All Forum Posts by: Wes Blackwell

Wes Blackwell has started 34 posts and replied 715 times.

So, this morning I log into Facebook and see that several people have shared a video that I can only describe as an action movie trailer for the city of Sacramento... check it out below:

WOWZA... I gotta admit, they make the city look pretty dang good! Better than I would've been able to describe, but then again I worked 16 hours yesterday and never get to experience half this stuff!

If you haven't heard the news already, there's currently a mass exodus from the Bay Area to surrounding counties that are more affordable. And a big part of the migration is the younger generation of working professionals who are quickly realizing their money goes twice as far in Sacramento as it does in the Bay Area. We're projected to have 18,000 - 20,000 people moving to Sacramento this year from the Bay Area alone.

"If you are under 40, use hashtags and enjoy networking over craft beer, what do you like best about Sacramento? The cost, the weather and the options for fun."

For even more evidence of this mass migration, just look at all the recent headlines about rents in the Bay Area plateauing or even falling in some areas. That's because tons of people tired of living in a cardboard box for $2,000 a month and are quickly getting the hell out of dodge:

This "mass migration" is a large part of the reason that Sacramento rents are continuing to rise, and we're projected to be the #1 rental growth area in the nation this year, with a 10% year-on-year growth for rents.

This increase in rents is driving millennials to get off their butts and become homeowners, because why deal with regular rent increases when you can buy a home and pay basically the same amount?

http://www.kcra.com/article/millennials-moving-in-to-become-home-buyers/6427779

This huge surge in demand will be met with low inventory, as we simply do no have the housing to satisfy it. New construction easily costs $40-100k per lot BEFORE breaking ground, and most of California would've needed to build 10,000+ housing unit per year FOR THE PAST THREE DECADES to keep our housing prices on par with the rest of the country.

http://www.latimes.com/politics/la-pol-sac-california-high-housing-prices-20160414-story.html

So if you hear people talking about the "bubble bursting soon" or anything like that, they're tripping. Hold onto your butts, because we've probably got 12-36 months of continued appreciation. Short of Donald Trump starting World War III on Twitter, there won't be much to slow it down. This is part of the reason why Sacramento will be the #4 Hottest Metro Market in the Nation this year with an estimated 7.2% appreciation and 4.9% increase in sales growth:

http://www.realtor.com/news/trends/top-real-estate-markets-2017/

All these things are evidence that we're about halfway up the mountain before the next peak, and we're probably somewhere in between an Early & Late Stable Market. We're climbing the ramp to the top again, much in the same way we did in the early 2000's:

So... what does this mean for you? If you can, buy now. Yes, the best time to buy would've been 2009-2010, but you've still got some solid appreciation coming your way and if you're living in the property you can probably hit the 2 year residency mark and be capital gains exempt if you sell at the peak. "The best time to plant a tree was 20 years ago, the second best time is now."

If you're looking for investment property, the mass migration to the area should be welcomed by your lovely 2-4 unit multifamily property. I'd shoot for 6 month leases so you can have more regular rent increases :-) And if you think that hipster millennial won't pay good money to live in your C class neighborhood because it's all that's available, think again:

http://www.sfgate.com/realestate/article/Box-man-living-San-Francisco-400-rent-Berkowitz-7215269.php

http://www.businessinsider.com/crazy-things-people-do-to-survive-san-franciscos-housing-prices-2016-4

Remember this is the same generation that thinks it's cool to pay $60,000 for a cramped 200 sq ft tiny house that they can park on their great uncle's lot and gladly post pictures on instagram about it all day long... until reality hits them:

Tim explains how the reality hit him suddenly as well. “I didn’t really foresee having to choose between owning a fridge or getting rid of all of my shirts.” <-- lolz

But if you've got a property in the Midtown-Downtown or East Sac area, hold onto it and watch the rents surge like crazy so all the young singles can be close to the night life. I know a young couple that pays $1,800 a month to rent a small house near downtown and think I'm crazy for moving out to the burbs and owning a home twice the size for the same cost. They're having a hard time justifying making the move... which is quite silly indeed:

In sum, my opinion is that it's a great time to invest in real estate, and the high housing cost in the Bay Area is driving literally tens of thousands of people to our city of Sacramento, and if you get in front of the demand you'll experience some awesome appreciation and some massive rent increases, and laugh out loud all the way to the bank :-)

22 Votes

Sacramento, California

Hi @Christina Womack! Great question!

And don't fret! You aren't the only investor from the Bay Area in your situation, I have several other clients in your same shoes. They want to invest, but look at the local opportunities and realize the prices are too high for the returns to be worth it. They don't like the idea of all the challenges involved in investing out of state, and would prefer to invest somewhere they can drive to quickly if needed. Sacramento is experiencing a surge of investors for this exact reason.

As you said, the 1-2 hr drive limits your options to Sacramento and the rest of the Central Valley down to Fresno. I recommend Sacramento far and above all other options for several reasons, here they are and the links to the data backing up the claims:

Sacramento is projected by Realtor.com to be the #4 Hottest Metro Market in the Nation, with a projected appreciation this year or 7.2% and sales growth of 4.9%
Sacramento is going lead the nation in rental growth in 2017 with a 10% year-on-year increase, and an 8.5% increase in 2018
And that's all because Millennials are moving to Sacramento in droves for a better quality of life, and that trend is projected to continue for the next 5 years. We are projected to have 18,000 to 20,000 people move to Sacramento from the Bay Area this year.
Our lower home prices are also attracting tech companies to the area stimulating job growth, and the city has set aside a $10 million dollar fund to bring tech companies to the area. New start-ups love it because they get free money from the city and don't have to pay their employees $30,000 per month to have a decent living like in the Bay Area
The above situations create high demand, but this article shows you the problem of low inventory and high cost to build that lead to the price surge in the Bay Area, and will be shortly expanding here to Sacramento. For example, Alameda County would've needed to build an additional 13,456 housing units per year FOR THE PAST THREE DECADES to keep the prices on par with the rest of the country.
And there simply isn't enough new housing (SFR or Multifamily) to meet the demand. There were only 512 new apartments built last year, but 18,000+ new people. Builders are scared to hop aboard the "Oh-Euphoria-Housing-Prices-Will-Go-Up-Forever-YAY!" bandwagon like they did in 2004-2006, and the high cost of permits and regulation here in California prevents them from building units fast enough to meet the demand.

So, it's simply supply and demand. Sure there are other options in the Central Valley, but they pale in comparison. Name another local market set to have 7.2% appreciation and 10% rental growth this year... you can't. For hot markets, Stockton-Lodi will be #28, and Fresno will be #43. Not even close to Sacramento at #4. And Modesto didn't even make the list. And that's because people don't want to live there, and with headlines like this there's no wonder why: Modesto Police Department Pushes City to Approve $15k for New Hires... makes you question why police officers don't want to work there...

A lot of the demand is coming from people moving out of the Bay Area, and so they'd like to remain close since they still have friends and family living in the area. And I-80 is so convenient because it makes Sacramento just over an hour away, compared to the 2 hour drive to Modesto and 3 hour drive to Fresno. Plus, Sacramento offers enough of a "big city feel" that Bay Area residents feel right at home. Modesto and Stockton simply don't cut it.

As far as investment opportunities go, your best bet is to go with 2-4 unit multifamily properties, as at any given time we have 80-100 for sale (winter numbers) and you can get some pretty amazing returns. SFR is pretty much out of the question unless you're coming with all cash and don't mind lower ROI.

Sacramento's main lure is that it's way more affordable than the Bay Area so it takes less money to play with and the returns are better. For a comparison of only the best of the best performing properties, investing in the Bay Area is going to cost you about twice as much for the average property leading to a higher down payment and monthly mortgage. Your annual GRM will go up about 2.5 years, and the 1% Test drops from 0.90% to about 0.70%.

These numbers are strictly for comparison of the best each area has to offer, so for the average one the numbers will obviously be lower. But I've ran the numbers for every single property for the following 7 counties: Alameda, Contra Costa, Sacramento, Placer, San Joaquin, Stanislaus and Merced. So I know these numbers are legit and dead-on accurate. And yes, it was very time-consuming lol.

But for example, just today I ran out to a new fourplex on the market priced around $350k in a C class neighborhood. It's tucked back in a practically unknown area with only one street in and one street out, so crime is extremely low for what is considered normal for the zip code as a whole. The property is completely remodeled and should easily rent for $750-900 per unit. So with 25% down and a 5% interest rate rented at only $750 per unit (which is what is was rented for prior to being remodeled) that puts you at $1,100+ positive cash flow per month based on PITI. And Capital Expenditures should be next to nothing since the property comes with brand new appliances and was just remodeled. You won't find anything like that in the Bay Area no doubt about it.

My recommendation would be to learn about the current potential deals available on the market and the local neighborhoods they're in. Once you're able to take a look at the entire Northern California multifamily market as a whole you'll easily be able to discern where the best opportunities are and will be armed with the information you need to make the best possible investment decision. Best of luck no matter where you invest, and feel free to ask any follow-up questions or reach out if you need some help getting started as it can be a little overwhelming :-)

3 Votes

@Bradley W. is a guy I've worked with, and I can attest to the quality of his work. Particularly if you're selling a large property or acreage, the stuff he can do with his aerial photography is AMAZING!

1 Vote

Hi @Roselyn Richards! Great question!

I would recommended reaching out to the Eason & Tambornini law corporation and see if they can help. They do work in real estate law and have KILLER reviews on Yelp. Reach out and see if you can get a free consultation before having them review your forms. Best of luck!

0 Votes

Hi @Michael Swanson Jr.! Great question!

I would reach out to Rick H. on here or at his site at http://ricktheprobateguy.com/. Although, I know he does not recommend probate deals for beginners, and instead suggests learning the in's and out of a standard deal with sellers who have a clear motivation. Once you learn the "wax on, wax off" technique, then you can expand to flying ninja kicks... if that makes any sense ;-)

I would highly suggest starting with preforeclosures, as there are literally HUNDREDS of them within a 100 mile radius from you. These sellers are already 3 months behind on their mortgage, and only have roughly another 3 months before they lose the property for good. Preforeclosure usually happens due to death, illness, job loss or divorce, so typically it's crippled their ability to bring the loan current. This is how I did most of my business as a flipper, and also how I've gotten plenty of listings as an agent. It's extremely straightforward like a typical sale and doesn't add in the extra layer of complication like you'll get with probate. Just my 2 cents.

But try reaching out to Rick for sure, perhaps he can steer you in the right direction. Best of luck!

2 Votes

Hi @Marcus Jefferson! Great question!

Since you're just starting out, you probably don't have the resources or knowledge to pull off a #1 ranked website for "sell my home Oakland"... but what you don't have in resources, you can make up for in time and effort. Just like @Lucas Machado in his immense effort online, you have to be willing to go the extra mile and do what other wholesalers won't. That's the only way to spread yourself from the pack. Here are a few examples that I can think of for a new wholesaler in your situation:

Preforeclosures: There are HUNDREDS of preforeclosures per month within a 100-mile radius from you. This gives you more leads than you can handle, especially if you go back and pull all the people who defaulted last month and the month before that. You can often get these straight from the County Recorder's website, and then you simply cross-reference the names with tax records at the county assessor's office to get the property address. But there are sites that will do this for you too. Go straight to the owner's house and knock on the door. Foreclosure usually happens because of death, illness, job loss or divorce and cripples the homeowner's ability to make mortgage payments. They might be in a tight bind and be willing to sell the property below market value, and you can make your money in between.
Vacant/Non-Owner Occupied: If a home is sitting vacant the owner may be willing to sell it quickly just to get rid of it. They could have moved away, inherited, or just not care about it anymore or aren't willing to rent it. You can door knock with these too (but you'll have to do it at the tax mailing address) or you could simply send a letter. At that point it's merely a numbers game. Talk to enough homeowners and you'll soon find someone willing to sell at a wholesale price, especially if the owner lives out of state.
Driving for Dollars: The last method is to simply drive around and look for homes in disrepair... things like uncut grass, broken down cars in the driveway, or properties that could really use a fresh coat of paint. These indicate that the owner doesn't have the money to fix these problems, and that might mean they are in a situation where selling their home might solve a lot of money problems for them. You can either send them a letter, or go up and knock.

Now, you may or may not have been aware of all these strategies, but what's really important is that the point I'm emphasizing is HUSTLE. Not that you aren't doing that already, I don't know, but what I do know is that doing the above activities 40 hours a week will practically guarantee you success.

While other wholesalers are relaxing at home and waiting for a deal to fall into their lap, you'll be out making things happen. I'm a firm believer that if you want success, you have to go out and get it, and the only real way I see having success with wholesaling nowadays is to get out their and meet property seller's face-to-face. Hope this helps and best of luck!

1 Vote

Hi @Zo A.! Great question!

OUT OF STATE INVESTING

For out of state investing, I would highly recommend using a turn-key investment property provider. Investing "turn-key" typically means that a third-party investor finds the property, rehabs it, rents it out, then sells it to you and offers property management services. All you really need to do then is "turn the key" and buy it.

The challenge about out of state investing is sourcing deals, hiring a local rehab team, and market knowledge. These can be huge obstacles, especially for a new investor. An oft-repeated piece of advice is "invest where you know" and when you can't do that, your best option it to invest turn-key and let another investor do all the hard work for you.

The main challenge is working with a turn-key provider is finding someone that you can trust. You'll find some horror stories here on the forums of investors who didn't vet their providers enough and failed on their due diligence, and paid a costly price for it.

Luckily, our own member Jay Hinrichs runs a site called Turnkey-Reviews.com where you can read reviews other investors have posted on various turnkey-providers. This will help you avoid many of the mistakes previous investors have made and choose a trustworthy and successful provider.

Here are some articles on the subject that will help you get started in the right direction:

LOCAL INVESTING

The good news is that there are plenty of local investment opportunities available in the Central Valley and Sacramento, where are all within a couple hours drive. And it's not going to cost you an arm and a leg either. I work with a lot of investors in the Bay Area who have the same goals as you, and I frequently recommend Sacramento as the best option for Northern California Investors. And here's why:

Name another market set to have 7.2% appreciation and 10% rental growth this year... you can't. And that's why it's a HUGE opportunity for local investors to ride the roller-coaster California market and experience 12-36 months of appreciation and then sell at the top of the market. Sit on those profits for a couple years and hopefully you'll be able to pick up homes for pennies on the dollar next time the market bottoms out. Or if the cash flow is good enough, hold onto it. Either way you win.

My advice would be to spend the month of January educating yourself on turnkey-providers and the markets they operate in, and also learn about the local opportunities available as well. Then you'll know which option offers you the best possible opportunity and matches well with your investing goals. Then you can take action and purchase your first investment property, cash flow, and win!

4 Votes

Hi @Robert Richards! Welcome to the Sacramento Bigger Pockets Forum!

My advice would be to attend them all. Even go so far as to attend all the meetups in Northern California within an hour or two's drive. As a wholesaler, the more investors you can pitch properties to the better. Introduce yourself as a wholesaler and learn what kind of properties they're looking to invest in. You'll want to get specifics such as price ranges, locations, amount of rehab required, etc. Then when properties come along that match that criteria, you can notify those investors.

One part of building your business is mastering your acquisition strategy for attaining more properties. Essentially, increasing the inventory you have to sell. The second part of your business is mastering your exit strategy for each property, and maximizing your profit. Having a large list of investors to market your properties to will increase your chances of a fast sale, and possibly even lead to a situation of multiple offers that increase the amount you can sell the property for, and hence, increase your profits.

The second thing you can do at these meetings is start asking for referrals for real estate attorneys. What's most important to you in hiring an attorney is knowing that they are fully experienced in the type of transactions you are completing, and nothing will represent this ability more than a stable of satisfied clients. While they might not be in attendance at the REIA meetings you'll go to, their other clients will be. And once you hear a name mentioned enough times, you'll have quickly found the perfect person for the job. Best of luck!

2 Votes

Sacramento, California

@Patrick Boutin -- Nothing can substitute for visiting the property live in person. Google maps just helps you get a feel for the property and neighborhood before spending the time to drive out there. If you don't like it on Google Maps, you certainly aren't going to like it in person. It's an easy way to virtually drive the neighborhood as a snapshot in time and give you a rough idea of what it's like.

But, the best thing to do is drive the neighborhood. After you've looked around on the surrounding streets for a bit, stop outside near the property and just sit in your car for 15 mins and see what & who comes by. Roll the window down to hear what's going on in the neighborhood. See the sights, smell the smell, and hear the sounds. You can even do this after different times of day (particularly night time) to really get a sense of the neighborhood.

0 Votes

@Rommel Pascual -- Great question! Let me see if I can help:

Negotiating the purchase of new construction is a little different than negotiating the sale of existing housing. The first thing to consider is that the typical sales strategy with a new development is to sell the first set of units at lower prices to help build momentum and amend prices up as successful sales help build buyer-confidence.

Depending upon market conditions, the total number of units in the development, and various other factors and variables, the difference between what the first round of buyers pay and the second round can be quite large.

The first round of buyers are taking the most risk, and the builder is usually willing to deal a little to get the ball rolling, and so they're often more flexible and willing to negotiate. But towards the end, they have more leverage and less willing to negotiate simply because of all the previous sales as evidence of demand for their product.

The thing to remember about builders is that once they sell you a home, they're still in the real estate game with more inventory to sell to the next buyer. So they're much more concerned about protecting price. If they give you a deal, then the next guy sees it and he wants a deal, and so on and so on until it costs the builder tens of thousands in potential profits. A traditional seller is one-and-done and doesn't have to worry about how the sale of their home affects other properties.

And so, if you're going to get a deal, it's likely going to be in the form of concessions or "off-deed" items that don't directly impact the publicly recorded final sales price. Things like paying all transfer taxes, recording fees, escrow charges, unit improvements, maybe even moving expenses or interest rate buy-downs.

Another strategy is to come in near the end of the development and pick up one of the last few units by low-balling the price. The builder may be eager to close out and move onto the next project, and so may offer a rebate or accept a lower offer just to get the development finished. Although, there's likely a reason why it's the last unit... it may not have the best features or lot placement, and that's why everyone else passed it up. But it's also the reason you can get a great deal on it.

But the last thing to understand is that the market determines your ability to negotiate more than anything else. And overall right now California is a seller's market. We're extremely low inventory and there are very few homes for sale compared to the number of people wanting to buy them. Nearly every deal is a multi-offer scenario, so the market is really in favor of the seller since they can easily turn to the next guy and sell their home for full price.

Currently we're experiencing a mass exodus from the Bay Area, and tens of thousands of people are leaving for surrounding counties because housing is so much cheaper. Boomers, Gen-Xer's and Millenials alike all see how there money will go so much further if they're willing to make the commute back to the bay from a cheaper area nearby. This is bringing a lot of added competition, especially from people who just sold their home in the Bay Area and are coming with all-cash or an extremely large down payment.

So in sum, in will be tough, but there are a few things that can be done, even a few that I didn't mention here. Best of luck!

@Chris Mason -- I LOL'd... hard.

2 Votes

Sacramento, California

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All Forum Posts by: Wes Blackwell

Wes Blackwell has started 34 posts and replied 715 times.

Post: Millennial Migration to Sacramento 2017 - Here Comes the Rush!

Post: Looking to get unstuck in the SF Bay Area

Post: New Motivated Member from Northern California (Sacramento)

Post: Searching for an attorney

Post: Probate Lists in California

Post: Best way to find seller leads

Post: Investing Out of State

Post: Sacramento / Elk Grove Wholesalers

Post: Porperty in Sacramento, CA

Post: Looking for a Real Estate Agent