1st time home buyer

13 Replies

Hi BP!

This is my first post, though I've been listening to the podcasts for a while now. A big thanks to Brandon and Josh for what they do!

I'm a recent (non real-estate) law school graduate taking the bar at the end of the month. In August, I'm moving to Sacramento for a new job and looking at investing there. I've figured out my financing (FHA supplemented by cash) and I'm looking to buy a SRF in the Sacramento and share it with a renter. I'm looking to purchase for 160k or less.

I've been having some difficulties finding a place with my agent and have a few questions:

1) I've been looking on the MLS and it seems that every decent property in my price range is snapped up immediately. I've also put in an offer on a property only to be been drastically outbid. Does anybody have experience successfully buying with non-cash in this price range in the Sacramento area?

2) I know I'm priced out of Down/midtown and East Sacramento. It also looks like a lot of North Sacramento is dangerous. Any ideas on neighborhoods that are reasonably safe in my price range? I have been looking at West Sacramento and some parts of Oak Park.

3) Does anybody in Sacramento have experience finding FHA properties in Sacramento using anything other than the MLS and Craigslist?

Thanks in advance for your advice!

I lived in Oak Park, near McClatchy Park, for a while (coworker's made fun of me for it: white boy in the hood). It was great: I felt very safe during the day, a little less at night but not bad. My neighbors were more friendly than in the burbs. There are some parts that are better than others, for sure. I would recommend staying closer to or on minor arteries (33rd, 2nd ave, etc.). The ability for a (cop) car to speed by your house is a good thing.

Between City College and executive airport is not too bad. I haven't been around West Sac that much. When I left there were a few revitalization projects going on. I think the downtown West Sac area has potential. Some parts of Rancho Cordova are good. It's an easy commute on the light rail to downtown.

If you are working downtown, I wouldn't go much beyond there. Or a 1/2 mile from lightrail stops. I DESPISE commuting in Sac. Life was so much better when I stopped driving 30 min to visit a friend across town, go to the movies, or anything. Check out walkscore.com if you hate sitting in your car for 2 hours a day. 

I would stay out of meadowview and del paso heights and the spillover from those areas.

Congratulations Andrew. On the job, graduation, and the bar which I am sure you'll pass. 

I live in Sac. I've lived in Elk Grove, Granite Bay, and Roseville (Not a big downtown liver). First off I would have to strongly recommend living no where near the Oak Park area. Yes there are "nicer" areas. Yes, there are good people. Like Matt said, it is the hood.

One problem you've already found is that there is very much competition in your price range. With that being said you have to do everything you can to make your offer most appealing without just throwing more money at it. You might have difficulties getting acceptance with FHA. If a owner has to choose between two identical offers, one FHA one conventional, they will go conventional every time. FHA has more requirements you have to satisfy which can cost sellers more money in repairs in comparison to FHA.

You mentioned FHA supplemented by cash. FHA is 3.5% down I believe. You can qualify for conventional for 3% at some places ( I used conventional 3% when qualifying). I think if youd have some better luck with that.

I will admit in your price range you're probably dealing with many investors with serious financing or cash.

You might want to consider renting for a period while looking to buy. If you need any help I'd be happy to assist you in any way. 

@Andrew Collins  Congratulations on graduating and new job. Good luck on the bar exam.

Have you looked into getting a full approved loan. This when you go through full underwriting with the address at TBD. So your loan is approved and the only outstanding thing is the property appraisal and clean title.

Contact me if I can provide more insight.

Upen Patel
Upen Patel, Lender in (#National Lender NMLS 1374243)
(571) 331-5161

Congrats Andrew!

I was born and raised in Sacramento and an investor, broker and own a boutique real estate company. I believe you can find something in your price range, in a decent neighborhood with FHA.

Consider thinking like an investor even to buy a house for your self. It may be more work, but the benefits maybe great. Talk to fsbo, other investors, etc. I will keep you in mind if I come across something that will work with FHA, right now I have one fixer, but wont go FHA even with an 203k. ( a 203k, if you aren't aware, is an FHA loan for fixers. The house gets appraised for after repair value, and moneys are held for repairs. It is time consuming processes, but something else for you to consider )

Wondering how often you have been to Sacramento and driven some of the neighborhoods? I wouldn't group all of south Sacramento or north Sacramento, nor any one zip code into good or bad. There are parts of many zip codes I would not buy in, but would in other parts of that same zip code.

What are your other life interests outside of work? Do you run, bike into water sports? Sacramento has a lot of these to offer. Nice neighborhoods I have and continue to buy, because not everyone can afford the Midtown, East Sac, downtown, are South Natomas 95833 and some of 95834, Rancho Cordova 95670, unincorporated Sacramento parts of 95821, 95825, 95864, 95841, 95842. 

Don't stop putting offers in. Be creative. Even though I am an investor, there is a lot of investor hate and many home owners would consider selling to an owner occupant rather then an investor, even with FHA - I have done it and will continue to. Many home owners don't want to leave there neighbors with a rental property. Consider writing a letter to the homeowner, especially if the owner is a homeowner and not an investor, especially if it is a home owner that has owned for a very long time.

Real estate is a relationship business. Your Agent needs to work on forming a relationship with the listing agent, selling them on you and him/her.

Good luck and welcome to Sacramento!

Oak Park is a great area, I lived there (McClatchy Park) for over four years. One thing to your advantage is perceived crime vs. actual crime. A lot of people who are from Sacramento have biased opinions on places like Oak Park based on the fact that there used to be some serious problems there in the 80s. In reality, it's just a safe, and maybe safer than other downtown neighborhood. For example, a women was just pistol whipped in the Fab Forties in broad daylight this past week.
It is pocketed from a value standpoint though; feeling out the area is very important, especially in today's market as the gentrification border are constantly changing.

Going against the cash buyers is a problem though. Bid often, bid smart, bid strategically.

Where are the buyers in California getting all this cash? Is it the drug trade. Because real estate there is quite overpriced to begin with the last time I checked. I went back to visit some boyhood places last year and was flabbergasted to hear someone tell me that they were outbid on a track of land for a mobile home in a place that is so much like the hood you would think you were in the Congo. The buyer paid 50,000 in cash. I'm not talking about an investor. This is not an area for revitalization. This is a little hillbilly village outside of a bigger hillbilly village in the central valley where everything was built without codes, with bars over the windows, and graffiti for curb appeal. I seriously would not give 500 bucks for the place. I would say they have something in the water out there but they don't have any of that either

It may be hard but not impossible with that budget. You and your agent just have to be on the ball. If your lender hasn't mentioned it to you yet, look into some of the new CALHFA programs. It's basically conventional financing with downpayment assistance so those sellers who want to shy away from FHA shouldn't be turned off by it. Certain areas are more popular than other and bidding wars are common.

Try expanding your search area, look at overpriced homes that have been sitting on the market for a while.  Back in 2013 when my wife and I were buying our home we were getting outbid every single time, then we started looking at the homes overpriced for the are that were sitting on the market 30+ days and boom offer accepted. We even got it for $15k under their asking price.

I'll leave safe up to you, but in that price range look into 95817, 95670, 95825, 95864, 95821, 95823, 95815.

There are some ways of finding off market properties but from what I've found they won't qualify for fha or  priced out of your price range.

Derek Jones, Real Estate Agent in CA (#01947645)

Thank you all for the insight and helpful comments!

Matt,

 I hadn't even considered the benefits of living on a main street in Oak Park. That's definitely something I'll consider going forward. Also, I'll be working in Midtown, so the traffic isn't quite as bad as downtown but still definitely something to consider. (Un)fortunately, I'll probably be leaving the office before and after the typical work day as well.

@Kelli Foley ,

Thank you for all the information and keeping an eye out! I will be adding those area codes to my search list! I have been looking at 203ks as well, I'll do some more research into it, but I'm struggling to estimate what rehab will be approved for and FHA and what won't.

In response to your question, I have driven around most areas of Sacramento (I'm in Davis now) and have noticed there seem to be pockets of nicer neighborhoods mixed in many areas. Because I'm not entirely familiar with these areas, it's difficult to differentiate what looks like a good area and what actually is a low crime area.

Honestly, I don't have too much time for activities. But I do enjoy large social events (food festivals).Also, I'll be drafting a letter to potential sellers letting them know a little bit about me. Thank you!

@Derek Jones

Thank you for the advice on looking homes sitting too long that are priced high and the area codes!

@Andrew Collins

@Andrew CollinsIf you get very specific look around the area of schreiner st and Amherst. It is off the pocket rd exit in the 95822 zip code. On the other side of the freeway are 300k homes in the pocket area but this little area is still under 200k. If you go towards hwy 99 the areas get rougher. If a seller doesn't like a FHA offer , you can always do a 3% down conventional loan. The mortgage insurance is cheaper on conventional loans anyway if your credit score is higher.

Gordon Cuffe, Lender in CA (#1037464)
916-261-2381

Congratulations andrew !

These are some key point to keep in mind. FHA requires full interior/exterior inspections. Exterior-only or "drive-by" appraisals are not allowed. FHA states graffiti on the house must be removed because it is a safety issue. There is no such thing in the FHA world for a certain feature or structure on a property to be given "zero value".

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