Questions on Potential Deal in Sacramento

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Questions on Potential Deal in Sacramento

Kevin P.
Burlington, MA · Member since 2016 · 13 posts · 4 votes

Good Morning BP,

Thank you all for looking at this post! I am a buy and hold investor, looking at a quad in Sacramento (area code 95841) and the numbers look pretty good ($165 per door and 10.27% CoC at asking price.) Property is also HOA so capex, repairs and maintenance should be insignificant. I just had some questions for the more experienced investors, particularly in that area.

1. Property has been listed for about 5 months, asking 329,000.  If I decide to offer on this property, would it be out of line to come in 15-20% below asking price? (Needless to say the numbers are even more attractive with a considerable discount.)

2. The school districts don't seem so great according to GreatSchools and while the crime doesn't appear horrible, it also doesn't look great either.

3. What kind of vacancy should I be expecting in this area? I'm currently assuming 5% but I could be way off base with that as I don't live there.

Could any experienced investors provide insight into this situation?  This will be my first investment property and it absolutely MUST be a winner in order to set the tone for my future business.

Again, Thank you all for looking and I look forward to your responses!!

Best Regards,

Kevin P

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  • Pat McGrath
    Real Estate Agent · Lincoln, CA · Member since 2014 · 225 posts · 43 votes
    10y

    why are you saying hoa means low cap ex?? Hoa's wont replace your hvac, roof or water heater.  Imho:

    1) 15-20% is low. You may not get a response at all or likely a flat no. But if your not embarrsed by your first offer, (as an investor & its been on 5 months) then its not low enough. 

    2) thats what you should expect in 99% of any coc return house in cali. Your not going to get a 8/9/10 school district & have cash flow (or at least right now).

    3) look at trulia (for rent) and rentometer to verify your rents. Then estimate the lower end so you can pick proper tenants. Imho 5% is tight but possible if you have the right amount of rent to get a lot of apps, you can pick the right tenant & a tenant who doesnt thrash it and stays. 

    Are you cash or financing? If cash you may be able to offer a little lower. You % below will likely get rejected but they could counter. Worse that can happen is they say no. 

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  • Chris Vail
    Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
    10y

    @Kevin P.Sacramento is a fairly hot Investors market right now.  This doesn't mean that there aren't deals to be had however I would say that if the property has been on the market for 5 months and has not been snatched up at this point from an investor I would raise a red flag and try to figure out why someone has not purchased it yet.  It also looks like the original asking price was 499,000 back in September so if they recently dropped the price they may be looking for more action.  I also see two other buildings in the same complex pending at 330k and 340k and another one that has just come on the market at 330k.  So this could be someone looking to get out of the area and just looking to liquidate or there could be an underlying problem in this complex.   

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  • Kevin P.
    OP
    Burlington, MA · Member since 2016 · 13 posts · 4 votes
    10y

    Thank you both very much for your input!  I am exploring your ideas in more depth so I can be sure to make an informed decision.  I welcome any additional feedback!

    BR,

    KP

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  • Sunny D.
    Pleasanton, CA · Member since 2015 · 246 posts · 115 votes
    10y

    how did you calculate the 10.27 coc return. My math says its much lower, how much cash are you putting in ?

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