Sacramento

[mountainman]

Hi,

I have been looking to invest in a duplex is Sacromento area.  What are the occupany rates in Carmichale, Elk Grove or anywhere else?  I have looked at a couple rent rolls and found near 25% vacancy.  This is kind of scarry, since cap rates are barely 3-5% even with 5-10% vacancy and impossible to stay cash flow positive, certainly not with any kind of mortgage.  Please concince me otherwise!  

[NorCalRealtor]

YOur stats seem to be in line with what I can see for Sacramento areas you mention below. Are you heart set on DUPLEX type properties or are you open to SFR's? What is your return goal on your investment? Lots of SFR's have come to market for rent at fair monthly rent making DUplex options not as attractive as they have been in the past. They are still great opportunities for investors but this market is still far from normal.

DRE#01324382

[mountainman]

Thanks,

I like the idea of the duplex, probably, for some of the same reasons others like it too.  Diversify rental income, may be lower maintenance per $/rent, "street cred" to leverage this experience for future opportunities.  I looked at condos only because there I can avoid getting a mortgage.  Will check into SFR.

Return goals?  Well, round trip after tax ROI on these properties have to be at least 10% for any reasonable investor.  5% NOI, and probably more, should be rock bottom minimum, give the mortgage rates of 4%.  But I am toying with RE to diversify my career options, so returns are not that important.  Besides, there are plenty or people who think that one can never loose money on CA RE, so I will always be outbid.

Here I said it  

[mountainman]

Talking to myself here, regarding my prior post, of course, 5% NOI is actually 5% cap rate.  

I looked at SFR and numbers look really bad.  You get about 70c/sf in rent and may be about 6-8% gross rate to price, i.e. your cap rate will be way below any morgage rate, if not negative.  Even if RE is back to growing 20% a year, it will take 10 years to recover from such handicap (and taxes at the exit).  What am I missing??  "CA RE never goes down" argument?