All Forum Posts by: Alester Thomas

Thank you for your replys guys! @Evan Licht @Carrie K. You both are right, I do need to take into account utilities. It would be about $100/mo. The current lease the one tenant is on from the previous seller has it so those utilities are covered by the owner. My goal by next lease is to change it so the tenant pays a surcharge of $100/mo for utilities (I've seen quite a few landlords this in Sac). I'm not sure if this counts as a rent raise, but even with CA statewide rent control at 5% plus inflation 2%, I can raise the rent by $105. So I can atleast do this for year 1 and start raising the rent at year 2. For any new tenants, I'll have them sign on with the utility surcharge. In terms of comp rents, this property is a little unique in that it looks more like a town home. It's got decent sq footage at 1200 for a 2 bed 1.5 bath plus the 2 car garage and driveway. Since it's hard to find a true comp value for this unit, I was assuming that rent of 1500 because a tenant just signed the lease for their unit as it is, non-renovated. Normally 2bd/1bths go for 1200-1300 at 900 sqft with 1 car garage. I'm also speculating that rent control will bring rents up overall. I will be renovating the side I am living on and put it back on the market for rent in a year or so.

I can definitely save about 20k every year with my current job, but my plan is to not put into this house what I can't pay back with my reserve fund. Difference is I'm paying a lot upfront rather than 7-10 years down the line. So I wouldn't have to replace the roof for another 25 years or so since I'm doing it in a year or so. My CapEx portion is 200/mo, 2400/yr, In a 25 year span it's 60k which would cover roof, HVAC replacement, re-flooring, re-painting, water heaters etc.

I currently am only limited to on market deals, I haven't connected with many people with access to killer off market deals for multifamily. I feel like most MF owners are investors and list on the market anyway rather than wholesalers. What is on market right now in Sac barely cash flows. Most properties barely cover the mortgage with any reserves with my FHA financing, even after pro forma. Right now the standard 1 story 4bd/2bth 2x1 car garages 1800-2000 sqft duplexes are renting at most 1200/unit and are going for 350k.

The other thing is that, since I'm living in it for a while, my wife and I need it to be somewhat of an okay area to live. The ones we see that sort of make the numbers work are in South Sac or Del Paso Heights. We night drove this property and checked out. It's slightly on the sketchy side but It's better than the war zones that are out there and on a cul de sac. That was just an external factor for us. Our strategy is to buy and hold something that can stand on it's two legs so that if my wife and I go to school (she's going nursing, I'm premed) and can't work, it can a least cover it's own expenses and just pay down itself, if not provide some cash flow eventually.

Thank you so much for taking the time to look at my deal!

Hello BP Community,

New investor here, under contract for a first investment property. Hoping my numbers are feasible as I acknowledge this isn't the most ideal deal. I posted this elsewhere but reposted this here as I felt it was more relevant to people who are already familiar to the Sacramento market.

Property is a duplex in a B/C neighborhood in Sacramento County, listed for 425k, under contract for 400k. Each side is 1200 sqft, 2bd/1.5bth, 2 car garage and driveway. Current tenant rents one side for 1500 and I will occupy the other side paying myself rent of 1500. My situation: I'm 27, have a decent job and have saved 60k in order to invest in something. I don't have the best credit, so I went FHA so I could go 3.5% down at a 3.3% rate with 0 pts. PITI is 2450. After inspections, the property will need 20k in rehab and renovations. Also I will need to replace the roof in a couple years (15k, but I'm attributing that expense to CapEx and will pay myself back with that). DP with closing costs is 20k. I am keeping 15% for CapEx, Vacancy and Maintenance (is this not conservative enough?) I will be managing the property while there and when I leave. Current tenant doesn't pay water, sewage, garbage which I will have to eat until I change the lease.

Projected Rent Revenue - 3000

PITI - 2450

15% Reserves - 450

Cash Flow = 100

Yearly CF - 1200

Total Investment - 40000

ROI - 3%

I acknowledge that 3% isn't great. Pro Forma makes it nicer with the possibility to raise rent to 1550 or maybe eventually 1600/side. Also, I'm not sure if investors take IRR into consideration with the principal paydown from the tenants, but that makes it nicer too. Though, I understand that money isn't realized until you sell or refinance. The other thing is refinancing from FHA to conventional (takes 8-9 yrs to reach 20% equity w/o app or depreciation) would take away the PMI and bring down the PITI to 2100 with 4.5% financing which would make the cash flow better, but would start over the 30 year term (not sure if that's good or bad to do). I'm considering that with my FHA financing, I'll be on the losing end of bidding wars with some of these cash/conv buyers. I got this into contract because I was the first offer and quickly got it under contract. The seller later got much better and higher offers and would really like to back out. Does this seem like an okay deal for me to do seeing how the market in Sac is? Thank you in advance!

Hello BP Community,

New investor here, under contract for a first investment property. Hoping my numbers are feasible as I acknowledge this isn't the most ideal deal.

Property is a duplex in a B/C neighborhood in Sacramento County, listed for 425k, under contract for 400k. Each side is 1200 sqft, 2bd/1.5bth, 2 car garage and driveway. Current tenant rents one side for 1500 and I will occupy the other side paying myself rent of 1500. My situation: I'm 27, have a decent job and have saved 60k in order to invest in something. I don't have the best credit, so I went FHA so I could go 3.5% down at a 3.3% rate with 0 pts. PITI is 2450. After inspections, the property will need 20k in rehab and renovations. Also I will need to replace the roof in a couple years (15k, but I'm attributing that expense to CapEx and will pay myself back with that). DP with closing costs is 20k. I am keeping 15% for CapEx, Vacancy and Maintenance (is this not conservative enough?) I will be managing the property while there and when I leave. Current tenant doesn't pay water, sewage, garbage which I will have to eat until I change the lease.

Projected Rent Revenue - 3000

PITI - 2450

15% Reserves - 450

Cash Flow = 100

Yearly CF - 1200

Total Investment - 40000

ROI - 3%

I acknowledge that 3% isn't great. Pro Forma makes it nicer with the possibility to raise rent to 1550 or maybe eventually 1600/side. Also, I'm not sure if investors take IRR into consideration with the principal paydown from the tenants, but that makes it nicer too. Though, I understand that money isn't realized until you sell or refinance. The other thing is refinancing from FHA to conventional (takes 8-9 yrs to reach 20% equity w/o app or depreciation) would take away the PMI and bring down the PITI to 2100 with 4.5% financing which would make the cash flow better, but would start over the 30 year term (not sure if that's good or bad to do). I'm considering that with my FHA financing, I'll be on the losing end of bidding wars with some of these cash/conv buyers. I got this into contract because I was the first offer and quickly got it under contract. The seller later got much better and higher offers and would really like to back out. Does this seem like an okay deal for me to do seeing how the market in Sac is? Thank you in advance!

@Gordon Cuffe @Kim Stofan Absolutely agree, as my partner and I are both in entry level positions in the health field, we didn't really think it was in our cards at this time to go for such an endeavor.  After talking about ways to really start taking our future seriously, we looked more into it and found heaps of information on how we could absolutely get into investing in real estate.  We don't like to make any big moves until we've thoroughly researched and gained insight on the matter first, especially when trying to take as big a step as this.  I think we've come along way with what we've learned, we are starting to see properties much differently than before.  The beautiful properties we once thought were great deals we now financially assess with strict standards to ensure they are profitable and ugly homes we would never think of looking to buy are now seen as excitable opportunities for potential revenue. 

@Jay DeCima @Wes Blackwell Thank you for the advice! Yes, I've had many people talk to me about how wholesaling is the way to go or how I should focus on buying a single family and renting out rooms. For me personally, I feel multifamily is the area I would really like to focus. My partner and I would be taking an FHA loan on any property we look to pursue and the added bonus of being able to live in one of the units as well as claiming a percentage of potential revenue to increase our pre-approval really appealed to us, not to mention how well they can cash flow. We are doing as much research as we can before we take our first venture, using free online resources like BP and watching a lot of videos. I'm staying clear of any seminars I need to pay for, I feel that all the resources needed are already available to us. But I do think that lessons learned from working under a mentor are invaluable. I'm definitely interested in volunteering my time with someone who has been though the the process in investing in multifamily residences so we can be successful when the time comes. @Wes Blackwell I'd definitely love to take you up on that offer sometime! At the moment, we are saving and trying to learn the market by running our own calculators and spreadsheets on limited MLS sites to see if we would think they would be positive cash flow properties.

Hello all! My name is Alex Thomas and I'm currently in my 20's with a steady job as an EMT in 911 and a CPR instructor.  I've always thought it impossible to start investing at my age. Though I may not have the experience or insight of many investors on this forum, I have a teachable spirit with a strong willingness to do what it takes to be successful. My research into investing has led me to stumble across the BiggerPockets forum.  I have a particular interest in investing in multifamily residences to produce positive cash flow in the Sacramento Area, as my partner and I are currently planning to get in the game within the next year. My long term goal is to achieve financial freedom through real estate.  I understand it doesn't come easy, as investing doesn't make you wealthy overnight, and there are many risks along the way.  I'm doing as much research as I can to learn the market so I can hopefully stay positive in my first investment.