Any advice on investment property in zip code 95835 and 95757?

Asked by Judy, Cupertino, CA Fri Sep 28, 2012

Hello everyone,

My husband and I are planning to go to Sacramento next Monday and look at neighborhoods around zip code 95835 and 95757. Our friend bought investment houses in those two areas and recommand to us. We want to start with a SFR that would be easy to rent and one that is fairly new construction (i.e. built after 2005). Our budget is under $250k.

Any advice on investment proptertis in zip code 95385 and 95757.

Thank you!!

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James Tan’s answer
James Tan, Agent, elk grove, CA
Sat Sep 29, 2012
I think, you already have a lot of good advice from my esteemed colleagues.
Just a note, in 95757 most newer homes have considerable mello-roos. This could add up to $2k or more in property taxes per year. In Elk Grove, the schools are rated 9/10 statewide, this is not the case for all the schools in 95835. The mello-roos would apply in 95835 as well, but I believe to a lesser extent.

These are hot markets with low inventory, so you have to act fast. There will be multiple offers on pretty much all desirable listings. I live and work in Elk Grove, so if you have any questions, please feel free to call me. I also have investment properties so I understand your position as a landlord.

Best of luck,

James Tan
916 230 5250
1 vote
Charles Ruth, , Sacramento, CA
Sat Sep 29, 2012
Both areas have comparable rents. I like the areas around 95757 over 95835 as a personal preference. 95835 has more airplane traffic too, but most people around here are used to that. You also might have levee issues with your insurance company in the 95835 area. It would also be important to look into special bonds or assessments some of these neighborhoods have.

I know a few other areas that are nearby that are also a good place to look for investment properties. Are you strictly interested in these areas as your farm area?

I will pull up some listing this weekend and see if I can find you some good streets to look at. Do you know how much your mortgage will be approximately, and the interest rate? This would help me be able to determine a little better the cash flow potential on listings. Also, are you looking to spend under 250k as just the purchase price then fix up, or 250k total to purchase and make ready to market as rental?

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0 votes
Jim Walker, Agent, Carmichael, CA
Fri Sep 28, 2012
Some of the numbers that are important are 1 Cap rate (capitalization rate). 2 ROI - (return on investment) 2. Cash flow (positive, negative or neutral ) 4 Expense to income ratio 5 Debt Service ratio.

Zip code number comes in at about #41 in importance. So while all these nice agents answered nicely, any one of them deserve your business.

My advice, though not so polite, is that you are asking the wrong question when asking if such and such a zip code is a good investment. The zip code matters very little if the five numbers in my first paragraph are good - or, if they are not good.
0 votes
Great advice!
Flag Sun Sep 30, 2012
Maurice Thom…, Agent, Mathers, CA
Fri Sep 28, 2012
They are both fast moving markets so be aggressive. If you are in the market longer than you thought, just take a deep breath and continue to stay aggressive.
0 votes
Stewart Guth…, Other Pro, Sacramento, CA
Fri Sep 28, 2012
Hello Judy,

We manage a number of properties in both those zips and investors have seen excellent results in both.

We have found that, all things being equal, prospective tenants favor newer homes/neighborhoods over an equivalent sized property in a more established neighborhood, so your target zip codes are good choices from that perspective. Newer properties are easier from a maintenance standpoint as well.

I think that you will find a little more balance in the construction in Natomas with a blend of traditional single family, zero lot-line and town home construction. 95757 in Elk Grove has all of the above, but seems much more weighted toward traditional single family homes.

All things being equal, a property in 95757 will likely fetch a higher rent as the positive reputation of Elk Grove schools seems to be pretty widely known. However, it will probably cost more as well, (we don't buy or sell properties, just manage them).

In my opinion, the sweet spot in the market is a four bedroom home, with three being the minimum number of rooms I would recommend for an investment property. There is a considerable jump in rental price between a three and a four bedroom and a much smaller jump between a four and a five. Tenants will take a fifth bedroom if it is the same price or not much more than the four, but very few actually need the fifth bedroom. Finally, given a choice, I would avoid swimming pools. They increase expenses while fetching little or nothing in terms of increased rent. They can shorten vacancy times, but I believe the additional costs outweigh the benefits.

I suspect you have an agent already, but if you need a referral, I know a couple that have done a lot of business with investors in both areas. Of course, if you would like help renting out or managing the property over the long term, we'd love to talk with you. Good luck!

Stewart Guthrie
(916) 452-5000
0 votes
We don't have an agent yet. You can send the referal to me. Thanks.
Flag Fri Sep 28, 2012
Sue Archer R…, Agent, Palm Harbor, FL
Fri Sep 28, 2012
Investment properties can be selected for a variety of preferences. For single family homes, I'd consider ones on the smaller side, personally. In my own experience, rents run on a gross average of about $1/sq foot until you get above 1600 square feet. Larger homes are most likely going to have larger family sizes and more traffic use on the property. I also prefer homes that show more 'durability' in their features, such as the type of flooring, amenities and landscaping. Last, I prefer not to have the liability of a pool on properties that I would invest in.

But that's MY personal preference. You need to make that decision for yourself as to the type of homes you want to invest in.

If I were buying more than one, and not in the local area, I might still buy in the same general area and work with one property manager, but someone else might prefer to have different mgmt companies and try out different areas. ...just something to think about. This is a big investment and should be thought out carefully how you will maintain it,manage it and work with this investment for many years to come. While you can cashflow all day, you'd like to get property that isn't a headache every month.
0 votes
Mike Schubert, Agent, Sacramento, CA
Fri Sep 28, 2012
Good opportunities in both zip codes. Pay attention to HOA fees as well as Mello Roos, both can cut into your net cash flow and need to be considered in advance of an offer. Both areas are desirable for renters and you must research going rents in both areas.

Mike Schubert
Better Homes & Gardens
(916) 799-8300
DRE# 01894768
0 votes
Jeffery Kess…, , Sacramento County, CA
Fri Sep 28, 2012
Hello Judy,

I work with Lyon Real Estate in Natomas (95835). I would be more that happy to work with you and your husband to find properties in this area.

If you give me a call or email me I can send you a list of the properties that meet your needs.

Jeff Kessel
Lyon Real Estate
CA DRE # 01920421
0 votes
Michael Cheng, Agent, San Jose, CA
Fri Sep 28, 2012
I've got an investment property in Elk Grove also. As for advice, it's basically the same for all single family investment properties.

Make sure you do a thorough inspection and verify that you'll get your required returns from the rent. Many of the new homes in the area were built by large home builders with lower quality production methods. Look for major cracks and leaks.
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