What are good areas near Sacramento for investment property?

Asked by Reeve Yang, San Jose, CA Sat Mar 21, 2009

With positive cash flow with 20% down, and good potential for long time capital appreciation? We are professionals in mid 30's and want to buy an investment property in Sacramento area. Our budget is within $500,000. That would be great if some expert in local area could give suggestions about the area/zip. (Actually We need a good agent to pick up a good property for us actually, and we need consecutive property management service as well because we're living in San Jose). Thanks!

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18
WorldTraveler, Both Buyer And Seller, San Francisco, CA
Wed May 13, 2009
My plan as of right now is to only buy in neighborhoods where you can get good, long-term tenants. Then, have them mail in the rent directly to my bank. If anything breaks they call me and I sent people over for estimates. The tenant helps property manage by being reliable, and that cuts down my overall cost.

Ed - how do you get your hands on great deals for people? Investors in the bay area are clamoring for cash flow properties. Sac is not too far.
1 vote
WorldTraveler, Both Buyer And Seller, San Francisco, CA
Wed May 13, 2009
I wish it were that easy! Property managers are not fool proof. There are all kinds of property management scams too. My friends and I have all seen and experienced those.

Common property management scams:

a) Keep the rent and don't give to landlord
b) Make up bogus repairs and then get their "friends" to do them
c) Collect rent late or take a long time to send over, then blame tenant.

Finding a good property manager is no different than finding a good doctor, lawyer, or any one else. Recommendations are key. Track record and history.

I own/have owned 10+ investment properties in the past 3 years...
1 vote
Sarendar Bal, Agent, Mather Air Force Base, CA
Tue Dec 29, 2015
Are you still interested in investing in Sacramento?
0 votes
Randy Stoker, Agent, Carmichael, CA
Tue Feb 3, 2015
I have been a successful landlord with properties in the Foothill Farms area of Sacramento. The rent vs. price of house is reasonable. Long term tenants? That is based on individual circumstances as people normally move, marry, divorce and buy their own houses. I have uses Tiner Property Management for many years http://www.tiner.com/ so I can recommend their services.
0 votes
smita, Home Buyer, Folsom, CA
Wed Dec 24, 2014
I'm looking to buy investment property in Sacramento/Folsom area. Which is better area in terms of ROI?
0 votes
There are still investment properties in Sacramento area that you can find with positive cash flow. If you want to finance / leverage for higher cash on cash returns, I would need to know how much you are putting down. I have my own investment properties and have been successful. I am a real estate broker for past 12 years in Sacramento area. I can help to find a good investment property and in financing. email me at awrehomes@yahoo.com. http://www.awrehomes.com
Flag Tue Dec 29, 2015
Julia Barbic, Home Buyer, Oakland, CA
Tue Oct 23, 2012
I am an agent/property manager but I have also personally purchased 65 units in Sacramento over the past 3-4 years. I personally buy lower end properties for a higher return but that can come with more difficult management. You can go a little higher in price and make your job a little easier. $500,000 will go far in Sacramento so I think you picked a good area. Please call me if you would like advice. 831-359-1496.
0 votes
Freddy, Home Owner, Grass Valley, CA
Mon Aug 13, 2012
Don't know if you have already made your purchase, but Tiner Properties in the Sacramento Area is great to deal with. They are property managers of over 1,000 properties, as well as selling investment properties. They have incredible knowledge of the investment market, and which neighborhoods make the most effective investment. Hint - just because the price is low does NOT mean you want to buy in that neighborhood! Some areas look great on paper but can be nightmares.

Tiner enjoys a stellar reputation and is ethical and straightforward. I actually met them during a class unrelated to property sales or investment and was duly impressed with their integrity long before I realized what a large company they had. Now, I am even more impressed. Not often you find someone like that who actually listens to their clients and helps guide you into a decision that is the right one for you.
0 votes
Ed Favinger, Agent, Folsom, CA
Wed May 13, 2009
Reenu...

Then you want the "nice areas"... We do offer a "lease up only" management service, where we will find you a tenant, screen them properly and prepare all the papers for their lease and then turn it over to you from there.

If you purchase a "home protection" plan you'll have the same protections as you would on your own home... You know..you'd just call them and they'd send a vendor out... this would be good for "working parts" such as a stove... heater.. A/C... plumbing... You would only pay a "deductable"... Other items that aren't covered you could get estimates from various vendors.. and I can supply you with plenty of them that have done work not only for my clients but for me as well...

And... how do I get my hands on great deals for people...? I'm in the market and do this full time... If you want an idea of what kinds of Cash Flow investments are available here... go to my website at http://www.TheDuplexGuy.net and you'll find my blog there with 3 deals that recently sold... These properties had enough cash flow that they would pay for Property Management and Landscape Maint (which I urge you to pay for) and still give you a positive cash flow...!

Landscape Maint. is one area that I think many investors over look and is probably the one big thing that attracts good quality "long term" tenants..

If your property is well maintained and has a great curb appeal...? even in a down market you'll get great tenants. I've posted a blog about this months ago...

I hope this helps... if you'd like more information drop me a note at: favinger@rwnetwork.com
0 votes
Ed Favinger, Agent, Folsom, CA
Wed May 13, 2009
Yea... being a Landlord can be a pain... that's why you can hire a Property Manager and they can take that Saturday night phone call when the plumbing breaks...

If you are going to be an investor, you have to be aware of what is going on with your investment. Hiring a Property Manager is probably a good thing for you...

The best thing about this market is that cash flow is so good here now, that you can still get one that includes Property Management.

I hope this helps....

Make it a great day...
0 votes
WorldTraveler, Both Buyer And Seller, San Francisco, CA
Wed May 13, 2009
While all that is true, the banks don't know your personal situation. Being a landlord can be a pain in the butt, not just from the financial perspective.
0 votes
Ed Favinger, Agent, Folsom, CA
Tue May 12, 2009
Reenu...

There is always some risk when you buy any kind of investment...

The solution is to have a reserve... and the cash flow that you generate from these investments that are proposed below...? put them in a bank somewhere and maintain that reserve... Then..? When you get a vacancy.. you'll have funds ready to fix up to get your place "rent ready"... you need a roof..? you have the $$ ready...

Besides... The banks are going to require you to have some reserves when you make a purchase of an investment property...

They will not allow you to purchase something anymore if they don't think you can handle it...

I hope this helps...
0 votes
WorldTraveler, Both Buyer And Seller, San Francisco, CA
Tue May 12, 2009
The numbers Alex posted are good, but they only tell one side of the story. What about the downside and risk and liability of having 2 homes? If you don't have renters in them for a few months at a time, be sure to consider the liquid you will need. The mortgage payments don't stop.

Also, with more tenants come more headaches, things that can go wrong and break.

I would still do what he's suggesting (buy 2 instead of 1) but be sure to consider the risks involved in 2 vs. 1 (plus mortgage). Your risk exposure doubles when you have 2 homes to maintain.
0 votes
Tamara Dorirs, Agent, Carmichael, CA
Mon Mar 23, 2009
Hi Reeve,

It looks like several agents have provided you with the same good solid idea I would.

The only thing I would add to that is to question your price-range. If I were looking for investment properties, I am not sure I would spend that much on one property. With the prices the way they are now, you could buy two properties for $500,000 and thereby be more diversified. At a higher price, the rent is higher and thus may be more challenging to keep occupied.

When I work with investors I strive to find them a rental property in an owner-occupied area because those houses tend to hold their value and appreciate the most. The caveat to that is that we are now in a market where even our mostly owner occupied areas are experiencing foreclosures.

Your best bet, since you're out of town, is to call a few agents and speak to them on the phone. Besides competency, look for the best personality fit. This is someone who you'll need to trust to be looking out for your best interest while you and your wife are in San Jose. From that, set up a day to come to Sacramento and allow the agent you seem to click best with to show you some various neighborhoods/properties. You'll get a good idea of what area with be the best to invest and get you best ROI as well as long-term appreciation potential.

Best of luck!
Tamara Dorris
Web Reference:  http://InLoveWithSacto.tv
0 votes
Anna Boyd, Agent, El Dorado Hills, CA
Mon Mar 23, 2009
My favorites are the McKeon 4 Plexes. Built in the late 1960's. Many have been split up into invidivudal units, but many are sold as a whole also. Areas close to colleges - zip codes 95841, 95826. Also, in popular areas such as Roseville, Auburn. Rents are $750-$900 a month per unit.

I just did a check and there are non available in Roseville, Auburn. There's a couple of potential good deals as short sales. Sellers bought for over $500k - shortselling in the $200's.

There's a three non-McKeon 4 plexes for sale in Colfax on Pinetop and has on site management (for $310 per mo). Rents are $800 per unit on average and low vacancy. Prices range from $349k-$479k (no real reason for difference??)
Web Reference:  http://www.annaboyd.com
0 votes
Ed Favinger, Agent, Folsom, CA
Sun Mar 22, 2009
Good morning Reeve...

I used to live in San Jose years ago and can compare neighborhoods from where you are from to those here...

Since your budget is up to $500,000 my suggestion would be to look into a Duplex in a decent neighborhood. If you go to a couple of my websites here you'll get some other information... http://www.TheDuplexGuy.net and check out my blog at http://www.TheyCallMeMrEd.com where I post some "Cash Flow" figures for several properties there...

My "preferred" zips would include anything between Hwy 50 and Hwy 80 because they will compare very much like some of the areas you live in now... 95630 for example is Folsom and I would say that compares to the Almaden in San Jose... 95608, which is Carmichael would compare with parts of West San Jose, the Cambrian... etc... 95819 East Sac would compare well with either Willow Glen, parts of Santa Clara or Los Gatos/Saratoga... and when you say "Sacramento", we are more of a "region" so there are other nice towns to invest as well... Roseville, Rocklin, Granite Bay, El Dorado Hills, Cameron Park, Lincoln, Auburn.... I think you get the idea...

If you prefer single family homes, depending on the area you choose... you may not get as much cash flow... and when you have it vacant it's a 100% vacant.... However there will be a lot of homes up here that are only a few years old which will save you $$$ in the long run with minimal fix up.

As for property management....? we have you covered as well... go to http://www.haven-properties.com and you'll get a web page that has links to what we do.. and even some satisfied customers...

I hope this helps...

If you decide to come up here to look around... it would be my pleasure to give you, what I call, "The Camber of Commerce Tour" of the area so you will know the area well before you put your money down...

We'll look at the work centers.. some of the great amenities here such as Folsom Lake, the Sacramento River, some of the parks and shopping that we have in our area and of course some real estate...

Make it a great day....
0 votes
Erin, , South Lake Tahoe, CA
Sun Mar 22, 2009
Hi Reeve: If you are new to investing, I would suggest that you get yourself educated about real estate investing. If you don't have the time or the desire to get educated, then work with an agent who is educated about real estate investing.

The things your agent needs to know, is what investment value estimates are you hoping for and expecting? i.e., Capitalization Rate, Gross Rent Multiplier, Cash on Cash, Return of Investment and Return on Investment, cash flow expectations and expectations for appreciation. What do you want to expect for before tax cash flow and after tax cash flow.

What is a good investment to you and what is your exit strategy?

One of they ways I choose investment areas is standard market rents and inventory of rentals in that particular zip code. Look for an agent that knows these things.

One book that I found extremely informative is "The Millionaire Real Estate Investor" by Gary Keller.

Good luck and have fun.
Web Reference:  http://SoldByErin.net
0 votes
Alex Amaro, Agent, Sacramento, CA
Sun Mar 22, 2009
Reeve,
Good evening. Glad to see you are contemplating your future on a late Saturday evening! :-)
If your idea is to cash flow and have a long term investment, I would suggest that rather than looking at single family homes in the $500,000 range, that you look at homes valued much less or for multi-family properties. Here is my reasoning-
(I recently wrote a response here on Trulia to a question similar on investing, it can be found here ( http://www.trulia.com/voices/Home_Buying/I_have_seen_more_th… )
It basically says the following:
_______________
The beauty of real estate is the ability to leverage.
Let's look at an example assuming you have $50,000 cash right now:

Option 1: Buy 1 home for $50,000 cash. No mortgage. Rent is $750/month.
Rental income: $750/mo - $85/mo taxes & insurance. = about $665/month income

Option 2: Buy 2 homes for $50,000 each with $25,000 down payment on each.
(Loans assuming 25k @ 7% interest = $167/mo, 50 tax, 35 insurance = total about $250/mo)
House A: Value $50,000. Owe $25,000. Payments are $250/mo PITI. Rent is $750. Income= $500
House B: Value $50,000. Owe $25,000. Payments are $250/mo PITI. Rent is $750. Income= $500
Rental income: $1000

Ok so in option 2 you make $350 a month more income right? That isn't even the best part. We aren't sure when this market will completely rebound but historically homes do appreciate.
Year 2009: Option 1 - Value $50,000. Owe $0. You add $50,000 to your net worth
Option 2 - Value x 2 = $100,000. Owe $50,000. You still have $50,000 net worth.

But... let's skip ahead and assume that in about 10 years these homes are now worth $75,000 each. AND, for option 2 let's assume instead of you keeping all the rental income you added an extra $125/month to pay down principle for the next 10 years)
Year 2019: Option 1 - Value $75,000. Owe $0. You add $75,000 to your net worth.
Maybe rent has gone up and you are making $1000/month.
Option 2 - Value x 2 $150,000. Owe $0.00 because of the added principle payments!!!
(I actually calculated this by the way. The loan would be paid off in March 2019)
So NOW... your net worth from these homes has DOUBLED to $150,000. Both homes are free and clear AND you have a rental income of $2,000 per month! That's leverage. Nice little bonus to your retirement!
_____________
Now as you can see, i am a numbers guy. I know from numbers and experience that homes in the $500,000 price range are more difficult to keep tenants in because the rent would have to be much higher to cash flow and at this rental rate, in this foreclosure market, that renter could just buy a home.
In Summary, follow the two tried and true principles of real estate investing:
1.) Leverage your money.
2.) Cash flow.
The area you buy is important to an extent, but I would choose cash flow because your tenants can pay off your mortgage and as you can see by the numbers, your net worth will increase far greater.

I hope that helped give you some further insight.
I am here to answer more questions as you have them. Feel free to contact me directly if you prefer.
Have a great weekend.

Sincerely,
Alex Amaro
Web Reference:  http://www.AlexAmaro.com
0 votes
Paula Swayne, , Sacramento, CA
Sun Mar 22, 2009
Hi Reeve!
If you want a positive cash flow, look for minimally a duplex but even better, a fourplex. Otherwise it will be difficult to not have to feed it each month. As far as areas are concerned, I would be looking in the midtown area. It is up and coming, still affordable, and has fourplexes. The zip codes you should be looking in are 95811 and 95814 (most will be in 95814). You will find a lot of good buys via foreclosures in the outskirts of Laguna/Elk Grove, Natomas and West Sacramento, but these for the most part will be single family homes. These would be better for long term equity investment. Midtown Sacramento has a lot of homes built in the early 1900's, so you would want to find one that has been upgraded, as remodeling can get very expensive. Be very careful with property management companies...the largest isn't always the best.
Web Reference:  http://www.PaulaSwayne.com
0 votes
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