Drea‘s new job meant a last minute relocation to the Bay Area. Luckily we were still living out of our backpacks so this was far less insane than it otherwise would be. We arrived and were lucky to crash at a studio out back of my parents house in Oakland. We immediately started looking for a place to rent and discovered something weird: compared to our neighborhood in San Diego, rental prices in the Bay were sky high but purchase prices for homes were reasonable.
This spurred us to start exploring the real estate market up here. That meant signing up for a crazy roller coaster of an experience and I’ll try to shed some light on what we learned so you don’t have to make the same mistakes!
We were en route to visit a friend in Palo Alto one evening in November when we decided to call Jay Corrales, our friend and real estate agent from San Diego, to see if he could provide a referral to an agent up North. It turned out that Jay was driving through the Peninsula when we called and we met up with him for a hot chocolate. He told us he had recently decided to move up to the Bay Area as well and was interested in expanding his practice up here. He agreed to work extra hard for us to make up for the fact that he didn’t know the local market too well. We agreed then and there to work together.
I grew up in the Temescal/Rockridge area in Oakland so I was a step ahead in local neighborhood knowledge to start with. We immediately got signed up on MLS and Redfin and started viewing houses like it was our job. We started by categorizing the different Bay Area cities:
- San Francisco: diverse, good nightlife, way too expensive, crappy weather.
- Silicon Valley/Marin: safe, better weather access to nature, expensive, lack of diverse culture, long commute to SF.
- San Jose: no.
- Richmond/San Leandro/other East Bay cities: crime, cheap, better weather, not a lot going on.
- Walnut Creek/over the hills: suburbia, expensive, safe.
- Berkeley: intellectual, insane rent control laws, diverse culture, access to nature, static (Berkeley feels the same as it has for 50 years).
- Oakland: crime, diverse culture, up and coming neighborhoods, access to nature, good weather, short commute to SF.
We chose to focus on Oakland and Berkeley. Oakland especially feels like the Brooklyn of the Bay Area. It’s where all the artists and DIY types live. It’s the Bay Area’s creative hub. The local Googlers have metal working shops in Dogpatch or Emeryville. The baristas roast their own coffee at home. The hole-in-the-wall barber shops serve you bourbon with your haircut. The breweries sell you kegs without requiring a deposit. Everyone rock climbs and goes to First Fridays. Unfortunately everyone’s also been mugged/robbed/terrified but that seems to be par for the course. Having grown up here it’s crazy to see Oakland’s trajectory over the past 25 years. I’ve never seen an American city with this kind of momentum.
Ok, so what about the house hunt? Here are some of the places we made moves on:
- A two house, one lot, place in Longfellow very close to Macarthur BART. The longtime owner residents were moving out and had renovated the place in preparation for sale. We imagined living in the sunny back unit and renting out the front one to help with the mortgage. In the basement of the front house was an old-school speakeasy bar with too-low ceilings. We presented our above listing offer in person to the seller’s agent with a heartfelt letter. They asked us if we could come up because there were two investors that had come in higher. We told them that was our max. They gave it to the all cash investor.
- A small two unit place in Northwest Berkeley near Gilman St. In my view, this is the coolest part of Berkeley right now. There was a two bed one bath and a one bed one bath. The 2/1 had been owner occupied and the 1/1 was tenant occupied. We made an offer but then rescinded it. The tenant was a “life tenant.” She had been paying essentially the same rent for thirty years. In Berkeley there is no way to (1) raise the rent in any meaningful way, (2) evict her for almost any reason, (3) buy her out because she’d never find another place willing to rent her a place for 20% of market, and (4) all of these terms survive change of ownership and even foreclosure. No way in hell we were signing up for that nightmare.
- A large single family in back in Longfellow that had been beautifully renovated by the best flippers in Oakland. We imagined finding roommates to help us afford the mortgage. Gorgeous kitchen, open design, etc. We called the listing agent to put in an offer. He said he literally just accepted one for substantially above the listing price. He didn’t accept backup offers. We were too late.
- A converted duplex in West Oakland that had been transformed from a crack house into a hipster den. The current tenants wanted to stay along with their Macbook Airs and fixed gear bikes. The owner had planted hundreds of street trees on the surrounding blocks, knew the local drug dealers by name and was helping to transform the neighborhood. We were interested until we drove by in the evening and saw how far the neighborhood still had to go to ratchet down its sketchiness.
- A beautifully renovated fourplex in Southwest Berkeley. Originally a single family home the bottom floor had been converted into three studios and the top was a gorgeous 2/2. Same reno team as the second house in Longfellow. We put in a blind offer early to increase our chances. There were over a dozen offers on day one. It went for 30% over asking.
There is your quick taste test. We reviewed a few hundred homes on paper, walked through 50-60 places and made ~9 offers. After about 6 weeks I knew every single neighborhood we were interested in block-by-block. I also knew every single house on the market in those neighborhoods and what the historical pattern for local deals looked like. Here are a few take-aways:
- The Oakland/Berkeley real estate market is really frothy right now. But it is ASYMMETRICALLY frothy. There is a single buyer demographic that is going nuts right now: young tech refugees fleeing SF in hopes of buying their first homes. This demographic wants to buy houses that are beautiful, hands-off and ready to move in. They would rather pay 75% more for a fully renovated house with granite counter-tops than hire a contractor to put in the counter-tops themselves. Every newly renovated place we looked at was ridiculously competitive and went for way over asking.
- Conversely, homes that have good fundamentals but aren’t shiny are not competitive. I’m not talking about serious fixer-uppers. I’m talking about functional homes with good layouts and quality construction that don’t have shiny cosmetic flash yet. The Twitter folks want houses that are Pinterest-worthy on day one. The Twitter folks also happen to be the only demographic that’s accelerating the market. You can still get a very good deal on move-in-ready humble homes with good bones.
- Don’t mess with Berkeley rent control. Don’t even bother researching more about it. I did it for you. Don’t touch it.
- Oakland is the hottest city in America for good reason. Check it out (but don’t walk down the street talking on your new iPhone).
So where are we now? Two weeks ago we closed on an awesome duplex in the NOBE neighborhood in Oakland right at the intersection of Berkeley and Emeryville (with Jay’s extraordinary help of course; you can reach him on his cell at 760-433-1505 if you’re looking for a fantastic agent). The neighborhood’s on the up-and-up and changing fast. Subaru’s are in ~33% of the driveways. About half the homes have new owners and half are incumbent owners from a time when it looked a whole lot different. We’re one block from a new park with a jungle gym, dog park and creek. We’re a few blocks from Pixar. Two BART stations are within easy reach on protected bike lanes. We’re smack dab in middle of our two climbing gyms. We can walk to Arizmendi. Two friends are moving in to the downstairs unit. We put down a deposit on a Sheepadoodle puppy from Feathers and Fleece Farm. We’re rolling up our sleeves to make good on this home’s amazing fundamentals… and we’re looking forward to your next visit!