I'm looking to buy a househack in the sacramento area. I'm looking at small multi-family homes, 2-4 plexes. I check listings almost every day, but it is rare I find something that the numbers work. Other than in war zones, the best case scenarios I find would cost me about $300-$400 a month after rental income and PITI. Is this as good as it gets in the Sacramento area? The better deals I find are located in Rancho Cordova, Natomas, and occasionally South Land Park. Are there any other areas I should focus on looking?
PITI - rent = $400 sounds good for a duplex in this area. I'm less familiar with the 4-plexes, but I would expect to be around break-even on the rent for 3 units (living in one) vs PITI. If you're looking for a duplex where the rent on one side will pay PITI for the whole building, you'll be looking for a long time.
There are clusters of duplexes out in Carmichael and other areas between 80 and 50. They come up for sale regularly. I'd look out there. For a purchase at market price on one of those, I'd expect rent to pay more than half of PITI, but maybe not a lot more.
@Dain DaVirro is that for a 2 , 3 or 4 plex? If it's for a 2 plex, those numbers should work. I've been looking in this area (along with Fresno & Bakersfield) to get similar numbers. I do see that the Sacramento area is getting hot.
@Jeremy Brown I don't see many 3 or 4-plexes for sale, I just wouldn't be opposed. I'll make sure to look in Carmichael as well!
@Paul Aguilar I don't see many 3 or 4 plexes, those numbers are more for duplexes. What areas in Sacramento are you looking?
@Dain DaVirro @Paul Aguilar Good morning gentleman, I am a local Real Estate Agent here in Sacramento, I am also looking for small multi-family units as an investment option. I have been having a lot of the same issues you guys are having, so I have teamed up with one of my local Title and Escrow Companies here to have them send me a list of all of the 2/3/4 none owner-occupied properties who have a mailing address out of state. I am waiting for a list that includes, Sacramento/ Arden, Rancho Cordova, Fair Oaks, Carmichael, Orangevale and Citrus Heights. After a lot of research, I have found that these areas are the areas with the highest concentration of multifamily units that meet my criteria. If you have an area in mind I can ask my rep to add it to the list and I would be more than willing to share it with you guys. Let me know. P.S.- I have been a realtor in Sacramento since 2014 and just recently after a couple of successful years as an agent I have gotten serious about investing, all thanks to BiggerPockets as well. Let me know how I can be of help.
Hi Reymon, have you considered using Property Radar to generate your own lists vs waiting for your connection to provide them?
Thanks @Ben Howard
Here are some quick insights (lists) about the Sacramento County MFR 2-4 market:
16,044 properties designated MFR 2-4
5,056 owners live outside Sacto County
4,476 owners live outside of California
884 were sold/purchased in last 365 days (~5.5%)
2018 YTD: 343
4,520 have 100%+ equity
796 are underwater
12 are in Preforclosure
263 marked vacant by USPS
143 were purchased at auction by a trustee sale buyer
1,445 have had a death of joint tenant in last 365 days
Since 2016, 676 transactions were off-market - and scanning through those buyers a lot appear to be investors as they've done 2+ deals or their LLC name indicates investment orientation. Those would be your aggressive competition.
Only 67 were flips since 2016, as expected, this is buy/hold territory. The investors who did multiple MFR flips in that period are names that are routine and volume SFR flippers.
Hope this helps - only had 15 mins to investigate.
@Reymon Hernandez I don't know the areas that well up there. I'm still doing research to get familiar and see where to go. I've seen the areas you mentioned on some of my searches, but if you're local and can see the conditions first hand, I'm confident in taking a look at the same areas you mentioned. When do you plan on buying?
@Dain DaVirro Oh, ok. Not sure yet. Still learning the areas.
@David LaPlante Thanks for the info! I just moved here, so I don’t have many connections. Found a couple REIAS nearby, looks like off-market deals are what I’m going to need to look for.
David LaPlante from where you got this data?
@Dain DaVirro you're welcome.
Check out NorCalREIA - I go to that fairly often. I'm up in Tahoe - and Sacto is 1.45hr away.
Yeah identify some transaction archetypes, reverse engineer the transaction financials and see how it flows. Drive the properties - talk to the renters see what they're paying.
@Kashif Riaz I'll ping you privately.
The problem is that you are house-hacking, which means you're losing 25-50% of the property's income by living in one of the units.
First, make sure you're only looking at fourplexes, because that will give you the most rent while house-hacking.
Second, realize that the goal of house-hacking (at least in California - I do a lot of deals in Sacramento with house hackers like you) isn't to make cash-flow, it's to try and live as close to rent/mortgage payment free as possible.
If you can buy a $300k property and only come out of pocket $400/month for it, that's a MAJOR win my friend. That saves you an additional $600/month you would've had to pay to rent a similar unit from someone else, and the property still appreciates, the mortgage still gets mostly paid down by other tenants, and when you finally move out the property WILL cashflow now that you're getting the maximum gross rents by renting all the units.
The deals you're looking at are working, you just need to change your perspective, that's all :-)