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/