What Is Pushing the Oakland Real Estate Market?
The main driver of the Oakland real estate market is the proximity to San Francisco and the general location in the Bay Area. Oakland real estate investments are hot, and the number one reason is that people are running away from real estate prices in San Francisco, which exceed a million dollars on average (to be precise, the median property price there according to Mashvisor’s investment property calculator is $1,328,000). Inevitably, this has heated up the Oakland real estate market too, which offers (relative) affordability, urban living within a commuting distance from San Francisco, a vibrant cultural scene, and diverse population. This means that you should be quick in buying your Oakland investment property before prices get too high.
However, don’t be mistaken. Oakland has many advantages to offer on its own, without the geographical closeness to San Francisco. Oakland is the trade center of the Bay Area, while the Port of Oakland is busiest one in Northern California and the fifth busiest in all of the US. The marine cargo transport provides as many as 200,000 jobs, in addition to attracting numerous business visitors. This means that investing in Oakland real estate would be good for both traditional and Airbnb rental strategies.
But let’s look at some of the characteristics of the Oakland real estate market at the moment before you start searching for specific Oakland real estate investments.
What Are the Features of the Oakland Real Estate Market?
All the dynamics have led to the following trends in the Oakland real estate market:
- Prices are going up: By 16% between June 2015 and June 2016.
- Properties are spending fewer days on the market.
- Appreciation is significant.
- Inventories are going down.
- Sale prices are much higher than asking prices.
What do all these signs indicate? Right – that the Oakland real estate market is a seller’s one. Don’t let this discourage you from investing in Oakland real estate now, postponing your decision for later. The demographic and economic factors are expected to continue pushing prices up. So, now is the right time for an Oakland investment property. But before that, let’s look at the main figures for Oakland real estate investments.
What Are the Numbers for Investing in Oakland Real Estate?
Before you decide whether investing in Oakland real estate is the right thing for you, you should perform a real market analysis and get all the comps. Well, Mashvisor’s investment property calculator has eliminated this need by providing you with all major numbers within a few minutes from the start of your search. So, let’s see the figures for an average Oakland investment property:
- Median Property Price: $734,000
- Traditional Rental Income: $3,030
- Airbnb Rental Income: $1,920
- Traditional CoC Return: 2.3%
- Airbnb CoC Return: 0.8%
- Traditional Cap Rate: 4.8%
- Airbnb Cap Rate: 3.2%
- Airbnb Occupancy Rate: 27.8%
As you can notice, affordability is becoming an issue in Oakland too. Although the median property price is about half of the San Francisco one, it is significantly higher than in other hot markets like Miami ($494,000), New York ($494,000), Philadelphia ($344,000), Las Vegas ($225,000), and Memphis ($189,000). The expected rental income is excellent, especially in the case of traditional. Overall, the traditional rental strategy is the better option for an Oakland investment property as Airbnb yields less profitability.
As a potential investor is Oakland real estate, you will be happy to know that as of June last year, Oakland has had the largest growth in rent among the 50 biggest US cities in addition to the highest real estate appreciation rate in California.
How About Airbnb Oakland Real Estate Investment?
Airbnb is an option for investing in Oakland real estate. However, you should keep in mind that the City Council is planning new regulations to mediate between allowing home owners to get some extra cash from short-term rentals and risking affordability (if traditional rental properties are taken down from the market and turned into Airbnb income properties). At the moment most residents are not allowed to rent out their homes or spare rooms for less than a week, but that policy doesn’t seem to be very well enforced. The new legislation that is being drafted includes taxing Airbnb Oakland investment properties, obtaining permits, and preventing the turning of secondary homes into short-term rental properties. So, if you are thinking of investing in Oakland real estate for Airbnb, you should keep your eyes open in the coming months for the final draft legislation.
What Are the Top Neighborhoods for Investing in Oakland Real Estate?
Now let’s look at the top 3 neighborhoods for purchasing an Oakland investment property. The figures below are computed by Mashvisor’s rental property calculator.
- Median Property Price: $695,000
- Traditional Rental Income: $3,080
- Airbnb Rental Income: $3,980
- Traditional CoC Return: 2.7%
- Airbnb CoC Return: 4.2%
- Traditional Cap Rate: 5.3%
- Airbnb Cap Rate: 6.9%
- Airbnb Occupancy Rate: 51.7%
Montclair, the most profitable neighborhood for investing in Oakland real estate, is an affluent area characterized by large single-family homes including cottages, mansions, and estates in addition to a few small apartment and condo complexes. The better rental strategy here is Airbnb.
Related: Investing in the Right Neighborhood
2. Cleveland Heights
- Median Property Price: $195,000
- Traditional Rental Income: $1,880
- Airbnb Rental Income: $2,150
- Traditional CoC Return: 2.9%
- Airbnb CoC Return: 3.7%
- Traditional Cap Rate: 5.8%
- Airbnb Cap Rate: 6.6%
- Airbnb Occupancy Rate: 65.0%
Cleveland Heights is another top neighborhood for Oakland real estate investments. Properties here are significantly cheaper than in most other areas of Oakland. Another important feature of this neighborhood is its location: although it benefits from some isolation from the neighboring areas, it is close enough to other parts of Oakland to allow its residents to enjoy life outside Cleveland Heights.
- Median Property Price: $524,000
- Traditional Rental Income: $3,100
- Airbnb Rental Income: $1,780
- Traditional CoC Return: 3.7%
- Airbnb CoC Return: 1.2%
- Traditional Cap Rate: 6.5%
- Airbnb Cap Rate: 3.7%
- Airbnb Occupancy Rate: %
Longfellow is an excellent option for an Oakland investment property location, especially if you are considering traditional renting. The neighborhood has changed and developed a lot in recent years and is becoming a popular destination for many people from San Francisco looking for affordability.
Oakland has many attractive features that make it an ideal choice for your next income property. The most important one of these is its proximity to San Francisco. But hurry up with investing in Oakland real estate because prices are going up, while inventories are going down.