1% rule in Stockton ca?!?

17 Replies

I was chatting with a colleague about the process I use to purchase properties and I was wondering with the market rising does anyone still use the 1% rule in Stockton CA or is that hard to achieve. Thanks in advance 🙏🏾

Edmondo, we've acquired a number of MFRs this past year in Stockton and the 1% rule is pretty difficult to find in this market cycle, even in Stockton. If you want to chat more about the area, let me know. 

I’d love to chat more when you get a chance. What is the common cap rate you shoot for in this area? Thanks in advance.

so happy you posted this, i am a novice I have 2 properties 1 in the weston Ranch area that barely seem to meet the rule. although the property was purchased at a great price (185k ) i have to many rental properties in the area with lower rents. im anxiously wanting another deal in stockton but i need to figure out how to make the numbers work

Awesome! Hopefully we can both learn some vital information on our area.

I am looking for investment properties that meet 1% rule in Stockton area. I could find one or two in Fresno CA but not in Stockton. What is the average CAP rate in Stockton, Modesto, Sacramento areas? Any thoughts on Fresno?

I am coming up with the same exact results and have also migrated my search to Fresno where I am finding better luck on meeting the 1% rule. You’d have to reach out to a good local realtor but most of the research that I’ve done has resulted in cap rates of 7-8 currently.

there are a few deals in stockton that meet the 1% rule but you really have to search and be networked with brokers.  Picked up a 16 unit in stockton recently that does better than 1% and have a few on my radar that i'm analyizing.

As for cap rates, around 6% or more with GRM's under 11. Hard to find, yes, but be patient and deals are there.

That’s great to hear Paul Choi...thanks for your input. Do you mind sharing more details about the 16 unit you purchased?

@Edmondo Morgan Jr

Sure, I'll send you a message.  It's slightly north of downtown, near hospitals and school so a pretty decent location.  Alot of MF properties are changing hands around there so new money is coming in and the dynamics seems to be shifting abit towards the positive.

Hey Edmondo. Paul definitely seems to have the market down, so he seems like a great resource. I’d like to echo his comment that it is getting tough in Stockton. Multifamilies are a sure fire way to meet the 1% rule but there are some rare gems in pockets.

Areas I would recommend are near UOP. People underestimate how much students will be willing to pay to be close to campus and not have to pay for gas and parking. And it’s a great neighborhood.

I’d also recommend Southside near I5. It has a bad reputation, but we’re starting to see a surge of Silicon Valley commuters buying in this area, and the crime is definitely improving with this inflow of people who care about their property.

Lastly, I’d recommend you get in touch with wholesalers or serious fixer uppers. With a low enough price and a strong stomach, you’ll get the 1%. Or you can force appreciation by adding square footage or rooms to meet the rule.

Happy to answer any other questions you may have.

@Edmondo Morgan Jr we've been having good luck in Fresno.  We have a lot of low caps in area's that are considered the "most desired".  My clients are finding great deals in pockets that are off the beaten path but still safe without too many issues in the neighborhood.  I"d say the 7-8 cap is a real possibility here if you are good at interpreting balance sheets and income statements to see the potential in a property rather than looking at what the numbers are in their simplest form.   I just purchased a property at a 7.2 cap using the 1% rule and it's going really well.  It was a property that was overlooked by a lot of investors as the numbers were a bit sloppy and the area of town was about a C.  All that to say, Fresno is great for high caps, and the more you know about financial projections the better.

@Jeff Zimmerman that’s great to hear!!! Not too far from our area either. I’m sure it helps knowing the area and the market as far as which areas are desirable vs parts you need to be careful in. I will keep studying and learning.

Edmondo,

 I’ve seen some Multi-families pop up in Lodi that meet the 1% rule. They move quick and some have been in need of repairs but if you keep looking I’m sure you can find some. 

Thanks,

Mike

Hey Edmondo, I’d recommend off of Downing or off of 8th Street

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