Wednesday, January 14, 2009

Time to Invest in Alameda Property?

So I was thinking is it time to invest in Alameda rental property because the last eight years it has been almost impossible to be cash flow positive buying investment property in the 94501/02.

A quick look at the Mason Management, Harbor Bay Realty Rentals and Gallagher and Lindsey Rentals websites showed that rents in Alameda range:

A one bedroom one bath rents from $800 to $1,200

A two bedroom one bath rents from $1,200 to $1,800

A quick search of Multi-Family properties and found 31 of them for sale. I was surprised to find 1514 Minturn listed for $380,000 for a duplex. $380,000! There are a lot of homes in this market that are NOT under $400,000. The Realtor for this property does not included the layout of the two units, but it is a Victorian that has a converted second unit so I am guessing that the two units are a three bedroom, one bath and a one bedroom, one bath. Another local blog Knife Catchers wrote this property back in October of 2008: 1514 Minturn Knife Catcher’s post.

The property sold for $720,000 in September of 2005 so this is a 52% reduction in that sale. Minturn is a foreclosure, and with the following assumptions the property could be cash flow positive pretty fast.

Purchase price: $380,000

20% Down Payment: $76,000

Interest Rate: 6%

Monthly Payment: $1,822

Other Expenses: 30% or $546

Total Expenses: $2,368

So if you can rent top unit, the estimated three bedroom for $1,600 (middle range for two bedrooms rental listings) and if the second unit is a one bedroom and it garners $800 then the revenue is $2,400 per month. This makes the property cash flow but is positive by a small margin. Lots of assumptions but it is worth a further look and working the numbers further.

There are two more duplexes, 613 Haight and 538 Palace Court, that are for sale under $500,000. Haight is a real fixer and I am guessing because the Realtor did not breakout the units, so one unit is 2-bed, 1.5-bath and the other unit is 1-bed, 1-bath. This property would take a lot of money to get it up running. Palace is has a lower unit that is 2-bed, 1-bath and the upper unit is 1-bed, 1-bath. Both of these properties would be tough to get cash flow right away.

At the higher end of investment property is $748,000 Colonial Revival four-plex at 2153 Clinton. According to Mason Management that has the listing, this is a well maintained property with its rental income potential of $54,000.00. That income verses the annual mortgage of $43,000 plus (30%) $16,000 in expenses makes the annual cost $59,000. So on the back of the envelop it will take a while to get positive, but not horrible if you can manage costs.

The most expensive investment property is 1179 Park Ave at $1,575,000. This 8-unit apartment complex close to Park Street is a big box complex with parking under the units. I will let you pencil it out if this is in your investment range.

To answer my own question: Investing in Alameda is becoming attractive again but as in anything in life you really need to understand the hidden costs (vacancy, eviction, maintenance), and the time you are willing to invest to understand income property. If prices decline much more in the coming year then it will be a good time to start building or adding to your portfolio mix. 

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