Sacramento Four Plex For Sale But Income is Way Too Low

This Sacramento Four Plex for Sale has a List Price of $580,000, 16.11x’s Gross Rents.

Folks, now that we have Rent Control for the most part effective on Jan. 1, 2020 I’m seeing a few listings coming up like the one pictured at 5743 Blachly, Sacramento.   There are some issues any Investor in the market now should be aware of if they plan on making money on this property.  Sadly there are others out there just like this one.

I’ve always been told to “keep the rents at Market” at all times, because you’ll have the cash flow for reserves and repairs when needed.   When it’s time to sell, you’ll get your asking price with not many issues like the one you’ll encounter below.

This owner has the monthly rents almost $300 each unit below market or translated annually to be about $14,000 in missed income.

The Rents shown on the listing for each 2 bedroom 1 bath unit @$750 per month, with a Gross Annual Income of only $36,000.00, when it should be about $50,000.

Our Property Management Company, Haven Properties currently manage 2 Four-plex Apartment buildings in the immediate area on Keoncrest Circle.   The Average Rents for the same unit configuration as the one pictured are Blachly$1,045 and we even have one at $1,200.

HOW TO GET TO MARKET RENT… ?

The obvious solution for any Investor in this transaction is to raise the rents to the Market Rent for the area to make the deal work.   The only other option would be for the Seller to bring the price down to reflect the value of the existing rents which I’m sure is not an option the Seller has considered.

If you keep the current tenants you can’t raise the rents higher than the Rent Cap that’s part of the Rent Control Law.  The Rent Cap is currently 5% plus the rate of inflation for the area which is about 3%.

However the “work around” would be that either the Seller gives the existing tenants a termination now prior to January 1, 2020 or the Buyer does it when they close the deal,  hopefully before the end of the year.

However the Buyer is going to have some “turn over” expenses.  Those are the only two options I can think of because after January 1, 2020, Just Cause Eviction comes into play.

It makes a little tougher to sell now doesn’t it…?

The lessons learned are a few more hassles and roadblocks that could have been avoided if the owner kept the Rents at Market.   To see what I am talking about…?

Which one looks better…?

 

Think it over and in the Mean Time…?

Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI, SFR 916-203-1260

 

Related Articles

Daly City Landlords Line Up To Evict Tenants Ahead of New State Law  SFist.com

Los Angeles City Council moves forward with eviction, rent increase moratoriums LA Times

 

More Rent Control – Now You Must Accept Section 8 Vouchers…?

If you are a Landlord, You Should Pay Attention

With the recent passage of the Statewide Rent Control Act, (AB1482) another recent piece of legislation, SB329 was also recently signed into law by the Governor.

Click here for the notice we got from the California Apartment Association.

Be sure and read the last line of the of the article.

You can be sure because of the ongoing housing crisis that governments are going to be placing more of the burden on Landlords and Investors.

They will be forced to become more of a player/participant as part of the so called “social safety net” the legislators will foist on Landlords/Investors because of their inaction.

While I still believe you can make money in Residential Investment Real Estate if you are not participating to help elect political leaders who understand the problem, more regulations and laws might come into being that you don’t like.

Get your checkbook out and be ready to support the efforts of the California Apartment Association and other groups that are in favor of building more housing and not restricting growth.   If you don’t help get people elected who are committed to increasing the housing supply, it’s only going to get worse for everyone, Owners/Landlords/Tenants and First Time Home Buyers.

Is this the California you want to live in…?

I’d like your comments….

In the Mean Time…?

Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI, SFR    916.203.1260

Related Articles

L.A. City Council Moves to Stop Landlords’ Rent Hikes, No-Fault Evictions Ahead of New State Rules

 

Sacramento Rent Control is here & Statewide – What Are the Rules..?

California Apartment Association Has an Overview

 

Well it’s sad to say, but we’ve entered the area of State Wide Rent Control with the recent passage of AB1482 that was signed into law a couple of days ago by the Governor.

While this law could have been worse, it’s still takes away many protections for Landlords/Investors because they will not be able to easily raise rents to market rates or evict tenants that might pay the rent, but are disruptive to an apartment complex or not following the rules regarding care of their unit.

The real problem is the lack of affordable housing that is caused by the ever increasing regulations and barriers put up by governments, state and local.

I guess one good thing is there is no “enforcement mechanism” in place with this new State law, such as a “rent control board” that was created by the City of Sacramento.  By the way, that Rent Control Board will be funded by Landlords with another Annual Assessment.   So if a tenant has a dispute with you and at the same time owes rent to a Landlord, that tenant can easily get a Rent Control committee to hold a hearing delaying any kind of enforcement.

The rules, procedures and assessment amounts from the City of Sacramento Rent Control Board haven’t been published as far as I know.   So stay tuned and if you’re thinking of buying an investment property there or anywhere else in the State of California, you’ve got to be aware of the new law’s impacts.

You can still make money with investment real estate, but you’ll have to learn the new rules.

Managing a rental will probably be made a little more time consuming so why not hire a Property Manager.   A good one will help make you money and keep you out of trouble.

Check us out at Haven Properties, 916.990.0770 or call me anytime at 916.203.1260 if you have questions regarding Rent Control, the Rental Market or Residential Investment Sales.

Click Here for the INDUSTRY INSIGHTS prepared by the California Apartment Association.

 

In the Mean Time…?

Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI, SFR   916.203.1260

 

 

High Costs of Rent in Sacramento Turns Renters into Home Buyers

Old News To Us in Real Estate.

There have been several articles all over the print and social media about the rising rental rates here in the Sacramento Region.   It was only a matter of time before Renters would turn into Home Buyers because it’s cheaper.

Our Property Management Company with approximately 400 total units of various configurations has only 7 current vacancies with, we think,  another 7 coming up within the next 30 days or so.Hand writing the text: Buying a Home

So it’s no surprise to those of us who work in the field everyday when we hear another news report about the market.

So after listening to the morning news on KFBK I got another news story from KCRA Channel 3 talking about the same thing.

Millennials are beginning to buy homes because Rents are so high here they’ve now begun to figure out it’s a better deal to Buy and own.

I’ve noticed that a lot of the Sacramento Duplexes being financed by FHA loans which are only given to Owner Occupied Buyers.. another trend in my opinion.   I’ve written before about buying a Duplex to live in one side and rent the other.  No surprise to me of late seeing more people do just that.

If you are currently a renter and would like to be a Home Owner, contact me today and I’ll get you started on your way.

In the Mean Time…?

Make it a Great Day….!

Ed Favinger, Broker, CRS, GRI, SFR     favinger@rwnetwork.com  916.203.1260

Related Articles:

This is the Number 1 obstacle keeping people from buying a home CNBC

How’s the Real Estate Market…?

Foreclosures At a 20 Year Low

I get this question all the time from people asking me “how is the real estate market?”.

The short answer is, Great…!

I have some links below that will give you some insight but in the greater Sacramento Area I think it’s one of the best I’ve seen.   Why do I say that…?

Have you tried to get a contractor or handyman to fix something at a rental…?  When you’ve got contractors busy with a back log of weeks out, that’s probably one of the best signs of a great real estate market.

 

Click Here for an article regards the low Foreclosure Rate.

And if you’re an investor curious about rents, click here for that article.

Aerial shot of Folsom, California with Folsom Lake in background.
Aerial shot of Folsom, California with Folsom Lake in background.

If you’re thinking of getting into the market for a new home or you are an investor looking to purchase your first rental property or you want to add to your portfolio, please call/text or email me at anytime.

 

Looking for a Duplex to buy…?   I’ve got one that you should take a peek at.   Click Here for the information on this Bread and Butter Property waiting for you.

 

 

In the Mean Time…?  Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI, SFR    916.203.1260   favinger@rwnetwork.com