Interview: The 2-4 unit real estate income market in Sacramento

Part 2 of 3: I sat down recently with Sacramento real estate broker Joel Wright to discuss the 2-4 unit residential-income market in Sacramento. Joel specializes in working with investors and he knows his stuff. We hit on topics such as prices, inventory, rent levels and current trends with duplexes and fourplexes in the Sacramento area. Let me know if you have any questions and check out The Wright Report also for a very detailed analysis of the local market. View Part 1 of this interview series here and watch the new segment below.

Here is a graph of all duplex and fourplex sales in Sacramento County over the past three years. What do you see? Does anything stand out to you?

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook.

Comments

  1. says

    Some random thoughts. The graph really shows a level trend and the prices are not showing the typical downward angle decline like the SFR market shows. I had not noticed this in San Jose much, because many short sale duplexes are on the market here, but they take forever to close. The explanation in the video surely is a telling story, if the banks are not willing to short sale, then the investors HAVE to pay off the mortgages in full, and discounting is not happening. Duplexes lower than 180k may need a lot of cash to rehab. Finding a move in ready duplex at 180k or more might not be a good cash flow though if the rent is 1600/mo. Counting on appreciation is not a good idea either, it may be California, but Sac is not going to appreciate for many years. The $36k is assuming that its land value only, maybe a meth lab? It might be a good tear down because the zoning will allow for a nice new constructed multi family and just start over and get the highest rents for a larger configuration. Any builder developer should take that idea on readily because they have the labor and skills that simple investors just dont have. Fourplexes are great for cash flow as long as that price is right, at $3200/mo there is more room to work. Looking at the graph, if fourplexes on the graph start at $250k (fixers) and 2/1 configuration to get $800 each would be a bargain as long as its not mold or fire damaged. Joel mentioned pricing for the $300k level for move in ready, not much room for positive cash flow. The rent rate is everything, and being realistic (and not wrong) before you buy is imperative to making a good decision. Spending $300k to almost break even may not be worth the effort. Nice commentary and video and this is so very interesting to me.

    • says

      Thanks, Sonja. Joel’s $180K figure makes good sense to me. I see duplexes and fourplexes priced at $100,000 or less all the time. The graph I made illustrates that they do sell quite a bit lower too. But the low sales are in particular areas that tend to have certain challenges anyway and rents and property values are really struggling. Multi-unit properties priced at a higher tier of the market will command greater rent because they are in better areas for the most part. $300K did surprise me. I wondered if he meant $200 or $250K since he went on to explain how he just bought a couple properties for his client at $200 and $220K.

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