All Forum Posts by: Tony H.

Hi BP!,

I have been learning a lot lately from the community. Although, I am still in the search for the right first rental property for me, I went ahead and imagine different scenarios in my head.

I read multiple discussions, but I can't seem to find the exact answer to my questions. (I apologize if this has been discussed somewhere, please point me to that discussion).

So, there is this Duplex in Sacramento, CA (2 units of 3/1). It's about 10 mins from a local city college. The school district in the area is well below average. I imagine this won't attract families with kids. (or maybe I am wrong?)

The estimated the average rent price for a 3/1 in the area is about $1200/month. Meaning I will only get $2400/month Gross total.

However, I came across an idea of renting out the rooms individually. Like $500 each for a total of $3000/month. 

Questions:

1. Where do I find out whether or not this is legal in Sacramento, CA? Is there a website where I can read about this?

2. If i decide to do this and if it is legal, I am planning to mark each room like A, B, C, D, E, F. Each tenant will have separate lease indicating the room that they are renting for. Is this a good way to do this? I understand that if 5 out 6 tenants move out, 1 tenant won't be responsible for the whole unit. If this happens, then it will just be my loss and poor business strategy. 

3. If anyone needs to be evicted, how is this strategy going to put me at a bad spot?

4. As for Deposit, I am planning to have them pay 1 month rent to cover damages in their specific room and "common/shared" area. I understand it's hard to fairly calculate for the shared area. But, here is my idea:

- When a tenant move out, I will assess the damage in the shared area and get an idea of how much it cost to restore it. That cost will then be split into 3 and deducted from the tenant's deposit. 

- Now, I will not have to necessarily repair/restore it right away. I will keep the deposit money and use it to restore at a later date when all tenants move out.

Is this legal?

Thanks all! Hopefully i can get some answers and learn more.

Tony

@Wes Blackwell Yep! I already have an agent. I am having him to look into a duplex in Citrus Heights this Friday.

He said the seller's agent already received multiple offers, but the duplex has been on the market for 54 days now. So, it sounds like those offers are in limbo?

Thanks Chris V. And all others who patiently answered my noob questions lol. I have been on the edge of the pool, i should probably take a step forward.

Leslie Pappas with a pretty good return, why cant these investors have property manager takes care the majority of the work? I know it reduces cashflow, but if they have multiples, i see it is still worth the costs. Thanks for all others who replied. I am interested to see a few multi units. However, most of these have tenants. And the listing says do not disturb tenants. Does that mean that I wont be able to see the inside condition? Thanks again.

Also, a lot of these multi units that I am interested in have tenants occupied. It says do not disturb tenants. It sounds crazy to me to buy something without looking the inside condition. Is that normal? Do you buy tenant occupied property without looking the inside?

Wow ! Thanks a lot guys. I'm really hesitant to jump in. Not sure what to do when i actually get it. Whats considered a good and efficient operations?

Hi Andrew Johnson thanks for the info. I was thinking of more like investors are liquidating in hope for the downturn to buy more. But who knows! Some of these 'good cash flow' properties have been on the market for some time. Some are even more than 30-45 days. Is it really that hard to sell multi units?

Hi BP, I am still new at this whole investing. In my other post, I had decided to go for an SFR and aim for an appreciation in Sacramento area. I have not found a property yet. However, as I was looking around, I saw a lot of multi family units for sale with tenant occupied. Looking at the numbers , the majority of them makes good cash flow (in my opinion). I also looked at Stockton after reading @wes blackwell 's post. The cash flow is even greater for multi family units. So, Why are these for sale???????, If it does making that much cash flow every month. I dont understand why people are selling it. I appreciate the insights on this. Thanks!

Wes Blackwell I did run the numbers and here is my analysis. Older homes (10-15 years age) costs about $340-365k. Plus I have set a higher budget for maintenance. Some of then even needs some minor work to get it ready for rental. After all said and done, i would have netted negative cash flow of about $300-400 every month. For new built home, which was about 30-40k more (roughly about $200 more in mortgage), i get $500-600 more in rents. This will net me pretty much zero cash flow. The HOA does not limit anything on rentals. In fact, their agent says they have interest liat for rentals. Both of these properties fall into the Mello Roos category. Btw, the new homes that I am aiming for is build by Beazer. Location wise, i think its perfect. Cant say much about build quality yet. But the models looks good to me.

Wes Blackwell i did find a couple duplexes that yield cash flow. However, the seller only want to sell BOTH duplexes. If i have enough capital i'd do it. But i can only afford one. Plus, this will be my first investment property EVER. Spending on two duplexes at once, will lead me to sleepless nights! I have decided to go for a long term appreciation for now. Looking to invest in SFRs. I found that brand new homes are more compelling than he older ones. Higher rent income, less maintenance. What do you think? The price is really only 20-30k more, which is $100 a month. Yet the rental income is about $300-500 more than older SFRs.