High Density SFH Greater Sacramento

[Chou D.]

I have the option of going into contract on a new construction sfh for ~425k. 2B, 2B, ~1300 sqft - it's one of those high density new constructions near Rocklin. 

My intent is buy and hold for at least 7 years. When I ran the numbers, the property does not cashflow at 20% down (negative $200 per month). This is without factoring in the cost of hiring a property manager (I do include mello-roos, solar costs, and ~10% vacancy rate - jeez these are expensive). I live about 2 hours out (closer to East Bay Area). 

- What kind of rental yield and tenants can I expect?

- How much do property managers charge?

- Do you expect the Greater Sacramento (and Rocklin / Roseville) areas to appreciate over the next 10 years? 

- What books , resources would you recommend I read up on as a first time landlord? 

- Would I be able to self manage?

- What are somethings to watch out for in a new construction? 

Thank you!

[Sergey Tkachev]

Hi Chou, welcome to BP! There is definitely an expectation for areas such as Rocklin / Roseville appreciate over the next 10 years. The answer to your other questions really depend on what your strategy, situation and abilities are. 

There are investors who buy for appreciation and don't mind negative cashflow in the mean time because they have enough resources to handle that. Other investors will tell you to never buy a negative cashflowing home.

You really have to find out what is the best approach for you and what your goals are, as well as what the opportunity costs are. 

New construction is generally (almost) maintenance free so management is easier than older homes. But you do have to expect to be involved and active in you decide to manage yourself. Finding the right tenants is key and can be the difference between an easy or tough experience.

If you are looking for cashflow, looking a small multifamily maybe something to consider as well

"The Book on Managing Rentals" by Heather and @Brandon Turner is a book you can start off with https://store.biggerpockets.co...