Investing under $300k

Member since 2018 · 41 posts · 11 votes

I am trying to understand where the best investment areas for rental income in Sacramento are nowadays. The pricing has gone up from when we invested 5 years ago. Ideally, a multi-unit without much fixing up would be best for cash flow purposes. But there are few properties around $300k or less. There are smaller SFRs that can be had for around the price range but I don't know what the rentals go for there and know that SFRs will net lesser cash flow than multi-units like duplexes/triplexes will net with a 20-25% down. I don't know the areas well but obviously closer to downtown the better? Nicer areas that have greater rental incomes and better long-term tenants. I know I am asking for what most people want but wanted to understand the neighborhoods better.

East Sac? Land Park? What about areas west of the 99 and south of the 50?

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Tapan Trivedi

Real Estate Investor · Sacramento, CA · Member since 2014 · 78 posts · 41 votes

Jason,

I live in East Sac and have rentals all over town. Getting something in East Sac or Land Park which is multifamily under 300k with low fixup would be a dream for all of us but if you are looking for real deals then I suggest Tahoe Tallac (the right side of Stockton blvd not the wrong side) and Rosemont.

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Tapan Trivedi
Real Estate Investor · Sacramento, CA · Member since 2014 · 78 posts · 41 votes
7y
Jason,
I live in East Sac and have rentals all over town. Getting something in East Sac or Land Park which is multifamily under 300k with low fixup would be a dream for all of us but if you are looking for real deals then I suggest Tahoe Tallac (the right side of Stockton blvd not the wrong side) and Rosemont.
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Richard Goore
Realtor · Sacramento, CA · Member since 2015 · 70 posts · 34 votes
7y
Jason - It seems as if you need to start by doing some online research to get better acquainted with the area. I am not sure where you are from but I would recommend driving the area after researching prices in general online. When you do this you will see some trends for price ranges in various areas throughout the greater Sacramento area. You can then begin searching for deals (not easy to come by) that may fit into your price range based on the average sale prices for the area. If you know you are in a budget range around $300K or less you will be very limited as to where you can buy multi dam and even SFH.
Again, without additional info of precisely what you are looking for it seems as if you need to get to know the area a little better first. Sacramento is still a relatively affordable area where you can find good properties that cash flow appropriately but you need to better understand the lay of the land first.
Good luck with your research, search and investing endeavors!
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Jason Y.
OP
Member since 2018 · 41 posts · 11 votes
7y
Tapan, I'm not familiar with the area Tahoe Tallac. What is the "right side" of Stockton Blvd?
What about South Land Park area? I've seen SFRs around $360k. But not sure how rents are there.
What about the College Glen area? Between Howe Ave and Watt Ave. I've seen SFRs around $350k.
Is the area north of Rosemont called La Riviera any good or is that still considered Rosemont area?
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Lulu Nguyen
Member since 2018 · 7 posts · 6 votes
7y
I started looking at Elk Grove School district area. There are a few nice neighborhoods in there. The rent is probably around 1.4-1.6K/month, depending on where you look. The school district is good but I don't know how the potential growth is like in the upcoming years. I plan to buy and rent out to build equity. Net flow income might not be high at first, probably break even with mortgage, insurance, and taxes.
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Jason Y. a 300k SFR in Sacramento probably rents for about $1600 a month, and I don't really see any cash flow in that for you. Unfortunately, I think the ship has (for the most part) sailed for Sacramento and we're in the wrong phase of the market to be investing locally. I made the switch to out of state in '16 and haven't looked back!
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Jason Y.
OP
Member since 2018 · 41 posts · 11 votes
7y
How is the projected growth in the next few years? Like @Lulu Nguyen mentions, its probably a break even with a 25% down (can you do 20% down on investment homes?) but long term growth?
Why did you decide on Elk Grove (besides good schools) vs somewhere like College Greens, that is closer to downtown?
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
Long term growth is great, but why invest in long term growth at the expense of short term yield. Invest in the asset that makes you money today, today. Invest in the asset that makes you money tomorrow, tomorrow. right?
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Jason Y.
OP
Member since 2018 · 41 posts · 11 votes
7y
@Account Closed, what parts of Sac around $300-350k can do that with a 25% down? You're not thinking Stockton are you?
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Jason Y. Not stockton, but parts of Arden Arcade, Citrus Heights, and South Sac would permit that, with other areas like North Highlands and such that would bring that kind of price around as well. Rents in that price range are probably $1600-$1700 a month in good shape. I wouldn't recommend investing in those areas at that high cost just to get $1600/mo by any measure though. IMO, that's a break even deal at best, and most likely losing if you run an honest pro forma with 40% expenses and a mortgage payment.
CA investors should look to different states for rentals, or at best, alternative strategies for rentals... multiple units with serious value add opportunity... flips.. etc.. I would only consider flipping in CA, personally.
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Jason Y.
OP
Member since 2018 · 41 posts · 11 votes
7y
@Account Closed another idea would be to get a SFR in areas like College Greens or Pocket area. Rents higher for a SFR? More for appreciation rather than cash flow with this approach. Not familiar with Pocket but heard its decent. Thoughts?
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Jason Y. nicer areas with higher rents tend to cost quite a bit more as well. Careful making investments that don't cash flow w/ the goal of appreciation in a market where things have already appreciated beyond their intrinsic value...
0____0
You might lose money for years before you make a buck.
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Pete Tam
CA · Member since 2013 · 221 posts · 30 votes
7y
@Account Closed- I am not sure if you can expect a decent appreciation year over year at least for next couple or few years. We are almost at the peak , if not peak , of RE cycle in this are (by just historical data).
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Jason Y.
OP
Member since 2018 · 41 posts · 11 votes
7y
@Pete Tam and @Account Closed how is the Del Paso Heights area south of the 80? I think this is known as North Sacramento?
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@Jason Y. Del Paso heights is the worst part of town. Pete's got the right idea man!
@Pete Tam where are you investing?
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Pete Tam
CA · Member since 2013 · 221 posts · 30 votes
7y
@Account Closed Sorry I am not much familiar with this area so did not respond to you immediately.
1 Reply
James E Tan
Real Estate Broker · Elk Grove, CA · Member since 2018 · 14 posts · 4 votes
7y
HI Jason
You have gotten great advice from others already above. I am still bullish about CA real estate, and my own experience investing out of state had not been so fortunate.
From my perspective, at this time, in order to get a positive cash flow and appreciation, I would suggest investing at the low end. There is a huge pent up demand from the millenials generation, who are starting a household and have not bought a home yet. I would consider buying condos, they have not participated much in the rally that took place since 2012. The Government will always help first time buyers, either in terms of down payment, relaxation of the lending criteria, etc. You can still buy properties for around 150k or less and generate 1.3k of rent a month (minus hoa). That would generate a decent positive return plus potential appreciation.
Another alternative is to invest in duplexes in certain areas. You are looking in the low 300k which would generate approx. 2.2-2.6k of rent a month. You should be able to get a positive cash flow and a potential appreciation. Remember that during the last peak of 2005, these duplexes go for around 350-400k.
I would avoid Del Paso, Oakpark, and other low income areas. Rosemont is good but there are also other areas that are interesting. Yes, prices are high but they have not reached the previous peak yet. This Winter is a good buying opportunity. There is not much activity, and it is a buyers market now.
BTW, my client just got an offer accepted for a SFR in Roseville (south of 80) 3 bed/1bath property built in the 50s clean, nice curb appeal with good roof and HVAC for mid 200s. So there are still good deals out there even for SFR.
Hope that helps
James Tan
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Brian Larson
Investor · San Jose, CA · Member since 2018 · 313 posts · 230 votes
7y
@Pete Tam and @Account Closed -- Remember, the best way to make money in real estate is at the time of purchase. If you buy for appreciation or tie-up large amounts of capital with only a small cashflow, you will live to regret it.
1 Reply
Jason Y.
OP
Member since 2018 · 41 posts · 11 votes
7y
@James E Tan, I've heard some up and coming neighborhoods near downtown like brentwood or hollywood park would be decent. However, there are no multi units in my price range. I don't know if rents are higher as you get closer to downtown. How is West Sac?
0 Reply
James E Tan
Real Estate Broker · Elk Grove, CA · Member since 2018 · 14 posts · 4 votes
7y
Hollywood park is a nice neighborhood in the 95822 zipcode. It is next to Land Park.
The prices there are too high though. This area is popular among the chinese.
There might still be upside, because it is improving. The properties there are typically older.
But this is not the best place to invest for cashflow.
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James E Tan
Real Estate Broker · Elk Grove, CA · Member since 2018 · 14 posts · 4 votes
7y
HI Jason
There is very low inventory on duplexes. There is a huge demand for these properties. I would be able to help you identify areas and properties before they hit the market. Contact me for further info. I may be able to help you find a decent property for cashflow.
Hope that helps
James Tan
Bethany real estate
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David Noh
San Francisco Bay Area · Member since 2019 · 24 posts · 6 votes
7y
@Account Closed,
I agree with you ! It seems very difficult to find a positive cash flowing properties in California and I don't see the point of potential for appreciation when there are other deals out of state.
What states/cities are your favorite OOS?
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Account Closed
Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
7y
@David Noh definitely not betting on appreciation after so much has already been had by other investors- the opportunity for that will be available again some day, but cash flow protects the investor coming out of high times like this.
I like northern indiana quite a bit, outside of chicago specifically. The market offers a stronger rental economy that other parts of the midwest that I've explored with a healthy sized tenant pool and plenty of demand. Combine that with low taxes in many cities and very landlord friendly laws and you're in business.

Have you looked at quite a few out of state markets? Where have you zero'd in on
0 Reply
David Noh
San Francisco Bay Area · Member since 2019 · 24 posts · 6 votes
7y
@Account Closed
I've actually been around Chicago suburbs a month ago and I found great properties that would go for 1.4~mil dollars in Bay Area for only 200~300k (in terms of quality).
I was first interested in Denver, Colorado but rent would be 0.5~0.7 % between University of Denver and the tech area but as you said, the appreciation were all had by investors years ago and I figured at this moment, cash flowing properties are the way to go for now.
Some parts of Memphis (C-B class neighborhood) seemed interesting but I definitely realized Midwest (I liked Indianapolis) was the place where ROI came out the best. It is just difficult for OOS investors to find the right people as I believe having the right team is the most important.
Could you elaborate on how Indiana has landlord friendly laws and how you were able to find the right team OOS ?
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Pete Tam
CA · Member since 2013 · 221 posts · 30 votes
7y
@Account Closed Do you have PM for your properties in Indiana ?
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Harvey LevinPro Member
Property Manager · Indianapolis, IN · Member since 2012 · 205 posts · 157 votes
7y
@David Noh we have helped many investors in TRUE C areas in Indianapolis have long term successes. The key is not overpaying which includes not only rents vs purchase price but also condition and marketability of the houses. I have personally been investing in those areas since 1980. Having qualified boots on the ground is critical. In 1985 I found that the best way is by utilizing the Section 8 voucher program and in my opinion that is still the only way to achieve long term success. (We currently manage over 300 tenants on Section 8 in houses and doubles) in those areas. I have found many investor buy thinking it is a C when in reality it is a D area.
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