San Jose, CA · Member since 2016 · 41 posts · 8 votes
Hello everyone
I am 3 days new here in BP. My husband Eric and I have been really excited to find this site and we've started listening to its podcast and reading post here like crazy in these few days. But now we run into Qs when talking about where to invest.
As we are fairly new to real estate investment, probably it's a safer bet to follow the recommendation to look for opportunities within 2 hours drive. However, the positive cash flow near SF Bay Area seems to be really hard.
Any thoughts or recommendations here will be highly appreciated. Any area nearby still have potential? We also think about some out of state market like Eugene, Austin or San Antonio. But not sure which route will work better for newbies like us.
For some background about us, we have lived in S San Jose for more than 10+years. Bought our house @2007 there. Out area was hit pretty badly during the bubble but finally went back 2-3 years ago. Now we have some nice equity and ready to start a new journey here in BP.
We are more like buy and hold for long term type. If there is great potential for future growth, we are fine to go with breaking even too.
If you wish to tag someone in the conversation on the forum, type @ followed by their name and then select the name of that person which should appear below the comments box. He or she will be notified of being tagged so that the conversation will continue.
San Jose, CA · Member since 2016 · 41 posts · 8 votes
9y
Thanks @Wes Blackwell, Very cool info. Thanks a lot! For a newbie like me, will you try Roseville or Stockton first? I really like the neighborhood of Roseville. But I know it'll be much easier for me to get multi-family in Stockton with the same amount of $$.
Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
9y
@Hui Kiang -- The problem with the Roseville area for multifamily investment opportunities is that there are very few of them. Currently 4 to be exact. The average listing price is $353k, which means you'll need a down payment of $70-85k, and they all have a annual gross rent multiplier of 11 or above. That means that it would take 11 or more years for the grossrents to pay for the purchase of the property. I can find you a place in Sacramento that will get that number under 7.
Stockton on the other hand currently has 33 multifamily properties available for sale, with an average listing price of $267k which will save you $20-25k on the down payment and I guarantee you'll find some better numbers in there because of the lower prices and increased options.
Here's why they're so different: Roseville is essentially a suburb of Sacramento, and if you look at housing trends in general you'll find that the center of a city is always more renter occupied, and as you go further and further out it's more owner occupied. The primary reason people move to the suburbs is simply because... they have kids. Single people tend to care about Asian-Latin fusion takeout, muddled drinks, and lots of 20-something single hotties who enjoy going to clubs.
Married couples with children tend to care about great schools, quiet neighborhoods, and less crime. And you pretty much always found those out in the suburbs, not in the inner cities. I know this is a generalization and that it doesn't apply to everyone, but it is an important trend to understand in investing and real estate.
Take Elk Grove for another example, just to the south of Sacramento and essentially another suburb. Great schools, lots of family-oriented activities, etc. Number of small multifamily properties currently for sale? ZERO. Number for sale in Sacramento? 83.
And the reason for the absence in Elk Grove and Roseville is that they were never really built in the first place. When suburbs are under construction, it's all new single family homes. Of those 83 multifamily homes for sale in Sacramento, only 10 of them were built after the year 1980, and only 2 of them built after 1990.
So that's why Sacramento and Stockton both have a great rental market, and the suburbs around them don't. Here's Sacramento on the news about how high the rents are climbing. Stockton doesn't get the same press, and it gets compared to how cheap it is compared to the Bay Area. That's because the city had THOUSANDS of commuters move into the area and drive up home prices during the early 2000's, so it's often considered an alternative for Bay Area home buyers.
Now, if you're an all-cash buyer, or the neighborhood matters more to you than the typical investment metrics most investors use, then a single family home is Roseville might be the best option. For example, I have an elderly client who is an all-cash buyer, and she's looking to buy several properties that are newer construction in the Roseville area to rent out.
Reason why? She wants to leave these properties to her daughter and granddaughter when she passes away, and wants a new home with no need for repair out in the suburbs away from the crime. That's a completely different motivation and investment strategy than 99% of other investors who are simply thinking "Where can I buy the best property for the least amount of cash and get some nice passive income to help secure my future and retirement?"
Thanks @Tom Ott. Looks like you're the pro from Cleveland. Do you think if it's still the good time to invest in Cleveland?
I think there has never been a better time! So many things are happening here. The entire city has been seeing an renaissance, and with that has come an influx in rentals. Many people are looking to live in the suburbs near the city so they can commute downtown. There has been some insane growth!
Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
9y
@Hui KiangI live in Roseville because it is great for kids and a safe place to live. I would not invest here unless it is in the old town of Roseville because of the lower prices compared to West Roseville. The homes are older but you can find many that are in good shape. You might drive around the area and go to one of the real estate investor meetings in Roseville to see if you want to buy here.
San Jose, CA · Member since 2016 · 41 posts · 8 votes
9y
Thanks @Wes Blackwell for your insight. Now I got it why there are very little multi-family units in good suburb area. I like your idea to invest in Sacramento. Will there still be safe area to invest with positive cash flow? I knew a friend investing in Oakland awhile back. She and her whole family were dealing with dead bodies and evictions the whole time til she gave up. I do not think I can deal with that.
Investor · Napa, CA · Member since 2016 · 95 posts · 62 votes
9y
I would look into Solano, Napa, Sonoma counties. There are still deals that will cash flow right off the MLS within certain areas. If you're willing to do some work to the property deals abound! I would focus on small condos and small single family homes. Multifamily valuations generally seem very stretched but should moderate as interest rates increase.
Impressions of a nice neighborhood are going to vary from person to person. You're friend from Oakland might come out to Sacramento and say "Oh wow! This is so much nicer!" while someone from Napa might come out and say "Oh wow! What the hell are you thinking?!"
In a lot of neighborhoods, it's going to be street by street. And honestly that can be said for most cities. You might live in a peachy-keen neighborhood but take a 5 minute drive and you can end up in the hood. The good news is you can look up the recent crime in the area over the past 6-12 months before even driving out there to see if the level of crime is something that you're comfortable with. Overall though, I'd say there are few places where you're going to have a dead body falling through the roof hahaha.
It comes down to two investing principles: 1) Risk vs. Reward and 2) You get what you pay for. The best performing neighborhoods tend to be a little higher in crime (risk vs. reward) and the nicer neighborhoods are going have a lot less, but be more expensive (you get what you pay for).
Ultimately, you have to find the balance that you are comfortable with, and realize that even under the best circumstances in the nicest neighborhoods, nightmares can sometimes happen. And remember that you can always hire a local property manager to deal with these nightmares for you and help you avoid risk by properly screening your tenants.
Property Manager · Sacramento, CA · Member since 2016 · 91 posts · 34 votes
9y
Welcome to BP, @Hui Kiang! I was going to chime in here with some details, but after catching up on the post, I don't think I have much to add. @Wes Blackwell just killing it with the advice. Seriously phenomenal post and info!
One tiny tidbit from me, I'd recommend Sacramento over Stockton. We're seeing an influx of people moving to Sacramento from other areas and it has a lot of potential when it comes to rentals / how the market is trending. Stockton may have that potential also, but it's a bigger risk of if/when that will really kick in.
Stockton, CA · Member since 2016 · 9 posts · 2 votes
9y
The south side has the lowest prices and the majority of crime. Downtown is good because the city of Stockton is rehabbing and encouraging development. We are negotiating with owners to buy their property, all of which need work. We focus on homes and leave the commercial to others.
Real Estate Investor · Sacramento, CA · Member since 2016 · 9 posts · 2 votes
9y
Hi Hui Kiang and welcome to BP! Despite the fact that Bay Area is one of the toughest markets in the country, there are still a lot of opportunities around. I'll be glad to meet and chat with you in person, feel free to reach out to me!
The safest and fastest way to learn for me was become a wholesaler. It is risk free and when teach you the aspect of both flipper and buy and hold investor. I started as a wholesaler and now switching from wholesaling to rehab and owning myself.