Analyzing Investment Property In Woodland, CA - Sacramento Region

[Hugo Luna]

Hello BP!

I wanted to share my recent experience and gather insight from other local investors in the Sacramento Region. 

I made an offer on a HUD home and after several counters, my offer was accepted at $295,000 (LP was $305,000) with $2,500 toward closing costs. My offer was submitted as owner occupied because my original lender only required the home to be owner occupied for 6 months prior to renting it out. After my offer was accepted by HUD, I was asked to sign a disclosure stating I would occupy the home for a minimum of 12 months. At that point, I had to back out of the deal, but was given the option to re-submit under investor terms which changes the whole scenario.

For an investment property, Wells Fargo has the following option:

Purchase Price: $295,000

Market Value: $335,000

Investor Down Payment (15%): $44,250

Investor Loan Amount: $250,750

Investor Rate: 30 Year Fixed 5.375 (APR 6.030%)

Principle & Interest Payment: $1,404.13

Property Taxes: $307.29

Monthly Mortgage Insurance: $127.46

Insurance: $72.43

Estimated Closing Costs (1 time): $5,689

Estimated Closing Costs (prepaid items): $2,070

Total Monthly Payments: $1,911.31

Monthly Rent: $1,650

Although this deal does not provide monthly cash flow under this scenario, there is potential for equity growth through appreciation and purchasing under market value. This would also get me started with my first real estate investment, which is why I am open to considering all options. The process on even getting an offer accepted has taken months, which makes me fear I won't find another deal for some time. 

What ratios are other investors in the Sacramento region looking at? What interest rates are being quoted to others? Any feedback would be great.

Thank you all!

[Gordon Cuffe]

@Hugo Lunawhat if 2017 is the last year for appreciation for 7 to 9 years? Are you ok with losing 3600 per year for 7 years? Why not buy a house for 160k that is worth 200k where your making 100 per month?  Or buy a 4plex for 350k that gets 3k in rents?