Cash Flow Practice: New Listing 2037 Robert Way, Sacramento, CA

[Brett Chaponot]

I'm not the listing agent on this property, I'm just curious to see how others determine their numbers. This popped up on the MLS today and I'm interested to how the BP community would analyze this.

3bd/2ba, $178,100, 1314 sq ft, built 1952, taxes ~$2k, no HOA, bank owned.

How are you assuming rent?

CapEx?

Being in California do you ever factor in appreciation on your calculations if all the other numbers look good?

[Wes Blackwell]

Hi @Brett Chaponot! Here's my thoughts:

Based on the location and size, I'd estimate the rents would probably be around $1,400 for a safe bet. Depending on whether or not you update it, you might be able to get several hundred more per month. But you'd have to figure those repair costs into your acquisition numbers.

CapEx would be determined by completing the routine inspections on the property so you know what the current status is on major ticket items. Most important two would be the roof and the AC unit since those are the most expensive. Then it really depends on who's doing your repairs. Are you hiring out? Doing them yourself? Or hiring a family friend for a discount? Everyone's expenses will be different.

I probably wouldn't figure appreciation into my calculations unless I was buying at the bottom of market. But if you plan on selling in a few years, you could probably calculate 5% appreciation per year for the next year or two. But we'll really have to see how high interest rates go next year.

Remember, "Income is King, and Cash Flow is the Holy Grail." The most important thing about this property is that you see a monthly return and don't go negative. If you put 25% down on list price at 4.5% interest you're looking at roughly $1,051.94 per month PITI, so you'd probably clear +$350 per month at $1,400 rented. That's probably more than enough cash flow to offset any vacancy or capex issues you might encounter over the course of holding the property.