Best Northern California Markets for Buy and Hold?

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Best Northern California Markets for Buy and Hold?

Dan P.
Lender · Benicia, CA · Member since 2015 · 33 posts · 8 votes

Hello everyone! I am looking to buy my first investment property within the next 12 months. I live in Vallejo in the SF bay area, and I know many will say to look out of state for better cash flow. 

While that could be something I see myself doing eventually, I'd like to start with a property that is close by. Vallejo, even being one of the most inexpensive cities in the bay area, seems relatively difficult to cash flow. Does anyone have recommendations on locations within ~75 miles of the bay area that would be worth looking into?

After doing a bit of research, I am thinking Stockton, Tracy, or Sacramento area. My goal is to spend $180k maximum, so I'm leaning more towards a SFR rather than multi-family to start out. Looking to buy and hold, cash flow is top priority, appreciation will be bonus. Any insight would be appreciated. Thank you in advance!

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Stewart Guthrie
Roseville, CA · Member since 2014 · 50 posts · 55 votes
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Hello Dan,

We don't get into the buy/sell side, but PLEASE make sure you do your legwork on what the rents will be based on the property.  We can help you there.

There are some neighborhoods off Florin that are surprisingly cozy and well kept, but you have to drive the neighborhood around the prospect property to get a feel for it or ask someone who knows.  I would consider properties that are South of Sutterville and West of 99 as well, (Colonial Gardens?), much of the architecture is reminiscent of Curtis Park but costs less.

I would also consider parts of Rancho Cordova and Citrus Heights as well.

I hope that helps, take care.

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  • Derek Jones
    Real Estate Agent · Sacramento, CA · Member since 2015 · 338 posts · 135 votes
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    Do you care at all what type of neighborhood the home is in? In and around Sac you'd be looking at C/D neighborhoods for around 180k. 

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  • Dan P.
    OP
    Lender · Benicia, CA · Member since 2015 · 33 posts · 8 votes
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    Doesn't have to be a top-notch neighborhood, but would prefer if it wasn't in a terrible area. In my searches, it seems the two most affordable locations seem to be around 99 and Fruitridge or the area north of 160 but south of 80. How are those? Thanks for the help.

    1Reply
  • Stewart Guthrie
    Roseville, CA · Member since 2014 · 50 posts · 55 votes
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    Hello Dan,

    We don't get into the buy/sell side, but PLEASE make sure you do your legwork on what the rents will be based on the property.  We can help you there.

    There are some neighborhoods off Florin that are surprisingly cozy and well kept, but you have to drive the neighborhood around the prospect property to get a feel for it or ask someone who knows.  I would consider properties that are South of Sutterville and West of 99 as well, (Colonial Gardens?), much of the architecture is reminiscent of Curtis Park but costs less.

    I would also consider parts of Rancho Cordova and Citrus Heights as well.

    I hope that helps, take care.

    2Reply
  • Franklin Romine
    Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
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    Around Fresno you can still buy C property around 100K.


    Frank

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  • Ian Dietler
    Carmichael, CA · Member since 2015 · 16 posts · 9 votes
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    Originally posted by @Dan P.:

    Doesn't have to be a top-notch neighborhood, but would prefer if it wasn't in a terrible area. In my searches, it seems the two most affordable locations seem to be around 99 and Fruitridge or the area north of 160 but south of 80. How are those? Thanks for the help.

     Both of those areas are pretty run down. South Sac. - by fruitridge, and Del Paso Heights - by 160. There is a reason why there are so many cheaper houses in those areas. If that is your thing, then go for it, I just wanted to let you know what I though about those areas.

    1Reply
  • Dan P.
    OP
    Lender · Benicia, CA · Member since 2015 · 33 posts · 8 votes
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    Originally posted by @Ian Dietler:
    Originally posted by @Dan P.:

    Doesn't have to be a top-notch neighborhood, but would prefer if it wasn't in a terrible area. In my searches, it seems the two most affordable locations seem to be around 99 and Fruitridge or the area north of 160 but south of 80. How are those? Thanks for the help.

     Both of those areas are pretty run down. South Sac. - by fruitridge, and Del Paso Heights - by 160. There is a reason why there are so many cheaper houses in those areas. If that is your thing, then go for it, I just wanted to let you know what I though about those areas.

     Thank you for the advice!

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  • Account Closed
    Registered Nurse (ICU) · San Jose, CA · Member since 2014 · 496 posts · 332 votes
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    Dan P. I have been looking around for this kind of information as well. My conclusion is its very difficult to find quality homes in or around the bay that will cash flow. But you may be able to find something that will break even or cost you a few hundred a month and then cash in on the appreciation in a few years. Or the bubble bursts and you lose everything. It's definitely a gamble. I am new to all this but keeping it simple and seeing how high all the homes have increased over the past few years makes me think it's just a matter of time before they start to drop. I have been reading a lot about the cycle of a bubble a burst market and seems like we may be peaking or close to the peak of the cycle before prices start to drop again. History proves this. And let's face it our countries economy is still in trouble. (Well your country...I'm Canadian). I tried to play the appreciation game in markets like the bay a failed miserably after the 2006 crash. Made me rethink my strategy and get into a more linear market with less risk for depreciation and a slow steady cash flow. It hasn't been easy but things have generally been ok for me over the past year. I am still interested in investing for appreciation and have a little reserve set aside to get something in or around the bay if a big crash happens again. This will diversify my portfolio even more. But untill it crashes I will continue to invest in Indianapolis and Birmingham where the numbers make sense.
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  • Account Closed
    Teacher · Sacramento, CA · Member since 2015 · 82 posts · 21 votes
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    Originally posted by @Dan P.:

    Doesn't have to be a top-notch neighborhood, but would prefer if it wasn't in a terrible area. In my searches, it seems the two most affordable locations seem to be around 99 and Fruitridge or the area north of 160 but south of 80. How are those? Thanks for the help.

     Not great pretty run down, IMO.

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  • Jo-Ann LapinPro Member
    Loan Officer · Tustin, CA · Member since 2015 · 3k+ posts · 713 votes
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    Don't forget Fairfield too.

    [email protected]
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  • Frank Quin
    REI · Sacramento, CA · Member since 2015 · 8 posts · 0 votes
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    My opinion is that In most place of California, The strategy of Buy and Hold won't work at all, because the rent/value ratio is so low, usually around 0.5%. It means that a $180K house , you can rent for $900/month. It would not cover IPTIMM  (interest, principle, tax and insurance, maintainance, management) at all. So that you need to feed your house every month, and wait for appreciation after you sell it. 

    The Buy and Hold strategy is use in the area where rent/value ratio is 1% or above. Only a couple small town in CA meet this critiria. 

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  • Parker Cox
    Independent Insurance Agent · San Diego, CA · Member since 2015 · 138 posts · 56 votes
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    @Dan P. 

    The Yuba city area could be a good one to look into.  I don't invest in the area, but this past summer I was driving through for a vacation and as an investor always keeping an eye out, if it was closer to me, I would be interested.  

    The inner city is quite sketchy but the outskirts have some new development and theres 2 walmarts within 10 miles (a strong sign to me of an active renter's market).  My gut was telling me that a duplex- 4plex on the outskirts of town might just be a worthy little gem by California buy and hold standards.  

    If you look into it and find anything good let me know.  

    Best of luck

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  • Patricio P.
    Sacramento, CA · Member since 2015 · 74 posts · 21 votes
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    Originally posted by @Derek Jones:

    Do you care at all what type of neighborhood the home is in? In and around Sac you'd be looking at C/D neighborhoods for around 180k. 

     What are A/B neighborhood 4-plexs generally going for in the Sacramento area? Do they cashflow? What sort of Cap rate?

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  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
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    I respectfully disagree that you cannot find 1% properties in Sacramento or a dozen other areas in California. Sacramento has had a 15.4% average rent increase in the past year and from what I see the huge midtown rent increases are pushing some quality renters farther out (OP, West Sac, alkali flats, So Natomas). If you can't find a 1% deal that cash flows after rents are driven to the current market rate, you are not looking very hard.
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  • Pat McGrath
    Real Estate Agent · Lincoln, CA · Member since 2014 · 225 posts · 43 votes
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    its entirely possible to get to 1%. It wont be a class A neighborhood, orB most likely. i saw a house in an ok neighbordhood a few months ago that fit, but it needed quite a bit of work i wasnt willing to take on just yet. We are in the winter slowdown now so that may help. This years run up was significant & finally most people even (2005/6 buyers) were not underwater, so a lot of people sold. I personally dont want near watt ave, but there are 1% areas there. But if i cant even drive there during the day & getn nervous, i dont want it. So i guess im also one of those not looking hard enough :)

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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
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    FIRST, learn how to crunch the numbers to determine Net cash flow to you every month.  Purchase price is not an indicator of a good investment.  Research to find the vacancy factor in the city you are considering.  I'll give you a big tip: If you see ads or banners "Move in for $1, or First months rent free", the owner is struggling with vacancies!!  Guess what - - you will too.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Dan P.  here are some under the radar towns you may want to check out I have not looked at RE there In a few years but they are well located and not on investors radar

    Winters,  Arbcukle , Williams  Colusa   then follow Hwy 20 over to Marysville Yuba city and of course the pearl of the central valley Olivehurst

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