All Forum Posts by: Nicholas Lohr

FHA loan for sure. reduces the amount you have to put down.

i just bought a 100 year old multi.  We did end up finding things wrong with it that were unexpected but luckily I was very conservative with my rehab budget numbers. I'd suggest you do the same on the old properties.  (as in budget way over what you think it will cost to fix up and make sure the numbers still work)

also have a qualified GC take a look at it first to make sure there's nothing crazy structurally wrong with it.

A BRRRR deal kind of implies a long term hold so id recommend doing what you said, "completely gut and redo the property the "right" way."

Youll have less CapEx, Repairs, and headaches this way.

Just make sure you get the rehab numbers right before you go for it and make sure they work out with the BRRRR calculations.

I'd say that the area just north of the city is going to take much longer to improve compared to the Oak Park area. Actually the Oak Park area has already improved quite a bit, hence the lack of inventory there. 

this may help you, it's pretty spot on...

https://www.biggerpockets.com/forums/621/topics/444774-sacramento-neighborhood-map-and-ratings----finally

and make yourself very familiar with the "Self Sustainability Test."

it says that the appraised rents have to high enough.

here's a link: 

http://www.anmtg.com/mortgage-resources/fha-loans/...

but google it more too.

Look for another bank! I got an FHA loan in Sacramento CA earlier this year and it was a 4-plex. The down payment required can vary.

Just to share my experience so far, I'm 1 BRRRR deal deep in Sacramento right now with the 2nd one in progress and what's been working for me is the value add multi family deals. Here's where I'm at so far....

Deal 1 Results

2016
Purchase Price $205,000
Rehab Cost $52,936
After Repair Value $350,000
Year 1 CCR Return 23.85%

Deal 2 (In progress)

2017
Purchase Price: 875,000
Rehab: In progress

And absolutely these deals would NOT have worked at the rents that I purchased them at.  You have to look for value add deals and analyze what the rents WILL be at once you improve the property.  With the skyrocketing Sac rents it's like the wind is at your back though, at least for the time being.  The rents are still about half of what they are in San Francisco so I think there is some more room for them to rise.

You have to really be choosy about the neighborhood out there too. I'd suggest Wes' map. It's so helpful!  Stick to the A's and B's and maybe some parts of the C's (i can tell you which ones) and look for the value add deals so you can do a cash out refi to get your money back, raise they rents, and still cash flow....

https://www.biggerpockets.com/forums/621/topics/44...

If you're looking for something more turnkey in Sacramento right now that will cash flow that may be a challenge. 

Ah I forgot the compounding!!  Assuming you could keep the continuous 300k invested (replacing one deposit with another as tenants move in and out) for 20 years straight with a 6% annual gain that would compound out to a little less than $1,000,000 total. hmm.

As far as I have read this is a state-by-state law so I am ONLY talking about California here. 

On line D of chapter 49.2 it states that, “Nothing in this Chapter shall preclude a landlord from exercising his or her discretion in investing security deposits.”

And then on line 3 it states, For March 1, 2015 and each year thereafter, the Rent Board shall calculate the rate according to the annual average of the 90-Day AA Financial Commercial Paper Interest Rate (rounded to the nearest tenth)

This is the amount in interest we as landlords are supposed to pay our tenants for holding their deposits. This amount is currently about 1%.

source: http://sfrb.org/chapter-49-san-francisco-administrative-code-security-deposits-residential-rental-property San Francisco, Sacramento

Hypothetically if one had 200 rental units, each with 1500 security deposits, that would be $300,000. Why not invest that money in a relatively low risk SP 500 index fund that has about a 7- 10% return over the long term?

That would be a $18,000 extra bucks a year. (300,000 * .07 = 21,000 – 3,000) The 30,00 being the simple interest we are supposed to pay.

It’s not a ton of money I know but it’s enough for me to want to pose this question.

Now totally I get it, the stock market can crash 10-30 percent in any given year like in 2008, 2001 etc… But even if it did, it has always recovered within a couple years and the chances that there would be some mass exodus from your 200 apartments with everyone demanding their deposits back at the same time and you not being able to refill all the openings is virtually nil.  

Curious if anyone out there has thought of this? Am I missing something? Perhaps what it is I'm missing is that if one had 200 rental units they wouldn't care about 18k?! Guess I'll have to wait and see....

One of the first steps is to talk to a local Civil Engineer.