Porperty in Sacramento, CA

[Amir B.]

Hello BP Community,

I just saw this fourplex on sale today. Its been on the market for 109 days. I was wondering what is a good offer to make on it?

http://assessorparcelviewer.saccounty.net/jsviewer...

http://www.realtor.com/realestateandhomes-detail/1... 

Any advice will help.

Thanks

[Wes Blackwell]

"One man's hell is another man's paradise."

@Account Closed -- Let's say you had two investors looking at a property in Anytown, USA... one investor from Oakland, and one from Napa.

The guy from Oakland looks at it and says "Oh wow! No one has been murdered nearby in over a month?! That's fantastic! I love this property!"

The guy from Napa looks at it and says "Oh wow! People actually live in this sort of dump?! That's crazy! I hate this property."

Same property, two different perspectives. And those investors only live an hour away from each other. It's all subjective.

(And yes, some investors from Oakland REALLY ARE happy that no one has been killed recently, as I've worked with investors who had the experience of routinely finding dead bodies in the nearby alleyway. YIKES! So to them Del Paso Heights is a cakewalk)

The most important thing is the numbers on a property. If the numbers work, then you can see if you're comfortable with the neighborhood and potential pool of tenants it will attract.

Just the other day I drove around a more troubled area of Sacramento with a couple guys from Google... specifically the 95815 and 95838 zip codes (North Sacramento / Del Paso Heights)

We looked at 8-10 different properties... some great, some not so great, all within 5 minutes of each other. So just because the zip code gets a bad rep doesn't mean you can't find a nice little pocket in it and pick up a nice property. In some areas, it's really street by street. It becomes hyper-local.

Also, I think far too many investors don't fully grasp the concept of risk vs. reward when it comes to investment property. I often get asked to find C neighborhood profits in A+ neighborhoods, and they simply don't exist. If you want better returns, you'll pay for it with the potential of more neighborhood crime and more troublesome tenants (which you can control to a large degree). If you want less crime and potentially better tenants, you're going to pay for it in purchase price.

I emphasize the word potential because you can do a lot to control what types of tenants you rent to (you do decide after all). Investors worry that if they purchase in a lower-class neighborhood, suddenly their tenants are going to turn into Nino Brown and Walter White, and start cooking meth in the garage and hiding dead bodies in the backyard, and that simply isn't going to happen.

Is this who you're worried about renting to?

I also emphasize the word potential because bad things happen to good people, anywhere, anytime. I had a client who trusted his gut and rented to a pastor from a local church who seemed like such a kind, warm, godly man. But unfortunately, he lived like a pig and had an affinity for punching holes in the wall, and so it cost him thousands to repair the damage once evicted. 

And this was in a nice part of town. Rented to a pastor. Near his church. My client should've screened him more heavily with a background check and referrals from previous landlords, and he would've avoided this problem all together.

NEIGHBORHOOD RATINGS

Here's how I would normally break down neighborhood ratings. There are no strict definitions of these terms. They're just rough grade people use to give an idea of what a property is like.

A: Newly built properties in the nicest areas. (Too expensive, ain't gonna happen)

B: Slightly older property, but still nice. Might not be quite as nice of an area. (You'll pay a premium, lower returns, fewer deals)

C: Older properties. Likely really could use some work. Not the best areas. For investors, these are really the bread and butter for rentals. (Better returns, but possibly more issues with tenants and local crime)

D: Run down properties in bad areas. (War zones, avoid!)

F: That city in Somalia from the movie Black Hawk Down

If you take a look at the local crime map below, in the past three months you've only had 3 incidences in the entire neighborhood. A parked car was stolen, assault with a deadly weapon (non-firearm), and somebody shoplifted from the local grocery store.

Plus, if you take a look at the street view, although the neighborhood is crowded (looks like a mini-development of multiple fourplexes) none of the cars are beat up or junkers... there's no drug dealers walking the streets or standing on the corner, and the grass is green and well taken care of:

 I promise you there are areas WAAAAAY worse in Sacramento. For example, take a look at Midtown, the main culture and nightlife hub of Sacramento where everyone wants to live and you'd die to have a rental in:

People are getting robbed left and right! Cars are constantly getting broke into! Businesses and homes too! BUT -- you wouldn't typically consider Midtown to be a troubled area, would you?

When it really comes down to it, you have to drive the neighborhood and see it in person. If you don't feel safe even getting out of the car, you certainly shouldn't buy there. But if it's a clean street and has a good vibe to it, you should proceed with your due diligence on the property.