Newbie Needs Help! Under contract in CA.

[Hannah Jones]

Hello,

I am under contract to buy a duplex in Yuba City, CA, for $200K. At first I was really excited about the deal because most stuff I look at doesn't even begin to pencil out. A couple of investor friends gave me the thumbs up. But the more math I do, the more nervous I get.

It is currently rented out for $800 per unit. Owner pays garbage and water, which is $110 per month (total). My realtor told me that the units could rent for $50-100 more each, but there are two great tenants in the duplex, and neither one has any intention of moving out, sot I am loathe to increase the rent too much.

The duplex has new water heaters, central AC, and heat. There is minor wear and tear, but not much. It was built in the 80s and it's in a low B or high C neighborhood. The bad news is that it needs a roof this year. But when that's done, it should be relatively maintenance free.

I live 3 hours away, but I plan to manage it myself.

So, it obviously fails the 2 percent rule and the 1 percent rule, and with the 50 percent rule, I end up about $10 ahead of game on a 30 year mortgage. When I do more fine-grained analysis, it seems better. But is this just a dumb deal? If so, why is my realtor telling me it's amazing?

[Jeff Kennedy]

Hi

@Hannah Jones

My name is Jeff Kennedy. I live in Yuba City and have been investing here for about four years. I have several duplexes in the Yuba city area. I can tell you that the prices here now are very high compared to just two or three years ago. I have not purchased anything in the last 11 months but I have analyzed several deals. I have not been able to find anything on the MLS that even comes close to a good ROI. I would be very cautious if I were you. Paying market price right now could be very risky.

I have lived here for over 30 years so I know the area well. I would be happy to help you if you'd like some local insight. I have a passion for local real estate - please PM me if you'd like to chat.

Jeff