All Forum Posts by: Emil Pinlac

Hey @Johnny Hoang -

That was definitely an idea I considered, even changing my home purchase preference from small multifamily to single family homes, and considering value-add renovations or the building of an ADU in either the backyard or a garage conversion.

Also just to clarify: just because a property DOESN'T meet the 2% or the 1% Rule, does not necessarily mean it will not cash flow, right? Do you think it is still a "win" for the investor, if they house-hack a property but the rents do not fully pay for all operating expenses? (i.e., only partially pay for mortgage, etc. etc.) 

@Brian Larson

Hmm. Let's say my goals are to just get some "skin in the game" and start my REI journey.

Maximizing cash flow is what appeals to me the most, as I feel like it could definitely be a good crutch to help support the financing for my future deals - but if Sacramento isn't the best market for maximizing cash flow, does that mean I should just jump right into out of state investing? 

 It just feels like OOS investing has a lot more risk and has a much higher learning curve overall especially for a newbie who hasn't bought any homes yet locally. Do you recommend jumping into OOS as a complete newbie OR should I start with my local market? 

@Brian Larson @Joe Bertolino @Aaron K. 

Got it.

And so the next most logical question would be - how or what metrics should the aspiring, 2-4 unit real estate investor in the Sacramento market focus on, in order to ensure that they can be successful in analyzing or purchasing a multi-family home? 

Could we/should we still look for $200-$300 cash flow per month deals? Or are we now more heavily on the value-add / fix and flip type of strategy? 

Hi All! 

For those who have chosen to set up roots and invest in the small, multi-family real estate space in Sacramento - have you been able to find any turnkey duplex/triplex/quadplexes that would fit the 2% rule? 

The 2% Rule as I understand it is this: Monthly rent (rental income charged to your tenants) should be approximately 2% of your property's purchase price. An example would mean that a $350,000 triplex should be renting a total of $7,000 each month (assuming all units are the same 3/2, and that each unit would rent for approx $2,333 each month.)

Doesn't that monthly rate seem a little steep? Or is that just about right as far as what tenants would expect to pay? I see a lot of 2 or 3 bedroom single family homes in my area that are renting in the $1000 - $1800 range, and so I feel like the 2% rule doesn't really work out here. And it only gets worse when you calculate for owner-occupancy - (i.e., in my triplex example above, IF the owner lives in one of the units and rents out the other two, he would effectively either increasing the tenant's rents to $3,500 a month in order to live for free and fulfill the 2% rule, OR keep the prices the same and effectively only be at 1.3% of the purchase price. 

I would love other local investors' perspectives and insights on how they either force appreciation on their small multi-family properties (does everyone in Sac just BRRR?), OR how they justify purchasing these types of small, multi-families even if rules of thumb like the 2% rule don't work out or make sense.

I hope this makes sense - I'm really looking forward to your responses. 

@Jordan Moorhead

Nice! And you said that there is a real opportunity to buy and improve MFH in the Austin area... could you share some thoughts or ideas of what you mean by improving MFHs? Like, are you adding/removing rooms or adding ADUs or are you swapping out kitchen countertops, or renovating bathrooms? Or are you just focused on minor cosmetic things like fresh coats of paint?

@Joe Bertolino

Hey Joe! I would honestly love to come or drive over and check it out if you have some time to spare, and are willing to meet amidst the current pandemic. 

I feel like being able to see it in action could help solidify some of these ideas in my head with how I should proceed with my own investment strategy here in the Sacramento market. Thank you for your advice! 

@Joe Bertolino

@Jordan Moorhead 

Hey Jordan!

Yes, I agree. It's just on my radar as a potential spot to invest, as I have a friend who currently works there as an Agent who has been telling me that the town has been growing in recent years. I know it is a military town, so I know there are other rules with regard to military tenants being able to break off leases if they get re-deployed elsewhere, but I figure that targeting that tenant market might be more responsible caring for the property than college kids might. haha. 

I see you are based in the Austin area - do you have any advice or insight for out of state investors looking to invest in small, multi-family investment properties in Texas? I would love to hear your thoughts, man. 

@Adrian Alfaro

Hey Adrian! Thank you for your insight AND for the link, man. I will definitely check it out. 

As an addendum/follow-up to finding Real Estate deals with unpermitted ADUs in the back lot, or an unpermitted converted garage - would I be able to pass the cost to tear it down or re-permit as a discount on the overall purchase price of the deal? 

Also - would I need to renew a permit every year for ADUs? 

I am effectively a year late from the first posting on this thread - but I'm glad i'm here now! 

I hope everyone has been doing well amidst this whole Pandemic. I would love to join in on the conversations and share in the insights at the next Sacramento BiggerPockets/REI MeetUp... whenever that may be.

I'm fairly new to the game - and I am currently based in the Rosemont/Rancho Cordova area. I officially made my decision to begin my RE Journey just last month, after realizing buying and holding index funds in Vanguard was taking too long. haha.

My current focus is on generating enough capital to purchase my first property: Ideally a 2-4 unit multi-family property with the intent to house-hack and generate cash flow from day one (if that is even possible in our Sac market).

Would anyone have some insight as to whether this strategies/these properties are feasible for Sacramento? 

Alternatively, I am also open to/have considered a couple pivots; specifically in Sacramento single-family homes with the potential for garages to be converted into an ADU, OR in out-of-state rental property investing for purposes of immediate cash flow (Killeen Texas, Orlando Florida, and Phoenix, Arizona come to mind). 

@Paul Choi congrats on closing that 14 unit deal, man! How were you able to get started? 

@Dan H.

Hmm. That is good to know. My first few preliminary analyses of potential small, multi-family rental property buys here in the Sacramento market have been abysmal as far as CoCR and rules of thumb, like the 2% or the 50% rules are concerned. 

Do you have any advice for how I could scope out how much landlords are charging for rent in certain areas of Sacramento? Are there any one-stop, generalized websites for these types of things? I've kind of just been looking through Craigslist when I run the analysis on rental properties, but was wondering if there were alternative ways. 

Finally - thank you so much for that BRRR insight. Seems like there are definitely a lot more nuances with BRRR and relying on a combination of factors (like you said - appreciation, value-add, competition, etc) that will lead to eventually making a return. I'm still a few years away from pulling the trigger on a property, but. .. ahh, to take on that much risk on a large sum of money is daunting.

Ideally, I'd really love to build a strong team and a wealth of knowledge before then - so that I can control my risks as much as possible.