Will it be a good property to buy and hold?

[Sejin Kim]

Hello, BP families!

I have a potential property, in Sacramento area. It's duplex 2 bed-2 bath single story ( I am going to buy only one side)  in C category neighborhood. Not a good schools, not very good neighborhood, very diverse neighborhood,  crime rates are okay and decreasing. Median home value is lower than CA average value.  However I think it has potential. It's just a minute away from highway, good shopping mall in few minutes, hotels near by. Owner is moving out of state, and he put in a market in November but no luck so far. So I think there's a lot of space to negotiate. I think it will be hard to sell, however, it will be easier to rent, even though not a quality renter. So what do you guys as expert think? I will appreciate any questions, advice! Thank you! 

[Jay Thackerson]

Sacramento is a very good market for rentals as home prices are becoming out of reach for most. The location you described seems ok but watch out for other issues that Ca. is experiencing these days. 

Good Luck...

[Nathan Gesner]

Quote from @Sejin Kim:

Most people invest in California for appreciation. The market just peaked in June and is on its way down. If prices drop 15%, you may be waiting 5-10 years just to get back to a break-even point.

I don't know where you are at or what is right for you, but wanted to get you thinking about it.

[Sejin Kim]

Quote from @Jay Thackerson:

Sacramento is a very good market for rentals as home prices are becoming out of reach for most. The location you described seems ok but watch out for other issues that Ca. is experiencing these days. 

Good Luck...

Thank you so much for the advice! That will be my first investproperty. So I still a lot way to go to learn! What do you mean by the other issues CA is experiencing? 

[Noah Laker]

Hey Sejin, 

I am a local broker and property manager in Sacramento. 

Awesome that you want to invest! Although it doesn't sound like any kind of "home run." How much are you offering? For $150k I would consider it based on what we know. 

I specialize in AirBnB and short-term rental properties, you really want A-CLASS nice properties for long-term success and appreciation.

Any cashflow you can get from this property ($200-500/month if you're lucky) could be eaten up by property repairs and insurance. I would be happy to consult with you sometime and I'd be eager to learn more about the details of this deal. 

Noah

[James Peterson]

Hi Sejin, 

No doubt Sacramento is a good place to invest.  There are a lot of good things going for Sacramento,  and there is money pouring in to certain areas.  This sounds like your first investment? Don't buy just because it seems like a good deal.  In the long run, you're better off overpaying for a house in a great area as opposed to getting a good deal in a bad neighborhood for several reasons. Here are the top two...

1. You'll have more financially stable and responsible tenants. (Huge)

2. You'll have better appreciation and more price stability in down markets. (long term wealth building)

Numbers will show better cashflow in crappy neighborhoods, in the beginning, but no amount of cashflow will outperform the rate of return on appreciation over 10+ years unless your putting too much money down.

Ask yourself these questions:

1. What kind of return am I expecting from this property?

2. What kind of discount do I need to make the numbers work?

3. What is my exit strategy?

4. How much am I willing to spend on repairs/prepping for rent?

5. What kind of tenants can I expect from this type of property,  in this neighborhood?

6. What cash flow am I expecting? Am I ok with negative cashflow?

7. Will I have enough reserves for an emergency? 

If you can't answer those with certainty,  you need someone that can help guide you. Finding great neighborhoods that are redeveloping, close to downtown is a good target. Properties with value add possibilities can multiply your returns. 

Best of luck, and great job in taking action!

[Scott Scoville]

Hey Sejin, congrat's on your real estate investing journey. Sacramento and beyond is a great market. I'm an investor friendly agent and I also invest, project manage, and property manage my own portfolio of rental properties, including short term furnished rentals. I only work with investors as an agent, and provide A-Z experience, resources, connections, etc. to help investors in the region. Let me know if you want to jump on a call to chat. Have a great rest of your week.

[DJ Dawson]

Depending on the price point, rehab costs, vs estimated rental rates (among other figures) this may or may not be a good deal, cant analyze a deal without that info of course but a halfplex typically is more difficult to sell when its time to do so due to a smaller buyer pool. Lower graded neighborhoods also come TYPICALLY with more tenant turnover and a for lack of a better word, lower quality tenant. sometimes the juice can be worth the squeeze :)