Better investment - multi family - Bakersfield or Fresno

[Meena Balaji]

Hello Everyone, Firstly sorry if this is wrong forum to post in.. We are looking to investing in a muli family. Budget is about 400k. Considering either Bakersfield or Fresno. Would you recommend one over the other. If yes please let me know which city is better and why. Thanks in advance Meena

[Max Gradowitz]

I don't own any investment properties in Fresno but I do know that Bakersfield is a great place to buy multi-family investment properties in.  I own properties here and a lot of my investor clients do as well.  It's a good market - the purchase prices are pretty low to begin with, and the market rents are high enough to cash flow really well unlike most cities in California.  Two unit properties tend to be in the $100k to $200k price range, while three and four unit properties here tend to be in the $200k to $500k range.

Another cool thing that some might now be aware of: unlike single family homes, multi-family properties are appraised/valued based mostly on their rental income, not just based on sq ft.  So, you literally do "get what you pay for" in the sense that the more money you spend on a multi-family property, the more cash flow you will likely receive on that investment.  This seems to be a good rule of thumb up to about $500k here in Bakersfield - after that cap rates tend to start dropping and deals tend to not be as lucrative.  That's the "point of diminishing returns" there: once you pass 5 or 6 hundred grand price point, it becomes more lucrative and smarter to buy two small multi-unit properties (like two duplexes for $300k each as opposed to one big fourplex for $600k).