All Forum Posts by: Jean Rhem

Hey @Jean Rhem, the location is solid, and you should see price appreciation in that area, as there is a lot of new investment coming soon to that part of Natomas. If you're mostly interested in cash flow, I would recommend small multi family. I'm an investor in Sacramento, and 1031'd a lot of my SFH's into small multi family properties. Happy to chat more about this offline if you're interested. Best of luck!

 I cannot believe that people are trying to convince you that sub-to is a good thing. This is why biggerpockets is going downhill. Too many people on here stating nonsense and potentially trying to scam you out of your house. Please do not listen to them.

How much money do you have tied up in it? 

I don't see a big downside other than opportunity cost, if your return on equity is low. That equity may be able to make more money elsewhere. 

Consider that you are still getting your mortgage paid off by someone else, you'll have decent tax benefits (either now or passed to the future), and you will likely get appreciation over time. Make sure you calculate those two things in your overall return. 

You also said it's near the new Costco. Costco is not going to build in a crappy affordable area. You can bet they are doing research on where they build/open a store. Being near a Costco is a good thing - the costco itself will likely bring in even more business (big anchors like that support other business). I believed you mentioned luxury apartments around too - this is another good thing for your area. Not only that - you can likely beat the new luxurious places on price. So you'll stay rented. I personally welcome properties that are nicer and newer than mine. 

Also - even if the cashflow is low, the RE helps diversify your portfolio. If the stock market dips 20-30%, your townhome will likely help stabilize your portfolio. 

TLDR - look at ROE, determine opportunity cost of equity left in the house, consider your diversification 

What part of Sacramento is it located in? Real estate transactions are expensive and a sub-3% interest rate won't be beaten for some time, so I wouldn't recommend selling right away because you think there aren't long term gains possible from equity growth. The hyper-local characteristics of the area matter a lot here. If there are thousands of new luxury apartment, it also means there is demand and likely a flywheel effect will start turning with more commerce + transportation coming to the area over time to help with growth.

Not a whole lot of risk on you besides the effect on your DTI for the next purchase --

That's right, it stays on your DTI ratio. Don't let the Pace Morby people convince you otherwise! Just read Fannie Mae & Fannie Mac.

In the event of nonpayment by the subto buyer however, the terms are very favorable to you. 

Hey Jean, I'm a local broker and PM. It's a fair question. Keeping a townhome / condo as a rental in my opinion is not a good idea. I'm very pro-multifamily for investment purposes.

If the main attraction to this property is the low interest rate, why not make that work to your advantage and sell the property subto? You can probably boost the sale price that way.

@Jean Rhem

Can you sale it and upgrade to a cash flowing asset

I would not keep a property that isn’t cash flowing and/or likely to have significant appreciation. The interest rate is irrelevant.