Sacramento / Highlands /Florin / Foothill Farms McCuen fourplex condos - good for new investor?

[Matt Leonard]

I'm looking for advice/info/others regarding some lower-end investments in Sacramento. Specifically - I'm seeing a ton of McCuen-style fourplex condos (in North Highlands / Foothill Farms area, and also south near Florin) that seem to have strong cash flow, even at market-rate sale prices.

Most units are 2/1, listing for ~$45,000-$65,000 (depending on upgrades), and are renting for $750-850+ right now. HOA's are low - most under $200/mo. I'm calculating ROI on these (assuming 20% down, PITI impounded, HOA fees, and 40% of income going to maintenance/vacancy) anywhere from 10% - 25% on various units. 40% also might be high for maintanece - considering HOA is already covered (depending on the unit of course)

I realize these neighborhoods are older and not likely to see significant appreciation. But if cash flow is positive from the start - this seems like a good move to get into investing, with a fairly minimal debt/cash outlay and build some equity and semi-passive income.

I'll admit - this is new to me, but I'm doing my research. I own/live in Oakland, own a 2nd home in Natomas with my mother and a tenant there. I have modest income but strong credit and cash reserves. 

Anyone else have properties in these areas? Care to share any tips, advice, lessons-learned, or pitfalls I should be thinking about specifically with these lower-end units?

[David Hutson]

I own a few of the McCuen units in Elk Grove and I love them.  The returns are high and everything outside of the door is on the association to maintain.

The main thing I look for is whether you can buy and rent out the units.  In Elk Grove the board changed the policy for rentals.  They approved a rule to maintain less than 50% investor owned units due to owner occupants getting financed loans.

Start with the association and see what their guidelines are for rentals in the development.  Ask them for any information that would be helpful as an owner such as what are their reserves, how much do they increase their reserves each year, have they had any extra charges for unplanned "emergencies/expenses" and what they think of the neighborhood.

I fix mine up better than most in the area and notice my tenants stay a min of two years and I have had one tenant up to 10 years. 

Another tip, look at the neighborhood during the day and night.  If the other occupants in the neighborhood don't take care of the homes and the area isn't nice you will either get tenants who are of the same mindset or good tenants who won't want to stay and move after a year because the rest of the people aren't so good.

Shoot me a message if you have other questions.