Low Interest Rates Help Offset High Priced Sacramento Duplexes

At 12 X’s Gross Income The Cash on Cash Is Skinny… But So What…? Low Interest Rates Will Help Offset the High Prices.

If you are thinking about buying a Sacramento Duplex I would like to warn you that the income on these Duplexes many times is going to be lower than market.   Many Sellers over the years get used to the same tenants and many of them will let the rent slide under market because the tenants have been there so long.

But when they go to sell, it becomes a bit of a problem if the rents are really well below market.

Rent Control Is The Problem with Existing Low Rents

Don’t forget that we have Rent Control.  While you can’t raise Tenants Rents to what the current market is, you’ll be able to raise them each year 5%+rate of inflation.  If a tenant was to move out because they bought a home or moved away that will be the time to get the unit at market.   However in the mean time you’re stuck with them because of Rent Control up to a point.

A Quick Follow Up Review

I wrote about 4 properties a couple of days ago and thought I’d update you with what the Cash Flow would be on each of these properties.   These figures assume you get the property at the “offer price” shown on these Cash Flow Proforma’s.

10996-10998 Hirschfeld, Rancho Cordova – The nicest of the bunch and had the most income.

Click here for the Proforma Cash Flow Analysis

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3416-3418 Viking Drive, Sacramento, Ca  – a 2 bedroom 2 bath unit that is vacant and could be rented at market.  This one looked terrible from the street but I think if the new buyer makes an effort to clean up the front, inside is nice enough we can get a decent rent amount here.   The problem with this one though is the existing tenant on the other side is only at $975 Per Month.

Click Here for the Rent Survey 

Click Here for the Proforma Cash Flow Analysis

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8919 Montoya, Sacramento  3 bedrooms 2 baths on each side – I think the curb appeal could have been nicer.  Rents are high on the side that is updated but below average on the other.

Click Here for the Proforma Cash Flow Analysis 

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9104 Nasreen Drive, Sacramento, Ca – This one was the roughest of the bunch.   I did post a video of the interior of the vacant side.   I think there should be a discount on the price a little deeper than the others because of it’s condition and low rental rate of $850 on the occupied side when it should be at or over $1,350.00.

Click Here for the Proforma Cash Flow Analysis – It’s a Pending Sale if you can believe it.   We’ll see if it falls out of escrow.

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If you are looking for a Sacramento Duplex for sale, then call/text me or drop me a note via email.

In the Mean Time…?

Make it a Great Day…!

Ed Favinger Broker, CRS, GRI, SFR     916.203.1260    ED@EdFavinger.com

 

 

 

Sacramento Duplex Market Update – Post Covid-19

Sacramento Duplexes in Good Condition are Selling – If Priced Right..!

 

That’s always the story isn’t it really in just about any market ?   Well maintained properties priced accordingly to the market conditions will always sell, many time with multiple offers.

Since the last update regarding sales data,  I did some follow up research to show you what sales have been like since the last post I submitted over a month ago.   Remember this is the sales data for the following zip codes: 95608, 95610, 95621, 95628, 95630, 95825, 95826, 95841, 95827.

The Sales Data from the May 12 post entry disclosed a List Price to Sales Price Ratio of 99.5%.  The information below that I’ll share shows the market still pretty warm and some properties with more than a couple of competing offers.

My Duplex sales Summary effective June 15, 2020 shows there’s a little bit of a price dip on some of the Duplexes for sale because as you’ll see the List Price to Sales Price Ratio is now at 97.7%.  This information is from closings occurring after May 7th up to June 15th.

You will notice however the Gross Rate Multi-plyer (GRM) has an average now of 12.81 for Sold/Closed Duplexes which is down from the 14 GRM for Active, Pending & Sold/Closed Transactions in the Summary from a month ago.

With fewer properties on the market we’ll see what happens in the next few weeks but I think you’re going to see an uptick in sales because we’ve got more pending now with the Average Days On Market down or the same for Pending and Closed Sales.

The Duplexes that are priced over the market or in poor condition you’ll see have a much higher Days On Market Average.

Rental Market is pretty good now too.   Units in good condition are renting up quickly at top dollar in spite of the Covid-19 situation here.

Bottom Line…?

If you are looking to purchase a Sacramento Duplex, give me a call at 916.203.1260.  Texts work too or you can send an email to me at Ed@EdFavinger.com.   We not only can help you in your purchase, but we also provide “2nd to none” Property Management as well.

If you are thinking of Selling a Duplex, I want to talk with you.   I can show you how to get the most out of your investment.

In the Mean Time…?

Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI, SFR

 

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Sacramento Duplex Market – Is It Dead…?

Duplex Market Is Active… Just Not As Much As it Was Before

Yes the Real State Market is a little slow but for those of you that are thinking of jumping into the Residential Income Property arena and thinking of buying a Sacramento Duplex,  I’m happy that you stopped by and took a minute to check this out.

It’s been a while since I’ve posted anything on this site but going forward I’ll be doing more and more here.

Effects of Rent Control and Covid-19

You may or may not be aware that we now have Statewide Rent Control from the passage of AB1482 last year which came into effect January 1, 2020.    Last year, the City of Sacramento also passed a Rent Control law that included a Rent Control board.

The result is they’ve capped the annual rent increase to no more than 5% + the local CPI which was 3.3%.   They also  included some tenant protections such as “just cause eviction” standards.

So we start things off the year with Rent Control and then the “Declaration – State of Emergency”.  All evictions were stopped until the end of the declaration.

Not only that, but in Sacramento County the courts aren’t going to start any court proceedings for evictions for at least 60 days after the declaration is lifted.

Some Sales Data to Look at.

In spite of the somewhat negative news above, I did a little research to show you what sales have been like.    I don’t see a lot of movement in price changes from List Price to Sales Price and I notice the Gross Rate Multi-plyer has an average of 14 for Active, Pending & Sold/Closed Transactions.

The Sales Data below is from March 15th until May 7th and includes the Zip Codes that I work primarily in which are: 95608, 95610, 95621, 95628, 95630, 95825, 95826, 95841, 95827    .

Total Active for sale now  –  25
Avg List Price    –  $498,238
Avg Days on Market     –        34
Avg Gross Rate Multi-plyer -14

Total Closed Sales       –          15
Avg List Price    –  $480,527
Avg Sales Price  –  $478,027
Avg Gross Rate Multi-plyer 14.2
Avg Days on Market           –  19
Avg # of Offers Per Duplex – 4.5

Total Pending Sales         6
Avg List Price     –   $427,983
Avg Days on Market        –     17
Avg Gross Rate Multi-plyer 14
Avg # of Offers Per Duplex  – 2

I’ll have another post in the next day or so regarding what to look for in the current market to get the most out of your investment.   Some of the inventory out there now is a little high given the amount of rent you’re able to receive if they have current tenants.

In the Mean Time…?

Make it a Great Day

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

 

 

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Tenants Have to Follow the Rules or a Termination of Tenancy Could Occur

When Given a Notice to Enter to Make Repairs… Be Available

We recently had the occasion of having to serve a tenant on more than one occasion to allow a Plumbing company entry into his unit to make a repair on a water leak that the tenant originally called in.

The plumbing company made more than a few attempts to get into the unit, but the tenant was never fully cooperative. Plumbing companies and other vendors we use can not always make an “on time” appointment. They will do their best but a lot of times they will have a “window” of time.   For example, “well be there between 9-11”.

Personally I agree with the tenant that if they use a window, it means they have to be there a 9 but the vendor may not show up until 10:30.  However,  that is the environment we live in and while it’s sometimes inconvenient we have to get the repair completed.

When the tenant stood us up again, we gave him a 48 hour notice to enter.

On the day we were supposed to enter, we get there with a copy of the keys just in case the tenant wasn’t home which,  in this case he wasn’t,  although he said he would be.

Here’s a list of the violations of his lease.

  • The Keys We Had Don’t Work – Tenant Changed the Locks
    If you didn’t know, as a Tenant you are allowed to change the locks on your door, BUT, you have to give a copy of those new keys to the Property Manager/Landlord in case they need access,  as was this case. Since the tenant wasn’t there and would not be available, we had to drill out the key and replace the lock.
  • The Tenant had “unauthorized” pets in his unit !
    After we get into the unit we find the tenant has dogs that he never told us about and was not authorized to have.
 So What Can Happen To a Tenant in a Case Like This..? 

The Tenant is going to be given a bill for the replacement of the lock since he didn’t give us a copy.  He also had dogs and never told us or got authorization so he getting a Termination Notice.

The new Statewide Rent Control Law does not come into effect until January 1, 2020, so his “termination of tenancy” doesn’t require any reason for the termination.   This was a tool that made it easier for Landlords to get rid of Tenants who don’t follow the rules.

So the advice I’d give you if you going to be a renter is, please follow the rules.   Most property managers don’t like kicking people out of their homes, but if you don’t follow the rules that is what could happen to you.

If you are an Owner/Investor looking for Property Management Services, please check us out at Haven Properties, Property Management Services 2nd to None.

 

In the Mean Time…?

Make it a Great Day…!

Ed Favinger, Broker, CRS, GRI, SFR

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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

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

 

Rent Control Is Here in Sacramento & Soon Statewide

Get Your Rents Up To Market Now Before January 1, 2020 Because Rent Control is Here.

 

The State of California it looks like is about ready to implement a Statewide Rent Control Law that recently passed both house of the State Legislature and headed to Gavin Newsom’s desk.

According to the Sacramento Bee Article I have here for you, it won’t become law until 1/1/2020.

If you have not raised the rent in a long time my suggestion is to do it now and get it close enough to the current market rent as you can because after the 1st of the year you will be limited in what you can do.

In addition, the more onerous “just cause” eviction will now be a factor in cleaning up a property that needs to rid itself of uncooperative tenants that maybe laying waste to the property and intimidating neighbors.   In the past with situations like this, we’d only have to give a 30 or 60 day “termination of tenancy” notice which had no defense.  It could be for any reason at all.

We rarely ever used that tool, but it did come in handy when we had situations that our Property Management Company encountered from time to time.

CLICK HERE FOR THE SACRAMENTO BEE ARTICLE DATED  SEPTEMBER 12, 2019 09:48 AM 

Now if you think Rent Control is going to help, it’s not.  The people it’s meant to help won’t get it.

Related Articles

CALIFORNIA LEGISLATORS MADE A MESS OUT OF RENT CONTROL. THEY JUST DON’T KNOW IT YET | OPINION – Newsweek, Sept. 13, 2019

California embraces failed rent-control policies at the statewide level – Washington Examiner, Sept. 12, 2019

If you have more questions, please contact me at 916.203.1260 or drop a note at favinger@rwnetwork.com

In the Mean Time…?

Make it a Great Day…!