Author Topic: Sacramento, California  (Read 6281 times)

Joel

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Sacramento, California
« on: September 05, 2014, 10:28:15 PM »
Does anyone have any real estate investments in this area?

Sdsailing

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Re: Sacramento, California
« Reply #1 on: September 07, 2014, 04:31:01 PM »

Yes.

arebelspy

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Re: Sacramento, California
« Reply #2 on: September 08, 2014, 03:41:21 PM »

Yes.

Heh. I laughed, but I imagine OP's reaction to be:


Joel, you may want to post more specific questions.  ;)
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Joel

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Re: Sacramento, California
« Reply #3 on: September 08, 2014, 06:36:15 PM »
The lack of response is indicative of what I was expecting. I can't find anything anywhere near the rents getting 1% of the purchase price, let alone the 2% that many suggest. And I have a very hard time starting to invest in real estate without being able to at least see my first investment.

Does anyone have any real estate investments in the Sacramento area?
Have you been able to successfully get rents equal to > 1% of the purchase price?
What about areas within 2-3 hours of Sacramento?

I've personally not found anything at all.

waltworks

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Re: Sacramento, California
« Reply #4 on: September 08, 2014, 06:49:49 PM »
Sounds like you need to either look further afield or invest in something other than RE.

-W

Sdsailing

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Re: Sacramento, California
« Reply #5 on: September 08, 2014, 07:01:19 PM »

I have responded to the op in detail privately.

Regarding the new question, I have heard Nevada City, but those are also people with pre existing property.

Brief summary: Sacramento real estate has been heavily run up in the last year and a half.

In general, CA real estate profits require appreciation, it is not a cash flow market, i.e. 45k properties that rent for 1.3k per month don't exist.   Nonetheless, you can make a fortune.

CanuckExpat

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Re: Sacramento, California
« Reply #6 on: September 29, 2014, 02:06:11 PM »
Check around bigger pockets, there are a few people who have made deals at around 1% rents, even with recent purchases, however it seems with the recently large amounts of appreciation, most people are counting on more appreciation for profits, not cashflow

Poorman

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Re: Sacramento, California
« Reply #7 on: September 29, 2014, 06:26:45 PM »
http://ochousingnews.com/ has a real estate search tool that I think is unique because it has Investor Filters:

Net Income
Cap Rate
Cash Flow
Cash Return
Flip Margin

In particular, I've used the Cash Return filter to find markets in California that still cashflow, and even some deals in expensive Orange County that meet the 1% rule (not many though).  The site compares estimated rents to cost of ownership to determine the cash return.  I usually search for 8% returns or higher.

malacca

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Re: Sacramento, California
« Reply #8 on: October 02, 2014, 11:57:22 PM »
You have to go to places that are not that popular with the glory investors looking for a tax right off.

Generally smaller cities are better. Sac may have some more run down places that might give decent returns.

I get 12% for regular rentals and 25% for furnished month to month corporate.

YMMV.

escolegrove

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Re: Sacramento, California
« Reply #9 on: October 04, 2014, 01:17:29 AM »
We buy in the Central Valley (Hanford/Lemoore area). We have class A properties but they don't rent for the 1%, 2% or 50% rules. Nonetheless I am still very happy with our investments. We also own in Charleston, SC where they meet the 1% + rule. The thing that makes me laugh is how high the price of taxes and insurance. My 150k house, 122k mortgage will be $690 for principle +interest and $550 for insurance+tax. Personally I am trying to buy as much as possible in California. While the numbers are slightly worse I would rather pay more for the house than have high insurance and tax. It also doesn't hurt that the houses appreciate more than inflation so you never "lose value" on your house. Just my opinion.

waltworks

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Re: Sacramento, California
« Reply #10 on: October 04, 2014, 10:50:29 AM »
What criteria do you use to evaluate your investment properties?

Just curious. I can see quibbling with the 1%/50% rules or bending them a little in certain situations, but if you are completely ignoring them, that says to me that you are just gambling on appreciation.

-W

csmith1521

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Re: Sacramento, California
« Reply #11 on: October 06, 2014, 04:12:35 PM »
Joel, I also live in the Sacramento area and have a hard time finding properties where the numbers make sense. I wouldn't be surprised though if there were a lot of deals made that never make it to MLS.

The idea of out of state investing scares me because I don't know much, but it's something I'm warming up to as a new investor with not a whole lot of capital.

escolegrove

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Re: Sacramento, California
« Reply #12 on: October 09, 2014, 05:04:39 PM »
We bought a $165k house that is 7 years old and rents for $1400. I love Central Valley because my insurance is .4% and taxes about 1.2% so I cash flow $450 a month. It is in a great area so we had no vacancy so far. We are able to self manage because this is class a real estate out her. This is with 0% down :) as it was our personal turned rental.

We are in contract to buy an out of state pure rental for $150k in Charleston. It will end about 10k with of work. So we will be all in at 160k. It will rent for approx $1600. That's 1%. On the other hand we will only clear $380 with 15% down since my taxes are over $4,000 and my instance is $1700.

That's why I truly look at earning based on cash investment.

Captain and Mrs Slow

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Re: Sacramento, California
« Reply #13 on: October 26, 2014, 12:40:30 PM »
I mentioned this elsewhere but the 12-15% rental yields that everyone keeps talking about strikes me as being massively out of whack with historical  norms (3-5%) I'm assuming that it's because the housing bust and credit crunch keeping buyers out of the market and thusly prices depressed or am I the one whose put of whack?

arebelspy

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Re: Sacramento, California
« Reply #14 on: October 26, 2014, 07:29:10 PM »
I mentioned this elsewhere but the 12-15% rental yields that everyone keeps talking about strikes me as being massively out of whack with historical  norms (3-5%) I'm assuming that it's because the housing bust and credit crunch keeping buyers out of the market and thusly prices depressed or am I the one whose put of whack?

What historical norms?  For when and where?

All real estate is local.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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Captain and Mrs Slow

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Re: Sacramento, California
« Reply #15 on: October 27, 2014, 02:16:08 AM »
In this case Iím referring to the fact that long term real estate follows the rate of inflation. There are periods where the returns are higher and periods where the returns are lower but they always return to the mean. In general I use the most commonly used, rates of returns e.g. Case Shiller index. Back to my original question, in researching this answer I came across this from MMM.

Quote
Person #4 may be the winner.. for now. In certain cities, US housing continues to be among the cheapest in the rich world when measured on a price-to-rent ratio. Thatís why my own next investment will probably be in another rental house. But note that Iím not selling stocks to do it Ė for me, that would be putting too many eggs in one basket.

So that does answer my question, right now RE in the US is dirt cheap (which is a bad thing but thatís an issue for another post). The problem is in a global forum like this people begin to think that is the norm, for example this quote from another thread.

Quote
4% or 0.34% seems way too low to cover expenses and risks for the rental agency.

In the case the poster is concerned that the yield that his is expecting (post crash house prices) are too low, but heís being influenced by the US situation.

So to rephrase my question.

If one is considering real estate (in America) what is a reasonable rate of return one should plan on?

Typically Iíd say 3-5%*

Hope this helps

Rob

*4% with a 20% downpayment would be in the break even range




arebelspy

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Re: Sacramento, California
« Reply #16 on: October 27, 2014, 07:09:27 AM »
In this case Iím referring to the fact that long term real estate follows the rate of inflation. There are periods where the returns are higher and periods where the returns are lower but they always return to the mean. In general I use the most commonly used, rates of returns e.g. Case Shiller index.
...
Typically Iíd say 3-5%*

Ah, but you're assuming appreciation is the only source of income.

Yes, I agree with you that long term housing should match inflation (returning 3-5% nominal).

But I'm hoping you collect rents as well, and that should add to your return, and by quite a bit if you've done it right.

If you haven't, and you're cash flow negative, hoping for 10-15% appreciation, at some point you'll be hurt quite badly.  Many were, last decade.  In general most of us on these forums don't recommend speculating for appreciation.

If one is considering real estate (in America) what is a reasonable rate of return one should plan on?

I personally shoot for a double digit return counting no appreciation whatsoever.

We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.