4 bedroom houses can be purchased for $150K. How much can it be rented to say, UC Merced students? Is it a good investment?

Asked by Bargain_hunter, South San Francisco, CA Thu Sep 9, 2010

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LINDA MOORE, Agent, Las Vegas, NV
Thu Dec 1, 2011
Currently (Nov 2011) there are Merced sold comps at $14 to $30 per sq foot. Of course these are bad parts of town but I do believe sold comp values will continue to drop through 2012. Would only pay UNDER $60/sq ft for the best parts of town and UNDER $35/sq ft for older areas in decent locations. Assume all will need cash for repairs and restoration.

Sure, there are going to be local families that will pay $100/sq ft to be in an older area, but this is the exception and not what any investor would pay. If you can't cash flow $300-$500/month off your investment property you have paid too much. Offer less.
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LINDA MOORE, Agent, Las Vegas, NV
Thu Dec 1, 2011
Current Merced CA sold comp values are running under $60/sq ft for nearly new homes near UC Merced. Older homes are under $40/sq ft. Sure, you will see listings way above that and a few higher sales, but the old entrenched Merced Realtors are some of the main investors now and this is what they will pay. The best deals are never seen in MLS. MLS is full of property priced at double or more than their true market value. Also be aware many of the older properties have many code violations and non working HVAC systems or unpermitted construction, which can be a real nightmare.

Many areas of Merced are rife with drug users/sellers/meth labs and people on assistance. The pool of potential tenants is bottom of the barrel.

I am a retired California Certified General Appraiser and licensed California General Contractor and have been investing in real estate since 1965. Have also been silent owner in 2 real estate companies. I know real estate values. I have property in Merced, so I do know the area and investment conditions.
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LINDA MOORE, Agent, Las Vegas, NV
Thu Dec 1, 2011
In Merced LOCATION is everything. You need to understand the town. Best rents are the nearly new homes near UC Merced (E of Yosemite & N of G St or N of N Gardner/Parsons & S of R St). A 4 bdrm in that newer area goes for $1100-1200/mo. People ask higher, but students will rent on 1 yr lease and move out by summer leaving it unrentable for 3 months. A property can sit 3 months before getting rented. And any rents above $800/mo in Merced are out of reach of most. So, you will get students sharing a large home and they can trash it in one month. The home MUST be on the UC Merced free bus route (CatTracks http://cattracks.org/). If you cannot easily walk to Cat Tracks the location is bad. Absolutely stay North of Bear Creek. And check the Merced Police Department Crime Map, very informative: http://www.cityofmerced.org/depts/police/online_crime_mapping.asp

If you are an out of area investor it is stupid to invest in Merced. The realtors/property managers can rob you blind. It's nothing for an out of area owner to be forced to spent thousands repairing a house each time it's re-rented. The property managers love this and make tons of money off non-locals.

Merced is not the place to invest. Their market values may take 20 years to recover. Way too many out of area owners have walked from their investments and still are in 2011.
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Loan Do, Agent, Oceanside, CA
Thu Sep 9, 2010
rental websites in the local area give you an idea what the going rate is. Your rent should cover all your expenses to break even unless you are willing to pay out of pocket to cover any shortage and pick up as the market turns and your equity increases. When dealing with students, you need to be prepared for the summer months when the students leave, hence a frequent turn over.
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