Tips for Buying Real Estate Today as a Sacramento Investor

A Sacramento investor today might want to consider buying a halfplex.

It doesn’t take a Sacramento investor to know that returns on money market accounts and CDs are fairly dismal at the moment. The stock market, too, can be a bit volatile, especially if you aren’t willing to risk a loss. In fact, I received an urgent letter from Capital One (which used to be ING) offering me one of the nation’s highest rates of 1%. You know, like any other Sacramento Realtor, we really don’t want to see interest rates rise but criminy, the rates of return for secure investments are so incredibly lousy and have been lousy for years. Can we have a little inflation, please?

I was thinking about this when a somewhat newer Sacramento investor called yesterday. She expressed an interest in the Bridgeway Towers condos, also known as the N Street condos. This particular investor did not want to spend over $300K for a condo there. Well, 5 years ago you could buy a one bedroom in the 500 N Street condos for $200K, but not today. Today they sell for about $350K on the small side. The larger condos on higher floors above 9th (which is the most desirable because you have an elevator to the basement) are about double what they were worth 5 years ago. But does that make a condo a good investment?

Five years ago, probably. There are still HOA dues to pay, and the difference that the HOA costs, applied to the sales price of a single family home, means you might make out better with a single-family home as a Sacramento investor over a condo. Besides, sales in the same complex, even distressed sales by some homeowners who needs to dump and get out, affect your value, whether you like it or not. There are just so many variables with a condo that you don’t have to deal with in a single family home.

That got me to wondering, though, if I were to buy as a leveraging Sacramento investor today, whose primary goal is appreciation coupled with potential for positive cash flow, what would I buy? Based on our current market, which is rising, and considering our affordability index — and let’s not forget the current Sacramento June Housing Market Report that reflects median prices in the Sacramento region at $400K — I might not consider buying a single family home in a prime neighborhood like Midtown. Not enough potential cash flow using leverage. Single-family homes in high demand areas such as Midtown will sell for more than $400K.

I would look where the strength always lies in the Sacramento housing market. With entry-level housing for first-time home buyers. Real estate 101. This is the foundation for our market. And that, in Sacramento, would be halfplexes. In fact, I’m working with a seller in South Land Park who is presently subdividing a duplex into a halfplex. As a duplex, on average, it would be worth about $400K. But as a halfplex, each side would be a minimum of $300K in South Land Park, adding another $200K of equity.

Halfplexes don’t have any HOA dues. It’s definitely affordable housing for first-time home buyers. Other investors have different needs, of course, and we counsel each Sacramento investor to meet their own goals. Just saying that this might be an avenue to explore, and I know the neighborhoods where a Sacramento investor might look. If you’d like help, just give the Elizabeth Weintraub Team at jingle at 916.233.6759.