All Forum Posts by: Wes Blackwell

@Gabriel Lamb

Easy... read the news.

Google "(City State) Economy/population growth/real estate/ etc." and read the first couple pages of news articles.

Within no time you'll be way up to speed on what's going on. 

Set news alerts for those terms, and for the Phoenix metro area in general since it's all so closely related, and within a month or two you'll be a walking encyclopedia of facts, figures and trends.

@Phillip Poyhonen

Looking at this property in Phoenix, first thing is the rents are way too low. I bet you could easily get $750/mo. Especially if you got rid of that hideous green paint! Yuck!

If you have the dough, I'd renovate one unit at a time. Fix everything in disrepair and do all the cosmetic fixes... paint, flooring, and spruce up the kitchen and bath a little. No need to go top of the line. $5,000 can go a REAL long way in a 600 sq ft unit. That would easily allow you to get max rent and possibly lower the repair / cap ex reserves since you're fixing a lot of stuff up front. Pay it now or pay it later, but either way you're paying it. I suggest doing it up front if possible.

And don't use the 50% rule for expenses... totally varies from market to market, price range to price range, etc. You think a home that rents for $2,000/mo has $1,000/mo in expenses? No way!

Using this loan calculator here --> https://usmortgagecalculator.org/ with a purchase price of $425k and $85k down and a 5% interest rate your PITI will be roughly $2,400/mo.

If you can get rents at $750/mo, that would be $3,000/mo in gross income. That leaves you $600/mo between gross income and base expense (PITI).

You estimate putting $50k towards repairs, which means these units should be TOP OF THE LINE by the time you're done with them ($12.5k per unit) so your rents could even be higher if these units are all cherried out.

Big thing about this one is the property has been on the market nearly 6 months... so it's overpriced for sure.

The fourplexes just on the other side of I-10 sold for $250-300k... yet these two up top (including yours) are asking $400-500k??!?! WTF?!?!?!

You know what did sell for $400k though? An 8-plex at 1017 E MCKINLEY ST, Phoenix, AZ 85006.

So ultimately, you've got a case of seller/listing agent pulling an asking price out of their rear end and completely ignoring reality.

You get this for $300k (what it's worth -- or less) and your PITI drops to $1,555 and suddenly this deal makes a whole lot more sense.

Hope this helps :-)

@Kevin Zhang

As a former resident of both Stockton and Sacramento, here is my full detailed advice on this one:

3871 Ryde Ave . Stockton, CA 95204

Gross rents are currently $2,800/mo. Two are rented at $950 and one is rented for $900. They are each 2/1's with 879 sq ft. That's about market rent, but you could possibly bump it up to $1,000 each depending on how nice the interior is. It says they were all renovated in 2009, so it really depends on how the upkeep has been over time.

If you purchased the property at asking price ($400k) with 25% down and a 5% interest rate, your PITI would be $2,143/mo. That leaves a spread between gross rents and base expense of $657/mo.

Tenant pays electric, so you'd be paying water/sewer/garbage (typical) and gas if there is any. When the current leases are up, you'd want to switch that to make the tenant pay for everything, or raise the rents according and market the property as water/sewer/garbage included (perceived savings).

Here's a list of the triplexes that sold nearby within the last year (triplexes are rare, so generally you have to go back further than 6 months):

• 1769 Oxford Way, Stockton, CA 95204 - $290k
• 2008 Buena Vista Ave, Stockton, CA 95204 - $365k
• 1302 Holt St, Stockton, CA 95203 - $255k
• 2158 Monte Diablo Ave, Stockton, CA 95203 - $335k
• 2619 W Acacia St, Stockton, CA 95203 - $225k
• 2879 Pixie Dr, Stockton, CA 95203 - $325k

Not all those triplexes are the same, but it just goes to show that this property is likely $25-50k overpriced, which is why it has been on the market for 81 days (anything that's priced rent would've sold much sooner).

At $375k your PITI would be $2,010/mo and at $350k it would be $1,876/mo. That's more the range that the property would appraise for, so that saves you several hundred dollars right off the top.

Taking a look at the crime map for this area the past 6 months, besides some petty theft and home burglaries, it's pretty much free from violent crime (which is what you should worry about):

Whereas the 6-plex posted above is riddled with crime. Notice the density of red fist icons:

Here's a map of both areas at once, with only violent crime displayed for past 6 months:

Which area would rather live in?

The thing to know about Stockton is that the area gets much harder south of Harding Way. That's an easy way to remember it. Notice how much more dense the violent crime is in that area. It's truly street by street.

If you take a look at the average rents on rentcafe:

https://www.rentcafe.com/average-rent-market-trends/us/ca/san-joaquin-county/stockton/

At $500-700/mo you're renting to the bottom end of the renter market. Plus with 1/1's being a lot less stable, prepare for your property manager to eat you alive when replacing tenants. People don't live in 1/1's very long. Have a child or get a girlfriend and suddenly you need more space. 2/1's are far more stable, with 3/2's allowing tenants to stay for years (but they are a lot more rare in multifamily).

So I'd highly advise going for the triplex rather than the 6-unit building. An asking price is just an ask... 

...

In sum, on paper one deal looks great and one not so great, but upon further inspection they totally change positions.

@Sachin P.

Yes, you are not the only one going through this in the Sacramento area. The City of Rancho Cordova is NOTORIOUS for it.

Thing is, the Sacramento market took a beating during the recession (as did most markets), and a lot of low quality and out of country landlords came in and swooped up properties for dirt cheap and then managed them like crap.

So, the city is making an effort to clean up the riff-raff. It's a bummer sure... but it's also a write off. And honestly it's better for the community. Think of it as an effort to clean up the area and get rid of the bad landlords next door who manage their properties poorly. Ultimately in the long run it'll be better for the neighborhood and better for property values.

@Kevin Crawford

When trying to determine flood insurance rates in Sacramento, your best bet is to call your insurance agent with property address and tell them you're considering buying it and want to get an insurance quote from them for the property. Piece of cake and pretty much 100% accurate.

@Jeremy Blevins

The challenge you're going to have is that Folsom is really kinda just a suburb of Sacramento... meaning it's mostly single family homes. Only 3 multifamily properties currently on the market right now... and only one of them is under $500k = YIKES! Plus there were only two 2-4 unit multifamily sales in Folsom in the last 6 months.

Here's your best bet, but even then it's currently pending:

https://www.realtor.com/realestateandhomes-detail/...

So it's going to be slim pickings and you're not going to cashflow or even come close to living for free. IF you could rent out one side of that property for $1,500 you're still left with a $1,600 or so mortgage payment.

If you're willing to consider Orangevale or Carmichael you'd have a lot more options, but as you can see in the map below most of the MF is going to be closer to the heart of Sacramento where the population density is much higher:

@Kevin Crawford

While Property Management and Buying/Selling real estate are related, generally they are two separate specialties in the real estate industry.

Property Managers can help represent you in the sale or purchase of real estate, and vice versa. But usually if you're going to be a property manager you'd specialize in that and make that your main source of business. Same goes for a real estate agent who makes most of their money helping others to buy and sell real estate, they may only manage a handful of properties, if any at all.

Therefore, I would probably recommend separating the two. Find yourself an agent who specializes in working with investors to buy rental property, and then find a really good property manager.

For the property manager, I would recommend interviewing multiple candidates, as everyone's prices and services levels will be different. For example, I had one company want me to agree to let them make all repairs without my approval and just send me the bill, and another property manager wanted to rent my property for $450 less than market value because he didn't have any comps for rent...

Little did he realize I knew the rental market better than he did because I work with so many investors, so I told him to go fly a kite... and the other guy too! Just decided to manage it myself instead.

As for the Sacramento market, here are some posts I've written that should help you get a better sense of the trends here and where the market it headed:

• https://www.biggerpockets.com/forums/621/topics/586279-investing-in-sacramento-or-stockton-which-one-is-better
• https://www.biggerpockets.com/forums/621/topics/590913-rent-growth-in-sacramento-is-triple-the-national-average
• https://www.biggerpockets.com/forums/621/topics/585796-sacramento-rent-control-101-everything-you-need-to-know
• https://www.biggerpockets.com/forums/621/topics/396725-millennial-migration-to-sacramento-2017---here-comes-the-rush
• https://www.biggerpockets.com/forums/621/topics/398662-heres-what-fixer-uppers-on-the-mls-are-selling-for

Hopefully that helps you make a more informed purchasing decision. Best of luck!

@Debra Thomson

Any outfit that makes it to the "team" level and starts doing lots and lots of deal is eventually going to bring a realtor in house. 

Simply put, you're way too big of an expense when they sell (even for reduced commission, as over many deals it adds up) and they would also get the added savings when they purchase either in the form of price discounts or getting the commission. If someone is going to do it full time like that it only makes sense to get your license.

But for the part-time investor buying their second or third property, it doesn't make sense, and that's where you come in and can be of extreme benefit to them. So just keep working with individual investors.

Remember that while the local expertise and skill in buying and selling homes, negotiating, etc. is hard to replace, the actual license that entitles them to save on commissions is not. It's not like a contractor's license where you need years in the trade first before getting one.

@Kevin Zhang

Lake Tahoe is pretty antagonistic to rentals, as @Tobias Falzone mentioned. See below:

https://www.rgj.com/story/money/business/2018/04/09/vacation-home-rentals-airbnb-lake-tahoe-vhr-fine-ordinance/460517002/

$1,000 fine for parking?! Lose your permit if you have 3 fines in any 2 year period? Nah I'm good... WAAAAAY too much risk. Lose your permit and you're screwed and will have to re-sell.

I would much rather have you opt for a 2-4 unit property in the Sacramento metro area (Folsom included).

@Charles Heuer

Whether you're in Phoenix, Sacramento, or any other market out there, tenant patterns are generally the same:

Single Family Home: Best quality tenants, and longest term too. Wish they could own a home, but aren't ready yet for whatever reason (no down payment, debt to income ratio too high, etc.)

Duplex: Not too much different than a single family home, as you're only sharing one wall, a fence, and a driveway. Tenant quality is probably going to depend on neighborhood. for example, if you live on a street full of duplexes, the population density is going to be higher and higher quality tenants will shy away from that. Plus you lose the luster of being in a named neighborhood.

Triplex: These are super rare, and it's really going to depend on how it's laid out, size of units, etc.

Fourplex: Most of the time these are two duplexes stacked on top of each other, and often they are surrounded by other fourplexes. So essentially, it's like living in an apartment complex. You still may have some great tenants, but it's really going to depend on the quality of the property and size of units. 2/1's with 800 to 1,000 sq ft is pretty standard fare. I'd avoid 1/1's as the turnover rate can eat your profits alive.