Rentals in 95630>Question Details

Nealer, Home Buyer in 95630

Are there good rental property investments in Folsom?

Asked by Nealer, 95630 Mon Mar 7, 2011

Hi, I've been looking into buying a home for over a year now (first time home buyer), but just haven't felt comfortable taking the plunge with the market continuing to decline. Recently I've began to think about getting a house with the intent to rent it out and generate positive cash flow. It seems like with the current Folsom prices, it's a pretty tight squeeze, but possible. Had a few questions I thought people may be able to help out with:
1) Besides closing costs, loan principle interest, property tax, utilities, HOA, mello roos, and maintenence, are there other hidden cost to purchasing a home that I need to take into account?
2) What size house makes the most profitable rental? 4 or 3 bedrooms? 1200 sq ft, 1600sq ft, 2000 sq ft?
3) How important is location? Are the "Bad" areas the best deals? Will they bring troublesome tenants?
4) Should I look outside of Folsom? (Rancho/Sac/Orangevale)?

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Purchasing rentals is always a good idea for growing real estate wealth. In purchasing a rental property there are different lending guidelines which may require you to have 6 months worth of resereves in the bank to cover you if the place isn't rented. You will also want to have "emergency account" in the event you need to do unexpected repairs.
If your main concern is the market hasn't bottomed out (no one can answer that for you) I am curious as to why you are looking for a rental. And, with interest rates at a low point it may be wise to consider purchasing a home you will live in to take advantage of those rates. Rates for investment properties are typically a bit higher. You really need to consult an accountant to see if that is the most tax effective way to invest your money at the current time.
As someone else mentioned you need to find a professional Realtor you feel you can trust and work with him/her to develop a plan to purchase property based on what your needs are. I own both rental property and a home in Folsom. The prices have gone down but I have every confidence they will rebound quicker than some of the other areas. However, El Dorado Hills, Rancho Cordova, Fair Oaks and some of the other areas are nice areas that will come back as well.
Location, price and your overall goal shoudl dictate where and if you purchase rental property vs. a personal home.
Denise Aquila
Alain Pinel Realtors
CA DRE #01143335
916-293-2930
0 votes Thank Flag Link Tue Mar 8, 2011
Nealer, you have recieved some excellent advice from these local agents. Since you have been on the fence for a year, it sounds like you have not selected an agent to keep you apprised of the market nor put a plan in place to achieve your real estate goal.

Our interest rates are fantastic. No one can predict the bottom of the market. There are trends which give us a heads up. I suggest you contact two or three of one of these agents, and meet with them in person. Then hire ONE to work for you. If you are also looking in other areas, have this agent help select a team for you. With the help of your local agent and any agent outside the area, your team of experts will communicate with each other and you and ultimately, you will be so informed that you are compelled to jump off the fence into real estate ownership.

Best of luck to you.
Web Reference: http://terrivellios.com
0 votes Thank Flag Link Tue Mar 8, 2011
Hello,
There are great rental properties in Folsom.
As Ed states below - the more doors you have the more cash flow you will have.
Duplexes are a great idea...and also very rare in Folsom.

With that said, most of my investors have found that they prefer 3 bedroom 2 bath homes,
if buying a single family residence.

Ultimately, you need to decide who you want to attract.
* Small families
* Professionals
* Executive rentals

Location is important and will depend on your targeted renter.
Small families - close to schools and parks
Professionals - might want easy access to freeways and shopping or running trails
Executive rentals - upscale and private areas

Explore all the neighboring locations. Then decide how far you want to travel to see your properties weekly/monthly, etc. Do you want a location you can drive by on the way home or make a specific trip to get to the home?

Please let me know if you have any questions.
Folsom has many great homes right now for rentals in ALL price ranges.
**I would stay away from those with HOA fees for the best cash flow.

Michele Peterson
Keller Williams Realty
(916) 743-5934
CallMichelePeterson@gmail.com
0 votes Thank Flag Link Tue Mar 8, 2011
Nealer

If you are serious about looking for a multi-family to live in... don't be afraid to look at Roseville, Carmichael, Fair Oaks, Orangevale and El Dorado Hills. I know a guy that is going to sell some duplexes that sit up on the hill just above the Purple Place off of Green Valley Road for example.

They will cash flow much better than a single family home if you decide to move out of it. If you are a single guy I think this is a great way to go starting out.

Make it a great day...
0 votes Thank Flag Link Tue Mar 8, 2011
Thanks for all the great responses!

I have not ruled out living in the home myself. I was initially planning on living in the home and then renting out one or two of the rooms, but I feel like renting the entire house would bring in more money. My main concern is that, should I decide to move away from Folsom in a few years, I don't want to have a house that's going to require me to pour money into it to keep my payment afloat. I want to make sure the house I buy is able to at least sustain itself. As long as I can guarantee that, I won't have to worry if the market takes longer than expected to recover.

I do like the idea of a multi family residence, however it seems that not many were built in Folsom. And I'd also have to get one in a slightly cheaper area, as I'm trying to keep my budget under 300K.
0 votes Thank Flag Link Mon Mar 7, 2011
Nealer,

Whether you are buying your first home or an investment property in Folsom, I don't think you will see much more of a decline for the smaller homes here in Folsom. As for location, not really any "bad" areas of Folsom. Its a matter of "location". Don't just buy a home because its seems like a good price. As always, whether rental or home, no busy streets, try to avoid those power lines etc. A home that is 3bed/2ba is good, 4/2 even better, or 3/2 with a 3 car garage. Lots of different options that could increase your desirability. If it is a rental, I would try to avoid homes with pools because of liability. If you can get a home 10 years or newer that is best, but sometimes finances don't allow that. If you really don't want to buy a home to live in, perhaps you should consider buying a duplex either in Folsom or surrounding areas. I like Fair Oaks, Orangevale, Carmichael, Roseville or Rocklin, and some parts of Sacramento.

I would like to point out, that your concern about declining market is the same problem whether buying your own home or a rental.

Do try to take advantage of this market, rental or your own home!

Mechelle Gooch
Movin'...So You Can
Web Reference: http://www.FolsomCorner.com
0 votes Thank Flag Link Mon Mar 7, 2011
Nealer...

First of all, are you aware that as a first time buyer you will get a better deal financially if you live in the property. You can get a low down FHA loan for an "owner occupied" type of deal. If you plan on purchasing a home as investment to rent out, then the required down payment is 25% of the Sales Price.

Single Family homes are probably not going to really "pencil" out in Folsom because they are an amenity type of property. However with that said... the rental market is pretty good not just in Folsom but other areas as well.

You've pretty well have it down regarding all the costs... except for the initial fix up...and they all need "fix up"..

My rule of thumb is that you will need something between $7,500 - $10,000 to really fix up a place to get top $$$ for rents. If you can do that work yourself then you'll be able to save some costs.

Rentals seem to go quick if they are in nice shape. For example we manage a condo over there by the Raley's off of East Natomas and didn't have much trouble finding a tenant at $1,300 for a large 2 bedroom 2 bath, 2 car garage unit. We just put a 3 bedroom home on the rental market that is not quite 1500 sq ft that had quite a few showings..It's been updated quite a bit and we're asking $1,700 with the tenant paying the Folsom Utilities and the owner taking care of the landscape maintenance..

We already have one application on it.

If you want good tenants, you must start with a property in good condition.

I could go on.. but let me leave you with a question...or maybe a suggestion...

Have you ever thought of buying a nice duplex, living in one side and renting the other....? This would be a neat investment for you as a first time buyer...!

I wrote about this on my blog a while back. Click the link below here for more information

http://bit.ly/A-1st-time-Buyer-idea

There's a video in there of a property that has since sold and I've got cash flow numbers that show you how cheap it would be to live in it.

By the way... You can buy this kind of property with the same kind of FHA loan as a single family home. And lastly... you don't have to live there forever either. You can build up some equity in this property, save some money for a down payment on another home.

A young attorney bought a Carmichael Duplex I listed a couple of years ago and still lives there... he got in there with 3.5% down and the seller paying his closing costs.

Anyway... I think it's a neat idea although I know most 1st time buyers want a single family home.

I hope this helps...

Make it a Great Day...!
0 votes Thank Flag Link Mon Mar 7, 2011
Hi Nealer,
I think Mati makes some really great points - best of all being that your choices need to begin with your particular financial scenario.Renting out homes is a business, so you need to make sure it is cash positive and doesn't suck you dry. Getting a feeling for what your month to month costs are and comparing that to what you can rent the home for is the best place to start. Are you working with a mortgage lender? They can give an idea on the differences between loans for a personal residence and an income property (interest rates are generally a bit higher). A good place to check rental rates is Craigslist. It usually gives you a pretty good idea of what people are willing to pay for different homes. Another thought on Craigslist - it's also a great place to find tenants. And to keep costs low, you could have a maintenance company, rather than property management company, take care of any issues that may occur once your tenant is in the home.

Other good rental areas include Fair Oaks, Orangevale, and Carmichael. You may be able to get a home for less expensive and rent for approximately the same.

My question to you: Why not purchase a home for yourself? With low interest rates and great deals, you can get an excellent starter home that you may not be able to get in a few years. Or, alternatively, what about purchasing a duplex? You could live in one side, rent out the other. Then you own your home (no more rent!), and be making money from your closely watched tenant.

If you have further questions or want other ideas (and a fantastic lender) I'd love to chat.

Happy house hunting!
Web Reference: http://www.morganlarson.com
0 votes Thank Flag Link Mon Mar 7, 2011
I personally think you can get more for your money in Sacramento, Roseville, and Rocklin. We bought our rental in Sacramento and now thinking about buying a newer home in the Roseville/Rocklin area. My clients and I usually take a look at the neighborhood to see if the neighbors are taking care of their home. With the prices as low as they are, you definitely have a choice. As far as timing... Warren Buffett says:


Billionaire Warren Buffett’s Third-Best Investment
By Dr. Steve Sjuggerud
Thursday, March 3, 2011

“All things considered, the third-best investment I ever made was the purchase of my home.“

Billionaire Warren Buffett said that in his annual letter to shareholders over the weekend.

Buffett is bullish on housing…

“Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates,” he wrote.

Now is the best time in American history to buy a house.
Home prices have crashed more than at any time in our lifetimes. And mortgage rates recently hit all-time lows. Houses are more affordable than ever.

Things are getting Less Bad. The recession is over. Housing starts bottomed, and the supply of new homes on the market peaked. Homebuilders like Toll Brothers are “back to growing,” and my home inspector friend is “swamped” with business.

If you can buy a house, now is the time – the best time in history. While prices may not soar immediately, I believe we’re seeing the lows RIGHT NOW.

Last week, I thought I was standing alone, saying this. But after Warren Buffett’s annual letter came out over the weekend, it appears I have company… The man who is arguably the greatest investor in history agrees with me about housing.

Homebuilding is cyclical. And I believe we’ve just finished the worst of this down cycle – which is the worst ever seen in our lifetimes, and likely the worst we will ever see. Now comes the upturn. Get in early… get in now.

It’s the best time in history to buy a house. And over the weekend, the world’s best investor agreed.

You can listen to your neighbors, the government, or the news media complain about how terrible housing is. Or you can listen to the advice of the best investor in history (Buffett).

Who do you think has a better chance of being right?

U.S. housing is a fantastic deal right now. If there’s any way for you to take advantage of it, you must.

P.S. Buffett said buying his home was the third-best investment he ever made… But what did he say were his best two investments? “Wedding rings.”



Good Luck,

Michelle Thompson
Lyon El Dorado Hills
0 votes Thank Flag Link Mon Mar 7, 2011
Folsom has many various areas and some great deals. Two of my Investors have purchased in Folsom - their strategy was to purchase 3+/2+ at least 1800 square feet and 10 years or newer. They did put enough money down to make it cash flow with the loans options available to them. Understanding 'your' Loan Options are a critical step for all purchases. For example - there is Self-Directed IRA with loan option most people don't know anything about, but the wealthy have been using since 1974.
My clients are very familiar with Folsom and know it has maintained it's value fairly well compared to other communities. Roseville and El Dorado Hills are two other areas my Investors like - but they buy a little higher than normal Investor and also intend to get a higher return on their investments in the future. That being said every Investor has a different strategy and set of numbers that has to make sense for 'them'.
For all your specific questions you listed, your best source of data will come from a great Property Management Company. For additional fees - I would add property management fees about 8% of the monthly rent . Get their professional opinion on the rental market and expectations. Renters have many rights, I HIGHLY recommend using a great property management company! For the purchase - It's easy to get an estimated Net Sheet to see what your costs will be from a title company.
With all good plans you want to include an "Exit Strategy" - understand all your risks and how to mitigate them. Best thing is to get educated by professionals who can meet 'YOUR' requirements.
It's a great time to buy! Yes the market may still go down or it could start going back up - no doubt change will happen, but don't let it paralyze you! Hope that helps - feel free to contact me to discuss further.
0 votes Thank Flag Link Mon Mar 7, 2011
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