first time cash flow 2nd home investment idea

11 Replies

New to this forum and hopefully find some useful advice and info. 

I wanted to use my home equity to purchase a 2nd home/apartment for cash flow.   I need some advice where in the SF bay area where I can start to look for that 2nd home.   My home value in the 1.2 million while I still owe the bank 250k.   I was looking into Sacramento area, but not sure how the rental market is out there yet? any city i should look for as a beginner? 

Thanks
Kevin. 

Sacramento has a great renters market and one of the fastest rates of rent growth in the nation.  That said, these increases are baked into prices and cash flow is getting harder to find (but not impossible).  You might also consider 2-4 plexes with the amount of equity you have.  Was there a price point you were looking at or a specific area that interested you? 

Rental market overall is quite strong in Sacramento.  Jumbo loan limits in Sacramento county are currently $517,500, 20% down would put you at a 646k purchase price and still be ok.  There are still duplexes in stable areas between 300-400k.  Even A areas like Folsom will have 500k duplexes in some pockets, but cash flow is going to be lower in higher end areas.  AirBnB in Sacramento proper has restrictions on short term rentals in non-owner occupied properties.

@Kevin Zhang

Rental market is on fire my friend:

https://www.biggerpockets.com/forums/621/topics/590913-rent-growth-in-sacramento-is-triple-the-national-average

Rental growth rate is triple the national average. Tons of migration here from Bay Area Millenials, inventory is low so prices and rents have gone through the roof in the past few years. Migration pattern should continue through 2020, easily.

I'll reach out via PM to get your questions answered and help you determine if Sacramento is the right market for you :-)

@Tobias Falzone Would you say it better to maybe look into rental property in Folsom versus for say Air bnb properties in South Lake Tahoe. I just got back trip from South Lake Tahoe that idea of having air bnb is very enticing.  However i'm not sure how air bnb house down here are versus for saying get a 500k duplex will look like.  Also is there housing duplex in FOlsom that will cost in 500k range? 

@Kevin Zhang It depends on your goals and how involved you want to be.  As for south lake tahoe, the local population there is quite antagonistic to vacation rentals, as many locals see it as driving up prices as to make it unaffordable for them.  The city already has a strict permitting system in place for Vacation rentals, and it is quite possible they will further attempt to regulate vacation rentals.  VRs are exempt by renting 30+ days at a time, but I would encourage you to look outside of SLT proper if daily vacation rentals are going to be a core investment criteria.

@Kevin Zhang

Lake Tahoe is pretty antagonistic to rentals, as @Tobias Falzone mentioned. See below:

https://www.rgj.com/story/money/business/2018/04/09/vacation-home-rentals-airbnb-lake-tahoe-vhr-fine-ordinance/460517002/

$1,000 fine for parking?! Lose your permit if you have 3 fines in any 2 year period? Nah I'm good... WAAAAAY too much risk. Lose your permit and you're screwed and will have to re-sell.

I would much rather have you opt for a 2-4 unit property in the Sacramento metro area (Folsom included).