Home Buying in 95835>Question Details

Coloandi, Home Buyer in 95835

What areas of Sacramento would be good for investing in for rental property?

Asked by Coloandi, 95835 Thu Apr 22, 2010

My husband and I are going to be living in Sacramento for at least another 2.5 years for work and are interested in investing in real estate for rentaIs instead of renting we would either like to buy a home to live in and rent out later on when we move or buy a cheaper home (or 2) to rent out now and just stay where we are. If we do buy a home to live in for now, we would buy in the north natomas area, is this an area that would be easy for us to rent out later on, or would we be better off going with a cheaper home in another area? If so any decent areas in mind for rental property?

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The benefit of buying in the 95835 area is that the homes are newer and would require less maintenance than an older home in another area. Therefore, the cost of ownership would be lower over the long term. I don't know what the price range you're considering? If you choose to buy the property as your primary residence then convert it to an investment that would be best. The terms and conditions of financing would be the most favorable in that case. Then, if you have additional funds available perhaps a condo in a more well established area with a good school district or college nearby would be a consideration.
Web Reference: http://patricksoldit.net
1 vote Thank Flag Link Thu Apr 29, 2010
I don't think I've said this to Jim specifically, but I don't think I've read a post of his that I've disagreed with.
He takes ample time to expand on his thoughts of why this or that is the right thinking. I've been in the business 11 years and I can learn things from him!
Web Reference: http://www.annaboyd.com
1 vote Thank Flag Link Thu Apr 22, 2010
I'll go contrary here, not because any of the others were wrong. They were right, but there is always another point of view. First the $125,000 Price Cap... Well that is pretty limiting. Especially if you want to live in it for 2 to 3 years.

If your only thought is cash flow, yes cheaper is often better. However, if you eventually move away from the area and become an absentee landlord, the premium for the better neighborhood may be be worth the trade off in piece of mind about the property having good tenants, becoming vacant or vandalized. etc.

2nd. There are parts of North Natomas that are cheap, okay for owner occupants or renters, and not in the flood Zone.. Check out parts of 95838 that are north of Main. East of Carl Hansen Park Streets with names like Delta Leaf, Mint leaf, Copper Leaf, and Amber Leaf and Fire Leaf.. I would do the street address search *Leaf.

Drive that neighborhood. If you don't like it, then give up on finding any single family detached home under $125,000 that you would like.

4th; If you want to stay down near the magic $125,000 but want a better neighborhood, then think condo or townhouse. North Natomas is blessed with an ample abundance of resale condos right now. A competitive market to be sure, but you can win a bid with the biggest wallet.
1 vote Thank Flag Link Thu Apr 22, 2010
Jim Walker, Real Estate Pro in Carmichael, CA
MVP'08
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Hi Coloandi,
Most of the Investors I work with prefer to to stay away from Natomas because of the added cost of flood insurance. You can find out what flood zone a home is in before you make an offer. You will get better cash flow in areas like South Sacramento. Investors seem to target a minimum of 1% of the acquisition cost for rent and anything above that is considered good. It's not likely that you will get that return in Natomas. If you are going to consider moving there first then you may consider homes built between 2002 and 2006 - you will find the best values in Natomas, Elk Grove, and Anatolia - these areas were hit very hard with foreclosures with some homes losing 60% of their value or more. When investors think long term they usually focus on cash flow and buying two properties with better cash flow might make the most sense. If you are familiar with Excel I can send you my Investor Analysis - just plug in your assumptions and it calculates everything from ROI and to Debt Service Coverage if you are using a mortgage.
1 vote Thank Flag Link Thu Apr 22, 2010
Hi Coloandi,

With housing prices so low and money still so cheap (i.e. interest rates are low), you can buy a house about anywhere and rent it out. The key is you have to find a neighborhood that you and your hubby will be happy living for the next couple of years before you turn it into a rental. That said, the real key, in my humble opinion, is to pick an agent you trust and start exploring areas through investor-glasses. Virtually any area in Sacramento County is fair game for renting, so I would first consider where you feel most comfortable living.

While most people are saying housing prices will not rise for many, many years, I just had Howard Blum, an international economist, on an interview and he says in Sacramento housing prices are at their very lowest and will rise in the next 2 years. You can listen to the podcast if you like. Being educated is your best bet, so good for you for reaching out and asking questions! http://www.InLoveWithSacto.com.

Take care,
Tamara Dorris
Web Reference: http://www.buyinsacto.com
1 vote Thank Flag Link Thu Apr 22, 2010
Hi Coloandi: Natomas is a great place to live, but unless the purchase price is below $100,000 (which it isn't in that area), it doesn't pencil very well for an investment. I'm finding better figures for my investors in places like North and/or South Sacramento. If your goal is cash flow as it should be, great. Appreciation may not occur for 5 to 10 years, so you need to have a long-term exit strategy. Also, all cash offers are often times beating out offers for anyone who has financing unless they have more than 20% down. The Sacramento market in these price ranges is sizzling hot because investors know, now is the time to jump in.
Web Reference: http://SoldByErin.net
1 vote Thank Flag Link Thu Apr 22, 2010
Many investors are buying in Natomas right now, and I'm seeing a lot of all-cash transactions. Another good area is Lincoln. On one of my Lincoln short sale listings, I have above list-price offers, some of which are all cash and five buyers in a committed back-up position. The thing about Lincoln is the homes are a bit less expensive so the cash flow is greater. Of course, it's also a half hour to downtown. But so are some parts of Elk Grove, and investors are buying in Elk Grove, too.
1 vote Thank Flag Link Thu Apr 22, 2010
First, I'd bet a double diet Pepsi that in 2.5 years the prices will not climb enough to sell and make any real money after expenses. So if you are going to invest think 7 years minimum. There are some tax benefits but remember what you get today in tax benefits you pay for in the end.
Second, with a little homework you can figure out what rents are going for in any area (email me I can help) but for the most part a solid estimate is that if the home costs more than $150k it will not pencil. Based on current interest rates of a minimum of 6% (probably closer to 7%) for non-owner occupied it cost about $600 per month per $100k. I am sure you will get lot’s of opinions but I am conservative.
Having said all this, I would concentrate on lower end homes less than $125k (after repairs) and they will typically pencil, but they may not be want you want to live in? Be conservative and you will make money. Feel free to email any additional questions.
Web Reference: http://www.GalsterGroup.com
1 vote Thank Flag Link Thu Apr 22, 2010
I think this would be a great area to purchase a home now. The prices are just right and many of the areas homes are rentals. It is close to the freeway and more impotantly the airport.You picked a great tome to buy!
Web Reference: http://www.yourreguide.com
0 votes Thank Flag Link Thu Apr 22, 2010
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