I'm new here, Any hope for two low-wage earners to invest in SAC?

Question

Hello there, I'm looking to get my sister and I into real Estate. Due to family obligations my sister does not wish to re-locate outside of CA and I need a more urban area to find work so we are looking at SAC. WE have a modest amount of savings to use for a down-payment (about 30k). We are not what I would call High income earners but there would be 3 of us paying down the mortgage ( myself, my sister, and my boyfriend). Because it took so long for me to save up money for the down-payment I was wondering if anyone could give me advice on what would be the safest strategy when this is sort of a "all the eggs in one basket" situation. Should I try to buy the largest home so I could get more roommates (house hacking?), or should I focus on a nicer area even if that means a smaller home and fewer roommates? What should be the goal of someone in my situation in order to grow wealth and opportunities for myself. Any Advice would help, any links appreciated. I'm watching so many videos on these topics but they all sort of assume one has more cash on hand to play with than I do.

I don't really have the resources to invest out of state ( or enough knowledge about tax policy in other states), but CA is so expensive I feel like there is almost no sure thing I can do with this amount of money but I am so eager to get things moving.

Jesse Hinaman · Answer

Hi Brittany,

If your sister and boyfriend are willing to go on the loan with you the combined income could allow you to buy a decent house. I would focus around the 95826 and 95827 area code by Sac State. Prices range between $350-$420k for the larger floor-plans. Great, safe area with great rental market. I have three rental properties in this area that I rent out rooms.

The trick is to find a 5bd/3bth or a 4/2 with option to easily convert living or family room into a bedroom. Big plus if you can add a 3rd bath or create 2nd master suite. My 5 bedroom homes bring in $3200 and $3400/mnth.

If you want more specifics, feel free to message me and I’d be glad to help. Would also be able to tell you what you can collectively qualify for. $30k is more than enough when buying as your primary.

Mariah Earl · Answer

Hi Brittany,

Sacramento is a good place for lower wages. I would actually suggest looking into getting a duplex they are going for as low as $240k. I love it here and actually want to buy more property in sacramento myself.

Mariah Earl

Real Estate AgentCalDRE Lic #02090006

Jack I. · Answer

I agree 100% with Gordon Cuffe...buy a duplex, live in half and rent the other side out. I would encourage you to look in Citrus Heights or Fair Oaks.

This will get the ball rolling for you guys, help you earn a bit of equity, and in learning the ropes on how to be a Land Lord.

Carrie K. · Answer

$30k should be fine -- you can get loans for 3.5-5 percent down. You'll need some for closing costs, and you'll also want to set aside a reserve for emergencies. A realtor can set you up with a mortgage broker who can run the numbers for you.I'd recommend also getting a home warranty, which is like an insurance plan for a small price every month in case anything expensive breaks right away (like your HVAC system, which could be $10k to fix).

Gordon Cuffe · Answer

@Brittany Keyes You can find many 3% or 3.5% down payment loan programs. You might think about buying a duplex where you can live in one side and rent out the other side and use the income from the rents to help you qualify if needed. I have closed a ton of home loans for owner occupied and investor loans so if you ever have questions about home loans, send me a pm. I can save you time compared to looking at videos.

Russell Brazil · Answer

Buy a primary residence with a low down payment. Eventually convert to a rental, then buy another primary residence with a low down payment.

Jean Marx · Answer

Hi Brittany -

Another BP member had a post where he mentioned a program called Neighborhood Works (https://www.nwsac.org/). I've never worked with the program directly, but I did look into it in case it would be helpful for my husband's clients. From what I can tell, they offer significant grants that can be put towards closing costs or a down payment for buyers planning to occupy a home in Sacramento County or West Sacramento. You don't have to be a first time home buyer but there are income restrictions. They also offer a number of free and paid classes. - Jean

Adam E. · Answer

@Brittany Keyes

Read David Greene's books!! Still haven't read BRRRR, but Long-Distance Investing was amazing. An easier intro to the subject is to listen to the podcast episode #327

Ced Chan · Answer

That gets really close to the "1% rule" I keep hearing about. How much are the property management fees for such a location? What are your greatest expenses being that it's most likely rented to students? Are vacancy rates an issue? Do you usually have parents' co-sign on the single lease? Have you had any issues with tenants partying and trashing the house just before the lease ends?

Sorry to hi-jack the thread but I've been looking for a closer rental market versus investing out of state. Seems everything in the bay area has negative cashflow but everyone is counting on appreciation to bail them https://www.sacbee.com/news/local/article233802817.html

I also noticed Sacramento government passed a rent control law, "Sacramento Tenant Protection and Relief Act" which takes place on Oct 12. Any houses built prior to 1995 will be limited to a 6% rent increase per year plus inflation.

I'm new here, Any hope for two low-wage earners to invest in SAC?

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