It is been heavily report lately that investors are on the rise in Sacramento. With Sacramento having one of the highest foreclosure rates in the country, it makes sense. Distressed properties make up approximately 70% of the market (REOs/Short Sales). With the rental market on the rise, investors are trying to obtain a steady stream of rental income.
If you have been thinking about becoming an investor yourself, here are some things to consider:
- Determine how much money you want to spend on the investment property.
- Most investors pay all cash because cash offers usually take priority in a multiple offer situation.
- If you would like to leverage your money, you can also obtain financing. However, to get a better interest rate, you need to put down at least 25%. For multi-family properties it can be anywhere from 30-35%.
- Most investors look daily for properties, so you need to have a good Realtor working with you to stay on top of new listings.
- Work with your Realtor to determine your ROI: 1) How much are other rentals going for in that area?; 2) How much will it cost to make the property move in ready (meaning what needs to be fixed)? 3) What are the ongoing fees? (HOA, Mello Roos, Taxes, Utilities, Garbage, etc.); 4) If you plan to hire a property management company, you can expect to pay 5-6% of gross income. 5) Don’t forget to account for vacancy rate and advertising! You should be looking for at least 5% ROI.
- Good deals go fast–usually within the first week of listing. However, if you are a new investor, make sure you see enough properties to understand the market before diving into anything.
- If plan on renting your investment property, make sure you understand the Landlord/Tenant laws by reading up online and consulting with an attorney. This step is crucial because one bad decision could land you in court with massive legal fees.
Bottom Line: There are some really great deals out there for people wanting to invest in real estate. Properties are basically 50% off right now. And if you plan to finance, interest rates have never been lower.
Posted by: Sheri Negri