Thanks for your feedback as well. This is more like a speculation and less like an investment. I am thinking more like a primary. I am still learning how to run the numbers. How did you get these numbers? Still need to add maintenance, vacancy, and property management.
For the mortgage, I just google "mortgage calculator" and use their template:
For a insurance on a SFR rental, I generally estimate 0.2% annual premiums (0.002 times the purchase price), but since I suspect the Oak Park area has had a high number of claims (based on the various burnt out properties from squatters) I bumped it up to 0.3%: $250,000 x 0.003 = $750
For taxes I usually use Zillow:
So in most areas, I'd just take 464 and divide by $29116 to get a tax rate of 1.6% However, some counties have more detailed info online and, fortunately, Sacramento is one of them. If you click "county website" it'll take you to:
From there, click on "e-PropTax" to get to here:
I don't normally see a "Secured Supplemental" -- I'm betting there was a tax lien from the owners who were foreclosed on before the house was flipped. Anyway, the tax rate code is 03-002 --click on that to see:
So you'll be taxed 1.1418% of the assessed value (which will probably increase to the purchase price next year). But if you go back to the previous screen, you'll see a $214.62 "direct levy portion" -- click on that and you'll see additional taxes and/or Mello Roos:
An additional $214/year isn't too bad, but some areas of Sacramento county get pretty crazy with these direct levies. For example, check out the additional $2,500 levy (on top of the expected $4000+) on this $400,000 house from Elk Grove:
Lots of people in this area are unpleasantly surprised by that additional $2500/year tax bill and wind up selling.
Anyway, for your taxes you'll probably have 1.1418% x $250,000 + $214 = $3070/year.
For maintenance, you pretty much have to use your best judgement. A brand new or completely renovated home will have much lower maintenance than a "survivor" time capsule from decades ago. I'm not a fan of using percentages because you can have the exact same home built in 2 different parts of town collecting wildly different rents, yet having nearly the same maintenance... From eyeballing the pictures of this property, I'd make a wild-***-guess of $50/month not including cap-ex.
Property Management? 7-12% -- I'd use 10% for calculations and try to negotiate down.
Opportunity cost? That's whatever rate of return you could comfortably get if you invested your down payment in something else (stocks, bonds, a business, a private loan, etc).
Vacancy? That'll depend on the area and your rent. I've found that vacancy rates are very low in the Sacramento area for cheaper housing -- I'd probably assume 5% vacancy. If this was in a more upmarket part of town, or you were trying to get the top end of the rent range you might use 10-15%.
Real Estate Investor · Sacramento, CA · Member since 2016 · 96 posts · 26 votes
9y
Hi Amir, you seem to be actively seeking properties in or around this neighborhood. First off what is your goal for this purchase?
As far as this neighborhood goes, it's oak park. Oak park is up and coming therefore it'll take time. I would rate this location C as for rentals. Couple street over on other side of broadway and over the freeway into Curtis park are upper end areas.
As a realtor/investor, this location with this price is at a retail.
Good luck.
Yia
I created a rental estimate for the property based on current market rents. If you're interested you can view it here: https://docsend.com/view/dijgbh6
Happy to explain in more detail about the estimate if anyone has questions. Just like @Yia Her said, Oak Park is still a neighborhood that needs some time to really improve. Based on the amount of recently fixed up homes (most look like flips), it's likely though that there is demand for nice homes in this area and I think you'll continue to see appreciation in Oak Park.
If you're looking for the best bang for your buck on a rental property, you might be able to find a place that needs some work at a more affordable price and then do some cosmetic improvements to attract quality tenants without doing a full flip.
Realtor · Sacramento, CA · Member since 2015 · 70 posts · 34 votes
9y
There are also different steers within Oak Park that are better than others. The closer to Broadway the better as there are more amenities near by - coffee, bars & restaurants. The other side of the 95817 zip is Tahoe Park which has great areas for rentals as well. Good luck! Post again whether offer was accepted or not, curious.
Real Estate Investor · Sacramento, CA · Member since 2016 · 32 posts · 36 votes
9y
Mortgage: $1267/month
Insurance: $800/year, $67/month
Taxes: $3200/year, $267/month
Opportunity Cost (if you had invested your $50k down payment elsewhere @5%): $2560/year, $213/month
-----
$1814 in monthly costs not including maintenance or management.
You're probably looking at $1400-1500 in rent for this area so, unless you're wanting to generate a tax loss, this looks less like an investment and more like speculation (which is true for almost all Sacramento residential properties in February 2017).
Investor · Sacramento, CA · Member since 2012 · 289 posts · 151 votes
9y
I used to a live a couple of blocks from there. In general, it's "nice" part of the neighborhood assuming you know what to expect living in Oak Park. (Not as nice as North of Broadway though) There will be lower income neighbors. You're bound to have a slumlord some where around there that rents to crappy tenants and doesn't keep the property clean. I haven't been on that specific street in a year or so, but there's been a lot of investing activity on 38th Ave in the last two years, and it is starting to clean up really nice.
Like @Jeff Gore mentioned, this isn't really investing grade; although I calculate PITI as about 1330/month compared to his numbers. Figure another 150 for sewer/water/garbage, which means you're break even at 1500/month. That's more risky than I would like.
It sounds like you are in a "want to buy now before prices go up and we'll figure it out later" mindset since you aren't sure if you're looking for investment or primary. You might want to figure that out before going further. Specifically decide if you want to live in that neighborhood. At these number you don't have good guaranteed exit strategies, and risk being stuck with a negative cash flow house if you don't want to live there. That could stand in the way of buying a house to live in if it's not there.
It's important to note that the current issues with Oak Park in that area are strictly cosmetic. Even six years ago when we lived there (and it was much worse), it still felt safer than midtown. Comparing it where we live in East Sac now, the difference is strictly feel. There are almost just as many homeless in East Sac. Property crime is probably worse here, since there are more people around during the day in Oak Park. Like I said cosmetic. If you're comfortable with that, then it's good buy. Cheaper than renting, great appreciation, and a good neighborhood.
Thanks for your feedback as well. This is more like a speculation and less like an investment. I am thinking more like a primary. I am still learning how to run the numbers. How did you get these numbers? Still need to add maintenance, vacancy, and property management.
Keep in mind that because of prop 13, the mortgage company will likely underestimate property tax in the good will statement. This happens when they look at the tax rolls for the tax amount which uses the current evaluation, and not the new evaluation after the property changes hands. This can be a significant difference for flips in this neighborhood.
Thanks for the link. How did you decide your primary residence verses investment property?
That's where I am not sure what to do. I am getting married and will be living with my significant other after April. Buying in Sacramento now is very challenging. I think the owner of this property is a flipper.
Rental Property Investor · Elk Grove, CA · Member since 2016 · 306 posts · 76 votes
9y
@Account Closed
Before making the offer. I decided that I wanted to live in Sacramento. My fiance works near the house so we figured it a place to live or rent out. I was banking on appreciation more than numbers. Most of the homes are retail priced (like this one) so it's hard to make any money. I could be wrong.
Thanks for your feedback as well. This is more like a speculation and less like an investment. I am thinking more like a primary. I am still learning how to run the numbers. How did you get these numbers? Still need to add maintenance, vacancy, and property management.
For the mortgage, I just google "mortgage calculator" and use their template:
For a insurance on a SFR rental, I generally estimate 0.2% annual premiums (0.002 times the purchase price), but since I suspect the Oak Park area has had a high number of claims (based on the various burnt out properties from squatters) I bumped it up to 0.3%: $250,000 x 0.003 = $750
For taxes I usually use Zillow:
So in most areas, I'd just take 464 and divide by $29116 to get a tax rate of 1.6% However, some counties have more detailed info online and, fortunately, Sacramento is one of them. If you click "county website" it'll take you to:
From there, click on "e-PropTax" to get to here:
I don't normally see a "Secured Supplemental" -- I'm betting there was a tax lien from the owners who were foreclosed on before the house was flipped. Anyway, the tax rate code is 03-002 --click on that to see:
So you'll be taxed 1.1418% of the assessed value (which will probably increase to the purchase price next year). But if you go back to the previous screen, you'll see a $214.62 "direct levy portion" -- click on that and you'll see additional taxes and/or Mello Roos:
An additional $214/year isn't too bad, but some areas of Sacramento county get pretty crazy with these direct levies. For example, check out the additional $2,500 levy (on top of the expected $4000+) on this $400,000 house from Elk Grove:
Lots of people in this area are unpleasantly surprised by that additional $2500/year tax bill and wind up selling.
Anyway, for your taxes you'll probably have 1.1418% x $250,000 + $214 = $3070/year.
For maintenance, you pretty much have to use your best judgement. A brand new or completely renovated home will have much lower maintenance than a "survivor" time capsule from decades ago. I'm not a fan of using percentages because you can have the exact same home built in 2 different parts of town collecting wildly different rents, yet having nearly the same maintenance... From eyeballing the pictures of this property, I'd make a wild-***-guess of $50/month not including cap-ex.
Property Management? 7-12% -- I'd use 10% for calculations and try to negotiate down.
Opportunity cost? That's whatever rate of return you could comfortably get if you invested your down payment in something else (stocks, bonds, a business, a private loan, etc).
Vacancy? That'll depend on the area and your rent. I've found that vacancy rates are very low in the Sacramento area for cheaper housing -- I'd probably assume 5% vacancy. If this was in a more upmarket part of town, or you were trying to get the top end of the rent range you might use 10-15%.
I've been a buy and holder in the Oak Park area since 2002 and between 2005 - 2008, I worked full time to help the neighborhood turn around. You've received a lot of great advice already, but you might want to hang in the area to get a better feel.
Central OP has a ton of potential but it'll need some active leadership to refine it. I've poured in a ton of work in North Oak Park - and have documented it here on BP over the years. Now North Oak Park (Med Center) is very desirable.
I'm not taking all the credit but I do know what I'm talking about. And have some bruises, negative press, and hurt feelings to prove it.
We're gathering on March 18th at the Guild Theater to discuss promising areas in the Sacramento Region and Oak Park specifically. You should attend and listen in as insiders share exactly where and where not to invest in Sacramento.