All Forum Posts by: Wes Blackwell

@Anthony Cruse

Hi Anthony! If this is an investment property, you're likely going to need to put 25% down, or at least have 20% equity in your current properties to start. But really, there are going to be a lot more numbers involved with this investment, so the best bet is to start off the conversation with a lender.

In the meantime, do a little research to see what your homes might be worth and what you could potentially rent them for. You could then compare that with the current mortgage payments and see if you might end up with some cashflow if the two of you moved into one of the houses and rented the other one.

If you sold the two properties, you could use that as a down-payment on the multifamily property and be good to go. Ideally it would be a fourplex as that would give you the best return, but you'll make some added sacrifices you wouldn't have to make living in a duplex at the same price.

Then in a few years you could move out and rent it all out, and see even better returns. But even if you don't buy any other properties, in 30 years it will be all paid off and give you enormous rental income every month, which will allow you and your wife to retire comfortably, and always have a place to stay if needed.

The best first steps would be to talk with a lender who can help you figure out what kind of financing you can qualify for, and then a local agent who's experienced in 2-4 unit properties and understands your investing goals. Feel free to post any follow-up questions here, as the members on this site are quite helpful indeed!

Also, be sure to head on over to the Sacramento Forum and join the conversation going on there and get a feel for the market. Here's a post I wrote about Sacramento recently that should really get you up to speed:

https://www.biggerpockets.com/forums/621/topics/396725-millennial-migration-to-sacramento-2017---here-comes-the-rush

Best of luck!

@Account Closed

You seem to have a serious misconception about what you think you "have" to do and all of the other options available, in real estate and in participating in these forums.

You made a lengthy initial post, and then when someone makes a lengthy one in return addressing every single issue you brought up, you mock them.

That shows me you're just trolling and have no interest in having a serious conversation about the issues you brought up.

Good day sir.

@Account Closed

Lots of great comments and suggestions have been shared, but if I could add one thing... it would be to treat every aspect of your career as a PROFESSIONAL, not an amateur.

A surgeon wouldn't operate on you without knowing how to successfully complete the operation, yet amateur agents try to help people buy or sell a home all the time without having a damn clue as to what they're doing.

Professionals learn every aspect of their trade, and never stop learning either.

Learn about loans. Learn about property management. Learn about real estate law. Learn how to sell a house quickly for top dollar. Learn how to find the killer deal that no one else knows about. Learn about the local market. Learn about the local economy. Learn about the local neighborhoods. 

Never, ever, ever, ever stop learning either.

Your primary role as a real estate agent is to inform and advise your clients. Provide them with factual information about the market, laws, and procedures to buy or sell a house, and then advise them on the best course of action. That's it.

Essentially, if you treat this like a hobby, it'll pay you like a hobby. If you treat it like a business, it'll pay you like a business.

Best of luck my friend! Once you've got your license feel free to reach out with any questions you may have and hopefully I can get you pointed in the right direction! 

@Account Closed4. Make it unlawful for real estate agents to purchase or own investment property. Make it unlawful for real estate agents to purchase investment property for anyone with which they have a personal relationship."

I'm really starting to reconsider all the time I spent on this post and wonder if you're just trolling everyone. It's starting to look like you had a really bad experience with an agent, or someone bought a property you were interested in... is that what happened?

"5. Require real estate agents to hire another agent when they purchase property. And make it unlawful for that agent to have any personal relationship to the purchaser."

Completely unnecessary and totally redundant and inefficient. And people like to work with those they know, like and trust. Would you rather hire your family member to sell your home or some stranger? C'mon man!

"6. Require the real estate industry to provide to the public the same sales contract and leasing templates they provide to real estate agents. And make it unlawful for real estate agents to discriminate against self-represented buyers or sellers in any way."

LOL! So all the dues paid to employ our MASSIVE team of attorneys to write (and re-write and re-write and re-write) those contracts so they should just be given to you for free? That's ridiculous! Man I regret even writing all this now lol.

@Joe Gettler

If I were you I would take a look into investing in Sacramento and Stockton, CA. Your money will go waaaaaaay further out here, and you could possibly end up nabbing 2 or 3 properties. Average gross monthly rents for 2-4 unit properties out here is roughly $2,000-2,200, so you could probably approach $5k in gross rents if you pick the right ones. Check out the Sacramento Real Estate Forum to get a good feel of what's going on in the area and see if it's for you. Best of luck!

@Account Closed

I'd call it a killer deal because to buy a duplex with rents like that anywhere in Midtown, East Sac, Curtis Park / Land Park would easily cost you $450-550k+

Here are the numbers at $340k purchase price (highest offer per listing agent) and $1,400 per month rent per unit:

PRICE: $340,000
Two 3/2's at ~1,200 sq ft each
25% Down: $85,000
Monthly Rents: $2,800
Annual Rents: $33,600
PITI @ 5%: $1,822
PITI Cash-Flow Monthly: $978
PITI Cash-Flow Annually: $11,731
Gross Rent Multiplier: 10.12
1% Test: 0.82%
Gross Annual Yield: $9.88%
PITI Cash-on-Cash Return: 13.80%

And with projected rent increases of 10% this year and 8.5% next year, in 2 years the gross rents will be over $3,300 and this deal just looks amazing at those numbers:

Monthly Rents: $3,300
Annual Rents: $39,600
PITI @ 5%: $1,822
PITI Cash-Flow Monthly: $1,478
PITI Cash-Flow Annually: $17,731
Gross Rent Multiplier: 8.59
1% Test: 0.97%
Gross Annual Yield: $11.65%
PITI Cash-on-Cash Return: 20.86%

@Jason Monroe

Yes, I would highly recommend the Sacramento Business Journal as a great way to keep your finger on the pulse of the market. I read it all the time and it gives you great insight into both major and minor economic developments happening in the area.

@Charlie Chew

Thanks for the compliments! I put a lot of effort into everything I share here, so it's always nice to hear that people are finding the information helpful.

LOCAL NEWS

One of the most simple and obvious sources for information that everyone tends to forget about is the local news. Simply type "(City Name) Real Estate" and check the news section on Google for a plethora of headlines about the local market.

Here are some recent examples for Sacramento:

• Home-flipping: How the Sacramento area compares to other markets
• Redfin says Sacramento’s Hollywood Park neighborhood is one of the nation’s hottest
• Elmhurst residents fight against real estate agent’s plan to open neighborhood office
• Commercial Marijuana Growers Buying Up Space In Sacramento At Unprecedented Rate

• Sacramento apartment occupancy rates suggest rents going higher, report finds

Here are some examples for Livermore, CA:

• Major Bay Area apartment operator sues Airbnb, alleging 'illicit subletting'
• Council Votes to Move Historic Train Depot
• BURGLARS STEAL APPLIANCES FROM HOMES FOR SALE IN LIVERMORE
• Shopping center and hotel project slated for Livermore
• Tesla snaps up huge warehouse lease in Livermore, highlighting car ramp-up plans

So, how do you interpret these headlines? 

Well, for Livermore it means that as an investor you should be wary of subletting and any AirBnB based strategies for rentals, because there may be some potential issues with that strategy, if not for now then maybe down the line.  

Where is the historic train depot being moved to? And what's being put in it's place? Will it being a housing development? A shopping center? A casino? How will that affect the home values in the surrounding areas? Should you invest there? These are all great questions to answer.

For the burglary issues in vacant homes you'd know that if you plan on marketing your vacant property for rent, you better be sure you have an alarm system or some other deterrence until this local crime ring stops.

The shopping center and hotel project will likely boost home values nearby, depending on the exact location and scope of the work. Similar to the questions about moving the train station above.

And for Tesla to snap up that huge lease, that means you'll obviously be bringing more jobs to the city, and those people will need a place to live, which are all good signs of a strong local economy and continued rent growth and appreciation.

See how much I was able to learn about your local market just be reading the headlines? I didn't even have to read the articles to learn more about what's going on in the area.

LOCAL REAL ESTATE BLOGS

The next best source for information on the local real estate market are local blogs and websites that have regular articles about the market and where it's at.

For example, one that I absolutely love and read every week for Sacramento is SacramentoAppraisalBlog.com. It's actually run by fellow BP member Ryan Lundquist. Every week he shares his insights into what's going on in the Sacramento market.

Another great one for the California housing market is http://www.doctorhousingbubble.com/. I believe they got started back during the previous bubble burst in 2007, and have been writing great content about the California housing market ever since. Here's one of their latest Bay Area articles that you wouldn't learn about anywhere else:

The latest Bay Area housing gimmick: Having investors pay for half of the standard 20 percent down payment and sharing on the upside or downside.

That's just crazy!

LOCAL INVESTORS AND REAL ESTATE PROFESSIONALS

Lastly, you want to get in touch with local real estate investors and professionals like agents, mortgage brokers, etc. And that's something you can do here on BP, but may even find them on other sites like http://www.city-data.com. You can pop into the local forums and see what the word on the street is from local residents if nothing else.

The thing about having a good agent is they can shortcut the whole learning process for you. If you find someone who's already read all those articles above and regularly works in the market, analyzes all the data, etc. then you're miles ahead of everyone else. 

If you find an agent who specializes in the types of properties you're looking for, you'll also get access to all their experience in working with other clients as well. If you get some run-of-the-mill Realtor who doesn't really understand what you're looking for and never helps people buy or sell homes like that, you're not going to get that.

@Jeff Yates

You're right... you shouldn't make an investment based solely on projected appreciation, because that's a very risky game to play. Although, the thing about California is that it's extremely different from most the U.S. so general rules like 50% expenses and the 1-2% test don't apply.

For example, take a look at this map of home values across the U.S.

https://www.trulia.com/home_prices/

Notice that the median home price is Sacramento County is roughly $300k, while most of the rest of the nation is less than half that. So a general rule of thumb that applies to 80% of the nation does not apply to the areas where home values are twice as much.

And that's because those numbers don't scale. 5% appreciation is twice as much equity growth on a $300k home as it is on a $150k home. But, the expenses don't go up twice as high just because the property costs more. Maybe your mortgage payment does, but other costs like utilities, repairs, etc. don't. Also, those properties don't always rent for twice as much either. 

So, you really have to take it on a case-by-case basis. You can easily determine your PITI (principal, interest, taxes, and insurance) and you can get a rough estimate for utilities from the current owner, although you don't have to pay any of them, you can put it all on the tenants.

If the property is beat up, plan on more repairs. If it's recently remodeled, plan on less. And vacancy isn't just a percentage you can plan either. 1-2 month's rent per unit if you're doing major renovations the first year, and 0-1 month's rent per year after that depending on what you know about the tenants. Sometimes you buy a property and the tenants have been there for 5+ years, so they're probably not going anywhere anytime soon.

Also, every market in California is different too. For example, take a look here at the Top 100 Hottest Metro Markets in the Nation for 2017, and you'll notice that the projected appreciation this year San Francisco is 8.41%, and for San Jose it's 8.26%. So you could go buy the median priced home out there for over $1 million dollars and expect to a growth in equity of over $80k this year. That makes $500 per month cash flow look like mincemeat.

In the rest of the U.S., appreciation is the cherry on top. 

In California, appreciation is the entire cake.

So I would ignore nationwide rule of thumb metrics, as they simply don't apply here. I always recommend learning the local market and what kind of returns, expenses, results, etc. investors are having here. Then when you know what to expect on average, and then you will know how to spot a deal when you see one. But taking metrics that work in Kansas where the median home price is $123k and using them here will only lead you astray. Hope this helps :-)

@Jeff Yates

I wouldn't call it speculation, since that's roughly what we did last year. You can expect the same this year. Just about every new listing turns into a multiple offer scenario, which keeps driving prices up. Plus, we only built 512 new apartment units last year, but there are waaaaay more people planning on moving here over the next 5 years. Here's some recent stats for the market:

1. The median price softened to $305,000 (down 7% from summer).
2. The median price is currently 8.9% above January 2016.
3. Sales volume was stronger in January than it’s been in 4 years. We could focus on sales volume declining by 27% from December, but volume always declines from December.
4. Sales volume in January 2017 was 14% higher than last year.
5. One year ago in January it was taking 4 days longer to sell.
6. FHA sales volume is down 6% this year compared to 2016 (but 27% of all sales were FHA last month).
7. Only 3% of all sales were bank-owned last month and 2.4% were short sales.
8. The average price per sq ft was about $202 last month (about the same as December, but 8% higher than last year).
9. The average sales price softened 1% last month and is currently $339,028. This is down 5% from the height of summer (but is 9% higher than last year).
10. Cash sales were 15% of all sales last month.

Perhaps you should try looking in the San Joaquin / Stockton Market. The median home price is about $40k less (which will free up roughly ~$220 per month in a mortgage payment) but the rents are fairly comparable in most cases so your money goes a lot further. Downside is you won't have the same growth that Sacramento will. Here's what the same numbers would look like for the better performing properties in San Joaquin county:

PRICE: ~$244k
25% DOWN: ~ $61k
MONTHLY RENTS: ~$2,100
ANNUAL RENTS: ~$25,200
PITI @ 5% w/ 25% DOWN: ~$1,305
PITI CASHFLOW MONTHLY: ~$795
PITI CASHFLOW YEARLY: ~$9,540
1% TEST: 0.86%
GROSS ANNUAL YIELD: 10.34%
PITI CASH ON CASH RETURN: 15.65%

Also remember that this is a long-term investment. Even if you made $0 per year in cash flow by the time you accounted for expenses, in 30 years you'd have a property that was paid off by someone else, that also acts as a giant savings bank that you can pull money out of or liquidate at any time, and it'll be worth far more than it is now and provide you far more rental income every month as well. Buy just and handful of those over the next 20 years and your retirement will be quite nice.