Duplex Buy and Hold Strategy- Appreciation

[Amir B.]

Hi Everyone in the BP Community,

I am looking to purchase a duplex as my first property. I am looking to house hack. Unfortunately, I live in California and no way of living for free. The plan is to have the tenant pay down the monthly mortgage payment. 

My price point is $400,000. I am planning on using a FHA loan using 3.5% down payment.

I am looking in Sacramento county. 

My question is would someone buy in a more desired area or cheaper? One duplex is $290,000 and the other is $410,000.

Please advise.

Thank you. 

[Karen Davis]

I am a property manager in Sacramento County I also am looking for a duplex for my first property. I have done a lot of Cleanup in apartments evictions start over and put new people in. If you have a person who understands the lower-income properties and how to properly screen your tenant you should be fine. A higher rent does not always mean a higher quality of tenant.

[Dylan Vargas]

@Amir B. Welcome Amir! The experienced investors on here usually recommend the better property for things such as appreciation, quality of tenants and location, location. location. At any rate there may be some deal in your area. Have you reached out to a local Realtor to show you some properties? Doesn't cost you anything and a good Realtor will know where to buy and possibly work with investor type clients. Fairfield/Vacaville/Vallejo and other close by areas are worth a look. Even Antioch and pittsburgh maybe? Good luck. If you are looking in Sac head East on Hwy 50 or 80 for better areas. 

[Brent Coombs]

@Amir B., if you've already found a Duplex for $290k in a spot that you don't mind living in, maybe the same area has 4-Plexes available for no more than $400k? 

THREE rents ameliorating your expenses are better than one, surely? All the best...

[Account Closed]

It's tough to see appreciation in small multis, even in good areas. One reason, there are less comps because there are likely not many duplexes in that area to compare   (most duplexes sit on a corner in Sacramento city due to zoning restrictions). Secondly, and partly because of reason number one,  there aren't many multi sales in the good neighborhoods to compare, either.  Personally,  I would always buy in the better neighborhood because you can charge more for rent and have a larger tenant base to choose from. It's been my experience, if you have a quality product for rent, renters will be salivating to get in. There's not much good inventory for highly qualified renters out here. With multis, it's more of a cash flow, debt paydown, and tax play versus an appreciation play. Feel free to PM me if you ever want to talk specifics about Sacramento. 

[Dan Baker]

I'm a little green, mostly single family live in flips. Ive recently been focusing on buy and hold.  @Account Closed has a great point about the multi's, they are not a great appreciation move, and if your are ever planning on selling, it will most likely be to other investors. I feel like paying more is not always the better move. It all depends on your goals and the ROI you are looking for. Not saying you cant rent from yourself, house hacking is amazing!! But I feel like appreciation isn't something you should be focusing on, its the flowing of cash through your business is what you should be looking to achieve. You mentioned that you were looking into an fha loan, just keep in mind that the mortgage insurance can be a little expensive unless you planning on a value add Refi. There is a great video that talks about why you shouldn't do a 2-4 as your first investment. hope that helps. https://www.youtube.com/watch?v=lf9_SOZdOjs (sorry not on bp)