Where To Invest: San Francisco Bay Area Or Elsewhere?
On Wednesday, March 29th, Kiri and I hosted our 2nd Real Estate Investor Meetup in San Mateo. Below are the meeting notes.
We divided the group into two teams to develop their arguments for either investing in the Bay Area or outside of the Bay Area (assumed different states).
Investing in the Bay Area
Pro's
Nearby/ easy access in case of issues to be resolved
Familiarity/ knowledge of local area
Strong appreciating market
Strong job market
Great weather
Higher demand than most parts of the country = higher liquidity
Con's
Time consuming to manage the property ourselves
False sense of security/ Feelings of attachment to color judgement
Appreciation is NOT a guarantee for returns
Earthquakes
More volatility than other parts of the country
Investing outside of the Bay Area/ Out of state
Pro's
Higher Cash on Cash (CoC), i.e. cash flow per amount invested
Smaller amount required to invest
Increased diversification
Con's
Slower appreciation
Harder to manage/ visit if things go wrong
Navigating legal requirements of different states
It was obvious that both groups were focusing on rental properties. We then went on to discuss that there are many different types of real estate investing besides rentals such as a few examples below...
Passive Income
Single-family rentals
Multi-families (apartment building/ complex)
Storage units
Private lending
Earned Income
Fix and flip (i.e. Rehab)
Wholesale
Property management
We briefly touched on a couple economic factors (job market, population growth, etc.) for evaluating an investment. At the next meetup (April 12, Wed, 7-8pm at Bobabia, San Mateo), we will deep dive into numbers, the vetting process and lessons learned from a variety of past deals.
The group was energized so we stayed for an extra 30 minutes to discuss the various components in deal structuring.
Wealth Pair = Asset + Capital Stack
Capital Stack = Equity + Debt
Different roles/ ways to invest in an average real estate deal:
Equity Partners
Credit partner (provides good credit to sign for loans)
Down payment partner (provides the capital for a down payment)
Rehab partner (provides rehab capital or performs the rehabbing on the property)
Debt Partners or Lenders
Rehab partner (provides rehab capital for a guaranteed monthly interest payment)
Typical private lender (provides both purchase + rehab capital)
Total annualized return or "Throw Off" of an investment = (Cash Flow + Depreciation + Principal Reduction + Appreciation) / Total Investment
Below are a few great ideas the group brainstormed for future meetups:
Past deal sharing: vetting, valuation, outcome, etc.
How to build the right team
How to market to foreign investors
How to create the legal structure to provide asset protection
We look forward to seeing old friends and new faces every other Wednesday night to learn and build a future we desire together.
To sign up for the next meeting of the San Mateo Real Estate Investor Meetup: https://www.meetup.com/Real-Estate-Investor-Meetup-San-Mateo/events/238913703/
