime or no crime there and generally good rental demand with high rent prices. They are not always available but they do come up. It’s close to the areas you have been looking in.

http://www.trulia.com/sold/Danville,CA/#sold/Danville,CA/3p_beds/2p_baths/price;a_sort

I would definitely look in Pleasanton, Dublin and San Ramon. You might find more to choose from there.

Biff

3   Biff Baxter   2012 Aug 30, 12:03pm  

EBGuy says

Read this article first to get psyched about West Oakland.

Read this article second to get un-psyched about South, West, North, East and Central Oakland:

http://www.nbcbayarea.com/news/local/Oakland-Gangs-Explored-in-Documentary-jw-59388487.html

Biff

4   thomaswong.1986   2012 Aug 30, 1:01pm  

BayArea says

From this Redfin plot, it's indicating a market surge of ~16% in 2012 for Concord, CA.

some kid makes an algorithm for Redfin, without any clear warranty on how valid it is and somehow its as good as gold...

its rather shocking how much bad info can be overused by the public.

You should look to dqnews.com for far better and accurate data...
they been publishing data long before the Internet using true accurate methods.

5   thomaswong.1986   2012 Aug 30, 4:30pm  

E-man says

My partner and I just got approved on a short sale today for a small 4/2 SFH in El Sobrante for $220k.

1997 prices plus inflation.. if not less... good call!

You need to educate the RE bulls how to negotiate purchase prices.

6   kpinna   2012 Aug 30, 4:43pm  

Hercules is cheap right now but BART is not nearby and the drive to SF is often a nightmare. It seems safe, friendly, and well taken care of. City finances are a mess, but I'm not sure if homeowners will take a hit or not.

As an example of current pricing, my neighbor wants to sell his 4-BR 2-Bath house (1770 sq ft) on a 7200 sq. ft lot in the hills for $350 or so.

The area is quite diverse: half Asian/Filipino/Mexican/African American, about a quarter Caucasian. I'm a Caucasian female and usually feel quite safe here.

7   JodyChunder   2012 Aug 30, 5:04pm  

Rare horror films on VHS cassettes in mint unopened condition.

Mobile hydraulic injury emergency clinic.

Tooled leather stall at the Flea Market.

Celebrity detritus (toenails/hair clippings/tampons, etc.)

8   Eman   2012 Aug 30, 5:21pm  

thomaswong.1986 says

E-man says

My partner and I just got approved on a short sale today for a small 4/2 SFH in El Sobrante for $220k.

1997 prices plus inflation.. if not less... good call!

You need to educate the RE bulls how to negotiate purchase prices.

Thomas,

Thanks for the compliment. I'm not a RE bull as some people labelled me on here. I just let the numbers be my guidance. I always have a back up plan before going in. The worse case scenario is we're walking away with $20k-$25k net profit if things don't work out. If I partner with a first time home buyer on this deal, we're likely walking away with $60k-$70k of equity in a couple of months.

That's all there is about RE. Leverage other people's money, leverage other people's knowledge, leverage other people's time, and leverage other people's credit. It's that simple.

If shit hit the fan, we walk away. Yes, we ruin our credit. We lose other people's money (the lenders), but we still have our cash and our knowledge. The beauty when shit hit the fan is that "cash is king." Then we take the cash and go for the next round. That's my investment model. :)

9   thomaswong.1986   2012 Aug 30, 6:51pm  

Good luck! as you point out your doing the numbers and knowing your risk appetitive.

10   Goran_K   2012 Aug 31, 1:21am  

Yup says

E-man, you are not a real estate investor, you are a thief. You are taking zero risk. You want all the reward and if it doesn't work out you leave someone else with the bill. Why anyone would take advice from you about buying a home from what you just said is beyond me. You are in fact proving that real estate is dead and the only people left in the game are the crooks.

Oh snap!

11   edvard2   2012 Aug 31, 1:36am  

I don't believe investing in real estate period. But if I were to do so- I sure as hell wouldn't do so anywhere in California. This is just my opinion but probably a better bet would be in faster-growing, more development-friendly states, as in primarily in states like NC, TX, GA, TN, and other areas that are experiencing a surge in population because people are moving from the coasts to these places.

Anyway..... Not investment advice.

12   coriacci1   2012 Aug 31, 1:53am  

buying a house? are you kidding? I won't give those bankster criminal, bloodsucker thugs a measly peso of my hard earned legal tender! Ever!

13   Eman   2012 Aug 31, 2:18am  

repo4sale says

Vacant land that is under $1000 per acre....

I bought and sold over 22,000 acres in California.

I own over 5000 acres today, with no debt, California land.

I averaged 1167% gross profit per acre in California...

Per Acre!!!

Resume Bio:

http://www.linkedin.com/pub/john-jason-chun/12/270/860

PS: 4 semesters of Calculus taken...

IRR calculated every day on 2 computers since 1987

IRR/MATH GENIUS!

If you want a fantastic return, go here. ^^^^^^^

14   Eman   2012 Aug 31, 2:19am  

Darrell In Phoenix says

"Where would you invest in Northern California today with the highest return?"

You mean the highest risk of loss presumably.

Undoubtedly, that area is the Bay area.

Darrell,

Learn to shift the risk onto the lenders, and you can invest anywhere including the Bay Area.

15   Eman   2012 Aug 31, 2:21am  

edvard2 says

I don't believe investing in real estate period.

I know you don't. You're a stock man. Different strokes for different folks. Nothing wrong with that.

16   Goran_K   2012 Aug 31, 2:24am  

I think his main point was that you're not actually an investor at all. You're more akin to a con man.

17   Eman   2012 Aug 31, 2:26am  

Goran_K says

I think his main point was that you're not actually an investor at all. You're more akin to a con man.

Con whom again?

18   SFace   2012 Aug 31, 2:38am  

E-man says

My partner and I just got approved on a short sale today for a small 4/2 SFH in El Sobrante for $220k. With 25% down, PITI is less than $1,200/month. We think it can be rented out for $2k/month. Nice area with predominantly Caucasian neighbors. We bought it because this deal just fell on our lap, and the numbers work. If things don't work out, we'll resell it for a profit. Eh...

That's great, congrats to you and PK.

Yes, 4/2 in that area goes for anywhere from 1,800-2,500. Your competition will be the newer homes in Hercules and country club on the bay side of the freeway. Most of those are built between 2001-2010 whereas yours are probably a little older and established.

2K area is the sweetspot for the demographic (middle class hispanic, caucasions, and southeast asians) (The established areas are most likely Causasians who have been there since the 70's) most will likely work in Oakland or even in the city. While 2,000 is the sweetspot, no one will pay more than 2,800 for rent no matter how big or grand the homes is. At that point, location matters. That demographic prefer Berkeley Hills, Walnut Creek, Lafayette.

80W approach is one of the worst commute in the country but most will exit @ EL Cerrito and park their cars to take BART to Oakland/San Francisco. There's also buses (air conditioned WI-FI buses thar runs every 20mins) that goes from Parking station to downtown directly. These buses use the carpool lane and much faster than driving. There's also casual carpool where you can randomly pick up people (or be picked up) and drop them off downtown. It's a crazy system but works and very popular in this area.

I generally prefer Hercules/El Sobrante over Concord for one simple reason. It is San Pablo Bay, 1 miles of homes and then the steep Hills. The building is pretty much done prospectivly based on natural limits.

19   Goran_K   2012 Aug 31, 2:51am  

E-man says

Con whom again?

C'mon E-man. Naive doesn't suit you.

I like E-man the guy "who just wants to see the world burn".

Case in point:
E-man says

That's all there is about RE. Leverage other people's money, leverage other people's knowledge, leverage other people's time, and leverage other people's credit. It's that simple.

If shit hit the fan, we walk away. Yes, we ruin our credit. We lose other people's money (the lenders), but we still have our cash and our knowledge. The beauty when shit hit the fan is that "cash is king." Then we take the cash and go for the next round. That's my investment model. :)

20   Eman   2012 Aug 31, 3:04am  

Goran_K says

E-man says

Con whom again?

C'mon E-man. Naive doesn't suit you.

I like E-man the guy "who just wants to see the world burn".

Case in point:

E-man says

That's all there is about RE. Leverage other people's money, leverage other people's knowledge, leverage other people's time, and leverage other people's credit. It's that simple.

If shit hit the fan, we walk away. Yes, we ruin our credit. We lose other people's money (the lenders), but we still have our cash and our knowledge. The beauty when shit hit the fan is that "cash is king." Then we take the cash and go for the next round. That's my investment model. :)

What's illegal about what I'm doing? Con man do illegal stuff. I don't. Big difference.

21   Goran_K   2012 Aug 31, 3:15am  

I think you misunderstand the term "con".

A con is simply an abuse of an entities "confidence", hence the the term "con man", a man who engages in cons. It's a misnomer to include "legality" as part of the definition of the word. Many "cons" are perfectly legal, though sometimes they become such a nuisance that laws are eventually put into place to prevent them.

Investors allocate capital with the expectation of a return, but also with the expectation and risk of potential loss. That's the most difficult aspect of being an investor, weighing potentials gains versus potential losses.

You have offloaded that risk by "conning" lending institutions into believing that you are a credit worthy individual who will pay them back. Had they known fully well that you wouldn't pay them back if your bets should go south, they would never have given you the money in the first place. But they did, and your lack of risk is based on the fact that you are more akin to a con man, not an investor. Because you have eliminated your risk by successfully conning the lending institution. There is no such thing as an investor who has no risk, hence, you are more closely related to a con man.

I hope that explanation clears things up.

22   SFace   2012 Aug 31, 3:37am  

Goran_K says

You have offloaded that risk by "conning" lending institutions into believing that you are a credit worthy individual who will pay them back. Had they known fully well that you wouldn't pay them back if your bets should go south, they would never have given you the money in the first place. But they did, and your lack of risk is based on the fact that you are more akin to a con man, not an investor. Because you have eliminated your risk by successfully conning the lending institution. There is no such thing as an investor who has no risk, hence, you are more closely related to a con man.

There's two sides to every transactions. A deal only happens if both sides are happy/agreeable with the terms.

It just happens the bank is willing to lend @75% loan to value ratio at a higher interest rate. The combination of the downpayment, interest rate, credit risk and banks lost opportunity plays a role in this. Unless there is fraud being involed, I'm sure the bank knows exactly the expected return from the transaction.

As a lender, the goal is to generate as much gross margin possible for as little risk possible thus net to an asset. Obviosuly, banks compete with other banks so they have to be in-line with others. As a lendee, the objective is the same, take the least risk possible at the lowest cost possible. The pount is, deals happen becasue it is a win-win not win-loss.

You can think like a Kindergardener and just say, cash or FU and live in secluded island doing evertthing yourself or you can treat yourself like a business and learn the nuance of finance and professional relationships. Different strokes for different folks.

My mom was the same way, cash or FU. Then she started seeing me and all my brothers going to Hawaii annually for free (free tickets and hotels at least) and now she is credit card or FU as well.

23   PockyClipsNow   2012 Aug 31, 4:01am  

Half the people on this board think if you 'make money its wrong and you are a crook'.

I would say to these people: consider adopting capitalism.

These guys flipping houses are not crooks but actual job creators. carpet installers, painters, tile guys, ecrow people, termite inspectors, realtors, bank employees, federal employees at FHA,Fannie,Freddie - they all need a robust healthy market with high transaction volume or they dont get paid.

The governement is BEGGING PEOPLE to buy/rent/flip - that why rates are 3% on mortgages.

The fact tha eman has a 'credit partner' just means he is a deal finder and either takes a flat fee for a deal or he invests a bit of his cash or some other other equity sharing deal.

Its open to anyone. We can all hunt for deals every day if we want to. E-man should be applauded. I might partner with him if he were in los angeles. (1% CD rates is killing me!)

24   kpinna   2012 Aug 31, 4:20am  

For El Sobrante, Pinole, or Hercules, the BART system doesn't really work out because there are generally NO PARKING SPACES left by the time we get there. El Cerrito has the safest BART station, but you have to walk 15 to 20 minutes after finding a parking spot in a zone without restricted parking. So most of us undoubtedly drive to the city and put up with 1.5 hours driving a 30-mile (for me) commute.

This area, with all its hills and views, is astonishingly beautiful. The hills of Hercules and Pinole seem to be a well-kept secret. The houses and lots are huge compared to El Cerrito and Albany, there are beautiful parks, people keep up their properties better than other East Bay towns, and the neighborhoods are quiet. El Sobrante seems a bit drab in comparison and has funky neighborhoods, stores, and people.

By the way, I don't think people would pay more than $2000 rent when mortgages are so much cheaper. I'm paying $1600 for a 4-bedroom house but got a good deal as a single female writer who does all the maintenance and minor fixes. The renters next door have paid $1800 for years, and I see homes advertised for $1700 to $2200.

25   Facebooksux   2012 Aug 31, 4:30am  

PockyClipsNow says

Half the people on this board think if you 'make money its wrong and you are a crook'.


I would say to these people: consider adopting capitalism.


These guys flipping houses are not crooks but actual job creators. carpet installers, painters, tile guys, ecrow people, termite inspectors, realtors, bank employees, federal employees at FHA,Fannie,Freddie - they all need a robust healthy market with high transaction volume or they dont get paid.


The governement is BEGGING PEOPLE to buy/rent/flip - that why rates are 3% on mortgages.


The fact tha eman has a 'credit partner' just means he is a deal finder and either takes a flat fee for a deal or he invests a bit of his cash or some other other equity sharing deal.


Its open to anyone. We can all hunt for deals every day if we want to. E-man should be applauded. I might partner with him if he were in los angeles. (1% CD rates is killing me!)

E-Man is openly professing that he's Ok from walking away from his financial obligations and stiffing his creditors and you're making it sound like it's the second coming of Adam Smith?

Well, dipshit, I've got some news for you.

Just who the fuck do you think ends up paying the tab for all those writedowns?

This is the same crap that got us into this situation in the first place and all it's gonna cause is more misery and financial ruin.

AF and I are gonna have our sights on you when Cannibal Anarchy comes.

26   EBGuy   2012 Aug 31, 5:00am  

FBsux says: E-Man is openly professing that he's Ok from walking away from his financial obligations and stiffing his creditors and you're making it sound like it's the second coming of Adam Smith?

If E-man walks immediately after closing (or anytime before refinancing) he loses his $55k downpayment. If he walks after refinancing (takes all the cash out but maintains 75% LTV if the house appraises at $300k) that is the banks fault for not appropriately valuing the property (and as a rental, the income stream). No one has been conned. Everyone needs to calm down.

27   dublin hillz   2012 Aug 31, 7:31am  

Helloeeze says

If you take that same 50K in put it in a low cost, diversified fund, like, say Wellesley Income Fund, you will make about the same (or more) over a ten-year period by just sitting on your bum and doing nothing.

I couldn't agree more. I think from that standpoint of risk/reward/effort, investing in a broad market bond fund or high yield bond fund is much better proposition than rental real estate. Heck, even REIT fund is better.

28   Eman   2012 Aug 31, 8:26am  

kpinna says

By the way, I don't think people would pay more than $2000 rent when mortgages are so much cheaper. I'm paying $1600 for a 4-bedroom house but got a good deal as a single female writer who does all the maintenance and minor fixes. The renters next door have paid $1800 for years, and I see homes advertised for $1700 to $2200.

kpinna,

Thanks for the heads up. Like I said, we don't know much about the area. I guess we'll find out the hard way. :)

29   Eman   2012 Aug 31, 8:39am  

Helloeeze says

If you take that same 50K in put it in a low cost, diversified fund, like, say Wellesley Income Fund, you will make about the same (or more) over a ten-year period by just sitting on your bum and doing nothing.

Helloeeze,

Thanks for engaging in a civil debate rather than speaking with emotion like some others. Our intention is to pull out all or most of our money after 1 year. By then, we're no longer having any investment in that house. The PITI will be less than $1,500/month, and the tenant is paying down the mortgage over $300/month.

With the net positive cashflow, we intend to buy mREITs, which are paying 12% to 15% dividend annually. That's what we have in mind at the moment, but things might change. How do you think that stacks up against your mutual fund investment?

Also, 4.125% to 4.25% no points no costs on the loan. Home is in move-in condition, but we will likely put some lipstick on that pig.

I was taught that there is no right way; there is no wrong way; there is always a better way to invest or do things. I'm still trying to figure out the "better" way to put food on the table for my family. It hasn't been easy, but I'm trying my best. I don't know what I don't know wouldn't you agree?

Cheers.

30   Eman   2012 Aug 31, 8:40am  

Darrell In Phoenix says

E-man says

We pick up a property for $220k. It's worth $300k.

No. It's worth $220k. Exactly what you paid for it.

You're absolutely correct. I can't argue with you there.

31   Eman   2012 Aug 31, 8:53am  

Facebooksux says

E-Man is openly professing that he's Ok from walking away from his financial obligations and stiffing his creditors and you're making it sound like it's the second coming of Adam Smith?

Well, dipshit, I've got some news for you.

Just who the fuck do you think ends up paying the tab for all those writedowns?

This is the same crap that got us into this situation in the first place and all it's gonna cause is more misery and financial ruin.

AF and I are gonna have our sights on you when Cannibal Anarchy comes.

I have to look out for the best interest of my family. If SHTF like some of you is envisioning, I have more things to worry about than keeping those depreciating assets. I pay taxes too so I guess I'm screwing myself over too. I guess it's not worth discussing with you if you don't understand how risk and reward work.

32   Eman   2012 Aug 31, 9:02am  

Bay Area,

If you're interested on how to seek out these deals, shoot me an email and I will share with you my approach.

33   Eman   2012 Aug 31, 9:21am  

PockyClipsNow says

Half the people on this board think if you 'make money its wrong and you are a crook'.

This reminds me of what Mitt Romney said yesterday and I'm paraphrasing here. People are apologizing for their success rather than celebrate it. I guess the guy has been attacked by the media for his success so it's time to strike back. ;o)

34   Eman   2012 Aug 31, 9:45am  

Squatting in East CoCo says

Lots of houses for sale in El Sobrante.

Squatting,

I just went on Redfin, and there are 14 SFHs that are active on the market. Like I said above, I don't know anything about the area. My partner and I can get slaughter on this deal, but we have a back up plan going in. So fingers crossed.

35   groundhogdaze   2012 Aug 31, 2:27pm  

E-man says

This reminds me of what Mitt Romney said yesterday and I'm paraphrasing here. People are apologizing for their success rather than celebrate it. I guess the guy has been attacked by the media for his success so it's time to strike back. ;o)

Learn from your victory. Prosper from your failure.

Speaking of Romney, I was watching Eastwood's speech and I could relate. Everyone's got an invisible rabbit friend. Frank and Harvey are common names for invisible rabbits but Eastwood's got one named Obama. I once got a perfect score on my math test with the help of my invisible rabbit friend. Everyone knows that one thing rabbits really like to do is to multiply. That and sit invisibly in chairs and telling people to go F themselves. Now back to our regular scheduled programming...

36   crazylikeafox   2012 Sep 1, 10:18am  

E-Man,

I think you are doing great investing in real estate now. Aren't we all try to beat the system and want to become financial independent?

I would love to learn from you. I'm currently looking properties in Las Vegas. If possible, can we discuss further via email?

Thanks.

37   dhmartens   2012 Sep 1, 8:22pm  

Finally a very simple question I can answer, Richmond will offer the greatest monetary reward over time.

To enjoy life now and advance your spiritual wealth, Southern Marin, Berkeley, and the Marina, San Mateo for some.

38   37108605   2012 Sep 1, 9:11pm  

I know this place is a bit well, no other way to say it, loopy and wacked out at times I presume it is the nature of the beast. However, I must say I have a real serious problem with this title "Where would you invest in Northern California today with the highest return?" or these greedy fucking phrases like "money reward."

In my opinion it is precisely THAT bullshite mentality (which I trans. as: make that buck find that hidden buck in that property and milk it,) that I feel got the country and real estate in the fucking economic mess it is in right now.

39   Goran_K   2012 Sep 2, 2:48am  

Wow. Richmond California. Why not throw West Oakland in the mix too?

40   B.A.C.A.H.   2012 Sep 2, 3:16am  

Ah yes, Richmond Real Estate. Part of my portfolio. Or at least, the part of Richmond that belongs to CVX. It's a nice position with a positive cash flow (15% federal rate at least for time being) , steady increase in valuation keeping ahead of inflation. No tenants to depend on. Legal liability buffered by the overall massive size of the corporate parent. Hyper liquidity, sub-leasable, and yes, for folks like eman, leverage-able. Wash rules are fairly liberal, providing opportunity for tax-managing some loss positions.

But its kind of humility to be a small fish in a big pond of a billion or so shares. If I were a coveting kind of person, well maybe something like shares is too intangible for my personal values. And then I don't have the opportunity to attach "Lord" (as in LandLord) to my identity.

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