Sacramento Market for SFH investment

[Jim G.]

New to Biggerport. I am in Bay Area and made some buys and holds in period of 2009-2013. Stop doing this in past 3-4 years as I cannot bit higher enough to get a good deal. So I decided to move to Sacramento area now. I know Sac is getting hotter. But I still believe it has room for a long term investment. But I don't know general area of Sac. Appreciated if somebody would give a general description of good/decent areas for SFH and bad areas I need to avoid. Is it possible for SFH $250K price with $1500/monthly rent?

[Wes Blackwell]

@Jim G.

Hi Jim! The scenario you described of $250k purchase price and $1,500 rent is definitely possible. Recently purchased my own house for $260k, 3/2 on a quarter acre with a pool, down the street from a park and in a good school district with low crime, and could definitely get $1,500 rent for it.

Although, at $250k purchase price, 25% down and a 5% interest rate (typical for investment properties) your monthly mortgage payment will be roughly $1,340 per month. By the time you add in some utilities and repairs, you probably won't cash flow much if at all.

But then again, you said this is a long-term investment, and it is true that Sacramento will be the #4 hottest metro market in the nation this year, with a projected appreciation of 7.2%!

Even at just 6% appreciation, you'll be adding another $15k or so in value per year, and then you could sell it at the peak of the market if you like and make your money then or 1031 exchange the equity into another investment property without paying capital gains on the profit.

One thing you might want to consider is looking at 2-4 unit multifamily properties (duplex, triplex, fourplex) as the lending is the same as other residential and it's much easier to get a return.

As far as neighborhoods go, it's really street by street, so you need to look at each property individually and can't just assume a neighborhood is good or bad based on the zip code.

BUT -- if you want a general suggestion of areas to look in where you may be more likely to find a good buy, I would try looking in Carmichael, Citrus Heights, Arden Arcade, North Oak Park, North City Farms, etc. I know of a few more hot spots but can't give away all my secrets in public hahah.

What's most important to you about this property? The cash flow? The neighborhood? The loooooong term potential (10+ year hold)? Let us know more and perhaps we can point you in the right direction to find what you're looking for.