I think I found a good one!


I think I’ve found a good deal in California (the San Francisco Bay Area). The top floor is a 3 bedroom 1.5 bathroom with views, and the bottom floor is gutted. This could be made easily into one big house or two separate units. The house is going for $440K, with only 17 houses on the market in this small town…there are only 2 properties that are going for less (the lowest is 399K, at 900 sqft, 2bd/1ba).

Do you think this is worth looking into? As a buy and hold rental property? I have a friend that wants to do it and will pull $100k out of his house as a down payment that we would both make payments on to pay back. Then we’d split the mortgage payments obviously. We think after rehabbing the bottom floor we could get about $1300 for each unit per month. Oh, and the top floor is about 1400 sqft, downstairs is 1200 sqft.

Any thoughts?? I’m obviously a newbie to investing…


Even if it was in ready to rent condition, you will still be cash negative (at least $500/mn, yikes!); I see that from the info you provided.

Plus pulling $100k out of your residence in Calif at this point is a bit risky. Just consider if the market dropped 20%, would that make you “underwater”???

Mike in Calif.

Thanks Mike,

So do you have any thoughts on buying it, fixing it up and then selling it? The closest comp in the area is going for $464K, 2bd/1ba 1500 sqft. …then there’s another 3 unit building going for $815K. My guess is that we’d have to sink about $50K+ into it.

Also, forgot to mention that it has a basement floor that can be converted (after pouring concrete), but it’s near a rail road track, and it’s zoned commercial.

Then again, with housing prices dropping 20% in CA…maybe it’s better to wait until things have dropped another 20% to buy?

I made the 20% comment to make you stop and think. Using your home equity is OK, but you need to leave your self PLENTY of margin. Personally I use it here and there to round out some deals, but I have an LTV at like 0.55.

It sounds like you are making some wild guess on building. I’m not sure how it is the Bay area, but contractor prices is WAY out of control and sky high here in SoCal (>$300 sq ft for retrofit stuff). If you are serious about this project get someone with a trained eye (preferabley a contractor friend) who can get you within 10K on the retofit. If you are starting with a dirt floor, I’ll go out on a limb and say there is no way its 50K, I would guess 100K, but even that’s a wild guess. You could easily spend 10K getting planns and approvals and permits before even get started with the real work.

I guess my message is do your homework and get solid numbers together and then make a decision; don’t but becuase it “looks cheap” compared other properties (especially if its listed with a realtor; they usually have their cleints properties at FMV).)

Just a few thoughts. Maybe some other folks will chime in; that’s my two cents based upon investing here in Calif for the last 6 yrs.

Mike in SoCal.