You are doing exactly what I am right now. In the east bay I would recommend looking in Concord, Pleasant Hill, Martinez to start. There are certain pockets within these that will offer you the best rental rates to achieve the highest cap rate. There have actually been a few over 10% in Concord that have sold. The houses needed work and there were multiple offers, thus if you are a contractor or can do the work yourself you could achieve a higher cap rate. The nicer the area the lower the cap rate... I have been tracking foreclosures and personally have purchased homes on the court house steps for the last few years. I find that REO and short sale properties are offering the best value if you do not mind doing some fix-up. If you have cash, trustee sales may be an option for you to consider. As you may know, the FHA is no longer approving all condo's for financing so due diligence is necessary with condo's.
Please do not hesitate to contact me if you would like assistance in the East Bay. My firm does property management as well, if you are not interested in managing the property. My best to you!
B. Ann Sullivan
Cal Bay Real Estate
Walnut Creek, CA