Investor · San Ramon, CA · Member since 2015 · 18 posts · 2 votes
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
Bakersfield, CA · Member since 2016 · 378 posts · 307 votes
9y
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).
Bakersfield, CA · Member since 2016 · 378 posts · 307 votes
9y
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).
My wife and I have been looking at Fresno as a first investment, but it sounds like we should look at Bakersfield and compare the two. Do you work with any property management companies in the area for your investments?
I will look at the numbers and may ask a few questions of the area later on if you don't mind.
Investors are taking note of Fresno right now. There has been a decline in unemployment and foreclosures over the last few years. High speed rail is slated to come in around 2026 (operation target). Rents have been rising a little bit.
I have looked into a lot of information on Fresno and thought things add up to a good point in the market. There is buildable land and it sounds like it isn't too hard to develop, so there is the chance of things being pushed into oversupply.
@Ken Teng, Thank you for pointing that out, I will check out that area on the forum and read up on it.