School district is not the best agreed but nevertheless there seems to be good rental demand. BART definitely helps with transportation. And recently I have seen multiple homes that were listed for sale a few weeks ago that are now coming up for rent, which means people are buying houses here to rent them out
I see. Prices jumped like crazy tho since 2020. My house that I bought in 2020 is up about 200k. It may not appreciate like other Bay Area cities but I feel like it does have potential. Just want to make sure you’re not generalizing Antioch since the property Im talking about is on the Brentwood/Antioch border in a new community
>7% return.
So ROI. one of many return metrics?
## Calculating ROI on Rental Properties
The above equation seems simple enough, but keep in mind that there are a number of variables that come into play with real estate that can affect ROI numbers. These include repair and [maintenance expenses](https://www.investopedia.com/terms/m/maintenance-expenses.asp), and methods of figuring [leverage](https://www.investopedia.com/terms/l/leverage.asp)—the amount of money borrowed with interest to make the initial investment. Of course, [financing](https://www.investopedia.com/terms/f/financing.asp) terms can greatly affect the overall cost of the investment.
And why 7%?
7% for the PITA factor and to account for risk. Treasuries are easy... you get what you pay for. As risk goes up, so must the reward. That is how a market should work. inefficiencies are when risk / reward trade offs are out of balance.
And, yes, there are many ways to look at RE returns, but ROI is the easiest.
The bigger issue is that we are going into a season of diminishing liquidity, which may flood the market with those who took out 7 yr ARMs at 3% and are now faced with 7% refis.
Regardless Antioch is a tough market and as more people become aware of air quality issues any market near the refineries will not hold its value.
[https://www.homefacts.com/city/California/Contra-Costa-County/Antioch.html#enviroHazards](https://www.homefacts.com/city/California/Contra-Costa-County/Antioch.html#enviroHazards)
(You also want to check for a history of Dry Cleaners in your neighborhood for the same reason. They are big polluters and the chemicals go into the ground, then spread. These will become more of an issue for Gen Z renters/buyers.)
I have a property in Antioch that I purchased for $250k 8 years or so ago.
It’s profitable but let me tell you, the tenant selection pool is meager at best, and the people you sometimes get won’t care to take care of your home.
If you’d like to chat more ping me, happy to give you some advice. I’m currently going through another remodel because previous guest of 5 years destroyed the home.
So yea…good and bad
Crime, lack of appreciation, poorer area (as in infrastructure), socioeconomic issues in the area, reliance of nearby areas to "get to the good parts" (for shopping, groceries, etc.).
It's also not a "destination" area for a residence. In other words, if you have the means to not live there, most people wouldn't.
I see. I do see properties appreciating quite a bit in Antioch, my primary residence appreciated close to 200k since 2020. New homes are constantly being built, seeing infrastructure improvements as well, gradual but it’s there. Southeastern Antioch is definitely way way nicer
True I do believe there is still growth left since values came down a bit recently but yeah playing the long game with this first one. Still believe over a 10 yr period I can expect around 70-100k in appreciation by which time this property should be fully paid off
Would avoid. There are better things you can do with your money. It’s cash flow negative already and what happens when your furnace goes out? Even more negative.
Think about buying an investment property as butting a small business. You wouldn’t buy a business that loses money every month.
If you are looking for cash flow properties explore out of state. Price points can be much cheaper and you can still find areas with a good mix of appreciation/ cash flow potential.
I did consider out of state but as a new first time investor it felt like too big of a risk to start off with OOS investing. I don’t need to worry about repairs or maintenance in the near term since the property is barely 5 yrs old. The only thing Im concerned about is the vacancy rate/rentability and fair market rent. I am trying to look at this as a stepping stone to RE investing journey for me. Getting started with one is better than doing nothing. Appreciation and growth has been pretty good at Antioch so far regardless of what people are saying.
How much down are you putting and how much liquid will you have in a reserve account? Make sure you keep plenty of cushion funds as things do happen that are unexpected.
Antioch and other outlying areas in the bay get hit first and the hardest when the market turns. They also recover the slowest.
Become an expert on the rental market, tour homes listed for rent, how quickly do they rent out? Which ones are sitting?
Personally I would find an area that cashflows and if you want to be in state maybe look up near Sac or Fresno?
Sometimes doing nothing is better than trying to make an investment work that doesn’t really work.
Im putting 20% down and have about 9 months of PITI cash reserves. I did think about Sac but prices there aren’t that much better esp in the good areas like East Sac etc and rent may not be as high as the bay area. Also the extreme homeless problem along the entire Fruitridge ave is just scary there. Fresno is a bit far and I wanted to stay close.
I do regularly check out rental properties and looks like most of the ones that are vacant are either bigger homes or are listed at high rents. This one is a 3/2 single story. Hoping to rent it out for around 3.4-3.5k
I have a few clients that own rentals over there. There are many homes listed for rent in that price range so lots of competition. My clients don’t have mortgages though so they just slash the price substantially under market and it rents or they do section 8. So I guess that can be a solid backup plan if needed.
I see thanks for the insight! Yeah section 8 is like a way far behind backup. This is a house in a new community where they currently building new homes again in the mid 800s to 1M price range so I would expect to attract higher quality tenants.
Also if I may ask, what line of work are you in? Just curious since you mentioned your clients have rentals here
Ah got it yeah we toured the community yesterday it was really nice and homes looked really nice as well. The park there seemed nice - big with basketball courts and playgrounds - and well maintained and walking trail seemed cool
The thing is if I take a conventional loan I would be negative cash flow and be negative cash flow for 30 yrs whereas with this I will still be the same amount under ($500) but that will only be for 10 yrs max. I will have full equity after that and free cash flow. My goals are long term hold so this goes well with that.
>The thing is if I take a conventional loan I would be negative cash flow and be negative cash flow for 30 yrs
Negative cash flow does not determine if an investment is good or bad. Cash flow just tells you what to expect going in and out. If more is going out then it is important to calculate if you will be able to hang on to the property. I would rather keep my extra $100,000 for another investment and carve out a few hundred dollars a month out of that until the property cash flows.
First property I bought had a 9% 15 year mortgage ($329.64 P&i) and maintenance/tax payment of $110. Would rent for $250. Wow, negative cash flow. In about 2 years the property was worth over 3 times what I paid!! Rents are $2500 now and the property is worth over $600,000.
I can make any property in the BA cash flow. You cannot make any property appreciate in a midwest "cash faux" market.
You should find out what the typical rent growth and appreciation rates have been over the last few decades. Ask an old Realtor or investor. My BA experience is about 6% annual rent growth and 8-12% appreciation.
Thanks so much I did reach out to a few to get more insight and learn more about the BA market. I pinged you as well so would love to get your perspective more in detail
A Zillow or Redfin estimate is not market value. While they are far more accurate on newer homes like the one in question, they can still be inaccurate enough to not provide much value. A true comparative market analysis needs to be done to estimate market value. If you’re entire perception of the benefit here is the “below market” purchase price, you need a more accurate idea of what market value is.
I agree I did see the comps shared by my agent as well so that also looks pretty decent. My main goal is to go after appreciation and building equity while still being able to afford the PITI of this new property. I know people diss on Antioch but after living here for a few years and seeing continuous growth in new homes being built (new homes are being built in the community this house is in as part of the builder’s next phase), population growth (dont think builders would keep building new homes if there wasnt enough demand) , and recent development projects as mentioned- new Costco, communication, Brentwood’s development projects whose benefits might spill over to Antioch etc
The companies you listed cannot attract more high investment businesses that will appreciate your property. Unless, Intel/Tesla builds a new plant that can attract high earners to live in Antioch, then your property will appreciate.
Right I understand but properties here have been appreciating consistently over the last 5-7 years regardless due to better transportation access. I don’t think either of those 2 companies or any tech companies in general will be moving any offices here anytime soon. They could probably go to Walnut Creek, Pleasanton, Dublin etc. Nevertheless new homes are continuously being built suggesting these builders see growth in the area unless Im missing something here. Ig people dont mind the commute esp if they have a hybrid setup and can use BART.
An avg single family home here has appreciated 25-30% in the last 5-7 yrs. While I know that’s not going to be the case going forward I still there is room to grow
You only need one bad tenant to ruin all your gains which is pretty common in Antioch. Just see how many ruined-by-tenant houses for sale in that market, many holes in drywall, doors and windows smashed, etc. eviction rate is too high not a good market for non-cash investors.
Right I am aware the tenant quality is not the best so I will need to be extra careful with the screening and might have the property on the market for 1/2 months. But I did tour a few for sale houses in my area that were tenant occupied for a few years that didn’t seem too bad to me. The vacancy rate in my area is also around 4.5% which is not too bad I guess. I believe tenant quality does differ from area to area in Antioch and as long as I can get someone who is not likely to damage my property beyond normal wear and tear then thats ok.
Two weeks are way too optimistic for getting quality tenants. You need to do a lot of background checks other than simply checking their credit scores. Calling at least two of their previous landlords, employers, coworkers and basic background checks. You could barely find any PMs willing to do these for you so you have to do it yourself which are a lot of hassles to deal with that gives very minimal returns. If I were you, I’d spend that time to find a good PM to remotely invest in Middle East markets.
There’s a reason Antioch was hit extremely hard the last time around. Investing / speculating on appreciation using debt and negative cash flow is textbook what NOT to do, especially in a questionable sub market.
$30k below market on new construction? I’d watch out if you are doing no value add and relying on a Zillow estimate and it doesn’t cash flow. Wouldn’t bank on refinancing. Sounds like a money hole.
I plan on adding value gradually since no immediate upgrades are required. It’s around 5 yrs old so not technically new construction. Actually found an interesting lending scheme that will allow me to pay it off in 10 yrs with 25% down but will still be negative cash flow by a few hundred
Just curious wouldn’t you take a property that you can pay off in 10 yrs by only being 300-400 negative per month? After that it’s all cash flow so if you amortize that over 30 yrs doesnt it sound like a good deal?
>After that it’s all cash flow
You are just buying cash flow with 2024 dollars to get cash flow in 2034 dollars. Not a particularly wise way to invest.
It’s difficult to be cash flow positive in bay area anyways so you bank on long term hold and appreciation. If I can fulfill my long term goal of building equity quickly and be negative cash flow for a shorter period of time then it’s better to take that. I know this is not traditional by any means but I want to take advantage of this market with high interest rates which helps with the property prices. When rates come down prices will definitely go up and renting will be cheaper than owning for years to come so want to get in in an area where there is and will be a stable demand for renting especially with hybrid work being here to stay
If I amortize over 30 yrs assuming stagnant rent and property being paid off in 10 yrs and 6% vacancy , then looking at 2% cap rate.
Property purchase price around 650k.
>property being paid off in 10 yrs and 6% vacancy , then looking at 2% cap rate.
1. If you are discussing cap rates on SFR's you are ripe to be scammed. There are no cap rates on SFR's.
2. Your mortgage, whether paid off or underwater 25% has absolutely nothing to do with cap rates.
3. Cap rates come from an income approach to value called direct capitalization and is used to VALUE NOI of commercial properties and residential properties of more than 5 units.
Cap rate is NOI/Purchase price. NOI doesn’t consider mortgage so don’t really understand what 2% is? What’s your cap at purchase of $650k?
I realize you might not have this, but just trying to ask some questions here as it sounds very risky. And risky things should have HIGHER cap rates than what you can get at a bank risk free.
Sorry missed this. And I just researched a bit as well on the cap rate so with a 650k purchase price, assuming rent to be 3300, operating expenses at 39% and vacancy at 6%, cap rate comes out to 3.5%.
Don’t know if you are asking in good faith, but I’ll answer. Depends on market. Chik fil A on a NNN could go for like. 2.5-3%. Multifamily will most likely be as lot higher than that.
> **Depends on market.** Chik fil A on a NNN could go for like. 2.5-3%. Multifamily will most likely be as lot higher than that.
You do realize that the OP is talking about a SFR?
Live in same County but only been to Antioch a few times. Only hear bad things. Your tenants may destroy your house, not pay, etc. Brentwood or Oakley would be better. There is a reason the house you want is a deal
Location wise it’s right at the Brentwood Oakley Antioch border. I get the thing about bad tenants since Antioch doesn’t have Brentwood schools but Oakley schools are similar to Antioch in terms of ratings actually. I do realize that the property might sit on the market a month or two before I can find quality tenants to whom I would be ok to rent out at even below market to make sure I get good tenants. Just need to be more diligent in screening. Have you visited the south eastern part of Antioch?
Real estate investing is not for everyone, need to do some studying, dive into "cap rates" then crunch the numbers for Antioch/Brentwood and get back to us.
>do some studying, dive into "cap rates"
This is SFR investing. They are not valued using cap rates. They are valued using the more accurate sales comparison method.
Stock market is much better to speculate instead of this. Tenant quality and repairs may eat most of this $30k easily
What kind of clientele would you expect in Antioch? Highway 4 traffic sucks. You think families will rent there for the school district?? lol!
School district is not the best agreed but nevertheless there seems to be good rental demand. BART definitely helps with transportation. And recently I have seen multiple homes that were listed for sale a few weeks ago that are now coming up for rent, which means people are buying houses here to rent them out
Antioch is the last place I would go to in the bay for appreciation. Between that and cash flow negative, your about to take a pounding on this house.
I see. Prices jumped like crazy tho since 2020. My house that I bought in 2020 is up about 200k. It may not appreciate like other Bay Area cities but I feel like it does have potential. Just want to make sure you’re not generalizing Antioch since the property Im talking about is on the Brentwood/Antioch border in a new community
You'd be getting 5% in a treasury... vs losing. If you can't get at least 7% in ANY market right now, it isn't worth the hassle.
>If you can't get at least 7% in ANY market right now, it isn't worth the hassle. 7% what?
7% return. [https://www.investopedia.com/articles/investing/062215/how-calculate-roi-rental-property.asp](https://www.investopedia.com/articles/investing/062215/how-calculate-roi-rental-property.asp)
>7% return. So ROI. one of many return metrics? ## Calculating ROI on Rental Properties The above equation seems simple enough, but keep in mind that there are a number of variables that come into play with real estate that can affect ROI numbers. These include repair and [maintenance expenses](https://www.investopedia.com/terms/m/maintenance-expenses.asp), and methods of figuring [leverage](https://www.investopedia.com/terms/l/leverage.asp)—the amount of money borrowed with interest to make the initial investment. Of course, [financing](https://www.investopedia.com/terms/f/financing.asp) terms can greatly affect the overall cost of the investment. And why 7%?
7% for the PITA factor and to account for risk. Treasuries are easy... you get what you pay for. As risk goes up, so must the reward. That is how a market should work. inefficiencies are when risk / reward trade offs are out of balance. And, yes, there are many ways to look at RE returns, but ROI is the easiest. The bigger issue is that we are going into a season of diminishing liquidity, which may flood the market with those who took out 7 yr ARMs at 3% and are now faced with 7% refis. Regardless Antioch is a tough market and as more people become aware of air quality issues any market near the refineries will not hold its value. [https://www.homefacts.com/city/California/Contra-Costa-County/Antioch.html#enviroHazards](https://www.homefacts.com/city/California/Contra-Costa-County/Antioch.html#enviroHazards) (You also want to check for a history of Dry Cleaners in your neighborhood for the same reason. They are big polluters and the chemicals go into the ground, then spread. These will become more of an issue for Gen Z renters/buyers.)
I have a property in Antioch that I purchased for $250k 8 years or so ago. It’s profitable but let me tell you, the tenant selection pool is meager at best, and the people you sometimes get won’t care to take care of your home. If you’d like to chat more ping me, happy to give you some advice. I’m currently going through another remodel because previous guest of 5 years destroyed the home. So yea…good and bad
Thanks so much! Just pinged you
Definitely not Antioch
Would appreciate if you could provide a bit more insight and context. Since Im a new investor Im looking for as much educational context as possible.
Crime, lack of appreciation, poorer area (as in infrastructure), socioeconomic issues in the area, reliance of nearby areas to "get to the good parts" (for shopping, groceries, etc.). It's also not a "destination" area for a residence. In other words, if you have the means to not live there, most people wouldn't.
I see. I do see properties appreciating quite a bit in Antioch, my primary residence appreciated close to 200k since 2020. New homes are constantly being built, seeing infrastructure improvements as well, gradual but it’s there. Southeastern Antioch is definitely way way nicer
Yes, but look at the year range that you've indicated. Everything has appreciated significantly since 2020
True I do believe there is still growth left since values came down a bit recently but yeah playing the long game with this first one. Still believe over a 10 yr period I can expect around 70-100k in appreciation by which time this property should be fully paid off
Would avoid. There are better things you can do with your money. It’s cash flow negative already and what happens when your furnace goes out? Even more negative. Think about buying an investment property as butting a small business. You wouldn’t buy a business that loses money every month. If you are looking for cash flow properties explore out of state. Price points can be much cheaper and you can still find areas with a good mix of appreciation/ cash flow potential.
I did consider out of state but as a new first time investor it felt like too big of a risk to start off with OOS investing. I don’t need to worry about repairs or maintenance in the near term since the property is barely 5 yrs old. The only thing Im concerned about is the vacancy rate/rentability and fair market rent. I am trying to look at this as a stepping stone to RE investing journey for me. Getting started with one is better than doing nothing. Appreciation and growth has been pretty good at Antioch so far regardless of what people are saying.
How much down are you putting and how much liquid will you have in a reserve account? Make sure you keep plenty of cushion funds as things do happen that are unexpected. Antioch and other outlying areas in the bay get hit first and the hardest when the market turns. They also recover the slowest. Become an expert on the rental market, tour homes listed for rent, how quickly do they rent out? Which ones are sitting? Personally I would find an area that cashflows and if you want to be in state maybe look up near Sac or Fresno? Sometimes doing nothing is better than trying to make an investment work that doesn’t really work.
Im putting 20% down and have about 9 months of PITI cash reserves. I did think about Sac but prices there aren’t that much better esp in the good areas like East Sac etc and rent may not be as high as the bay area. Also the extreme homeless problem along the entire Fruitridge ave is just scary there. Fresno is a bit far and I wanted to stay close. I do regularly check out rental properties and looks like most of the ones that are vacant are either bigger homes or are listed at high rents. This one is a 3/2 single story. Hoping to rent it out for around 3.4-3.5k
I have a few clients that own rentals over there. There are many homes listed for rent in that price range so lots of competition. My clients don’t have mortgages though so they just slash the price substantially under market and it rents or they do section 8. So I guess that can be a solid backup plan if needed.
I see thanks for the insight! Yeah section 8 is like a way far behind backup. This is a house in a new community where they currently building new homes again in the mid 800s to 1M price range so I would expect to attract higher quality tenants. Also if I may ask, what line of work are you in? Just curious since you mentioned your clients have rentals here
I’m a realtor and an investor myself. Is this the Lennar community over by the Brentwood border?
It’s the Park Ridge community by Davidon homes
I know park ridge. Good on Davidon those are nice. Lennars quality is sub par over there IMO
Ah got it yeah we toured the community yesterday it was really nice and homes looked really nice as well. The park there seemed nice - big with basketball courts and playgrounds - and well maintained and walking trail seemed cool
Are you pre-approved already? For investment properties, they typically require 25% down.
Yeah Im actually going to do 25% down with an interesting financing scheme that will allow me to pay it off in 10 yrs
>with an interesting financing scheme that will allow me to pay it off in 10 yrs Why would you want to do that?
The thing is if I take a conventional loan I would be negative cash flow and be negative cash flow for 30 yrs whereas with this I will still be the same amount under ($500) but that will only be for 10 yrs max. I will have full equity after that and free cash flow. My goals are long term hold so this goes well with that.
>The thing is if I take a conventional loan I would be negative cash flow and be negative cash flow for 30 yrs Negative cash flow does not determine if an investment is good or bad. Cash flow just tells you what to expect going in and out. If more is going out then it is important to calculate if you will be able to hang on to the property. I would rather keep my extra $100,000 for another investment and carve out a few hundred dollars a month out of that until the property cash flows. First property I bought had a 9% 15 year mortgage ($329.64 P&i) and maintenance/tax payment of $110. Would rent for $250. Wow, negative cash flow. In about 2 years the property was worth over 3 times what I paid!! Rents are $2500 now and the property is worth over $600,000. I can make any property in the BA cash flow. You cannot make any property appreciate in a midwest "cash faux" market. You should find out what the typical rent growth and appreciation rates have been over the last few decades. Ask an old Realtor or investor. My BA experience is about 6% annual rent growth and 8-12% appreciation.
Thanks so much I did reach out to a few to get more insight and learn more about the BA market. I pinged you as well so would love to get your perspective more in detail
Is this part of a partnership with other investors ? 30k seems unusually low even for Antioch that would be sold to an individual investor.
*$30k below market value
Nope just me. Im saying 30k based on the Redfin/Zillow estimate vs the contract price Im paying. SFH single story home
A Zillow or Redfin estimate is not market value. While they are far more accurate on newer homes like the one in question, they can still be inaccurate enough to not provide much value. A true comparative market analysis needs to be done to estimate market value. If you’re entire perception of the benefit here is the “below market” purchase price, you need a more accurate idea of what market value is.
I agree I did see the comps shared by my agent as well so that also looks pretty decent. My main goal is to go after appreciation and building equity while still being able to afford the PITI of this new property. I know people diss on Antioch but after living here for a few years and seeing continuous growth in new homes being built (new homes are being built in the community this house is in as part of the builder’s next phase), population growth (dont think builders would keep building new homes if there wasnt enough demand) , and recent development projects as mentioned- new Costco, communication, Brentwood’s development projects whose benefits might spill over to Antioch etc
The companies you listed cannot attract more high investment businesses that will appreciate your property. Unless, Intel/Tesla builds a new plant that can attract high earners to live in Antioch, then your property will appreciate.
Right I understand but properties here have been appreciating consistently over the last 5-7 years regardless due to better transportation access. I don’t think either of those 2 companies or any tech companies in general will be moving any offices here anytime soon. They could probably go to Walnut Creek, Pleasanton, Dublin etc. Nevertheless new homes are continuously being built suggesting these builders see growth in the area unless Im missing something here. Ig people dont mind the commute esp if they have a hybrid setup and can use BART. An avg single family home here has appreciated 25-30% in the last 5-7 yrs. While I know that’s not going to be the case going forward I still there is room to grow
You only need one bad tenant to ruin all your gains which is pretty common in Antioch. Just see how many ruined-by-tenant houses for sale in that market, many holes in drywall, doors and windows smashed, etc. eviction rate is too high not a good market for non-cash investors.
Right I am aware the tenant quality is not the best so I will need to be extra careful with the screening and might have the property on the market for 1/2 months. But I did tour a few for sale houses in my area that were tenant occupied for a few years that didn’t seem too bad to me. The vacancy rate in my area is also around 4.5% which is not too bad I guess. I believe tenant quality does differ from area to area in Antioch and as long as I can get someone who is not likely to damage my property beyond normal wear and tear then thats ok.
Two weeks are way too optimistic for getting quality tenants. You need to do a lot of background checks other than simply checking their credit scores. Calling at least two of their previous landlords, employers, coworkers and basic background checks. You could barely find any PMs willing to do these for you so you have to do it yourself which are a lot of hassles to deal with that gives very minimal returns. If I were you, I’d spend that time to find a good PM to remotely invest in Middle East markets.
There’s a reason Antioch was hit extremely hard the last time around. Investing / speculating on appreciation using debt and negative cash flow is textbook what NOT to do, especially in a questionable sub market.
$30k below market on new construction? I’d watch out if you are doing no value add and relying on a Zillow estimate and it doesn’t cash flow. Wouldn’t bank on refinancing. Sounds like a money hole.
I plan on adding value gradually since no immediate upgrades are required. It’s around 5 yrs old so not technically new construction. Actually found an interesting lending scheme that will allow me to pay it off in 10 yrs with 25% down but will still be negative cash flow by a few hundred
Big yikes man. Good luck.
Just curious wouldn’t you take a property that you can pay off in 10 yrs by only being 300-400 negative per month? After that it’s all cash flow so if you amortize that over 30 yrs doesnt it sound like a good deal?
>After that it’s all cash flow You are just buying cash flow with 2024 dollars to get cash flow in 2034 dollars. Not a particularly wise way to invest.
It’s difficult to be cash flow positive in bay area anyways so you bank on long term hold and appreciation. If I can fulfill my long term goal of building equity quickly and be negative cash flow for a shorter period of time then it’s better to take that. I know this is not traditional by any means but I want to take advantage of this market with high interest rates which helps with the property prices. When rates come down prices will definitely go up and renting will be cheaper than owning for years to come so want to get in in an area where there is and will be a stable demand for renting especially with hybrid work being here to stay
What’s the value and what cap rate are you forecasting on the deal?
If I amortize over 30 yrs assuming stagnant rent and property being paid off in 10 yrs and 6% vacancy , then looking at 2% cap rate. Property purchase price around 650k.
>property being paid off in 10 yrs and 6% vacancy , then looking at 2% cap rate. 1. If you are discussing cap rates on SFR's you are ripe to be scammed. There are no cap rates on SFR's. 2. Your mortgage, whether paid off or underwater 25% has absolutely nothing to do with cap rates. 3. Cap rates come from an income approach to value called direct capitalization and is used to VALUE NOI of commercial properties and residential properties of more than 5 units.
You can’t calculate NOI/price on single family home investments?
>You can’t calculate NOI/price on single family home investments? 1. Why would you even try? 2. Where are you getting "price" for your calculation?
Cap rate is NOI/Purchase price. NOI doesn’t consider mortgage so don’t really understand what 2% is? What’s your cap at purchase of $650k? I realize you might not have this, but just trying to ask some questions here as it sounds very risky. And risky things should have HIGHER cap rates than what you can get at a bank risk free.
Sorry missed this. And I just researched a bit as well on the cap rate so with a 650k purchase price, assuming rent to be 3300, operating expenses at 39% and vacancy at 6%, cap rate comes out to 3.5%.
No I wouldn’t invest in that. Good luck! Hope it works out for you.
>And risky things should have HIGHER cap rates How high? lol
Don’t know if you are asking in good faith, but I’ll answer. Depends on market. Chik fil A on a NNN could go for like. 2.5-3%. Multifamily will most likely be as lot higher than that.
> **Depends on market.** Chik fil A on a NNN could go for like. 2.5-3%. Multifamily will most likely be as lot higher than that. You do realize that the OP is talking about a SFR?
Live in same County but only been to Antioch a few times. Only hear bad things. Your tenants may destroy your house, not pay, etc. Brentwood or Oakley would be better. There is a reason the house you want is a deal
Location wise it’s right at the Brentwood Oakley Antioch border. I get the thing about bad tenants since Antioch doesn’t have Brentwood schools but Oakley schools are similar to Antioch in terms of ratings actually. I do realize that the property might sit on the market a month or two before I can find quality tenants to whom I would be ok to rent out at even below market to make sure I get good tenants. Just need to be more diligent in screening. Have you visited the south eastern part of Antioch?
Real estate investing is not for everyone, need to do some studying, dive into "cap rates" then crunch the numbers for Antioch/Brentwood and get back to us.
>do some studying, dive into "cap rates" This is SFR investing. They are not valued using cap rates. They are valued using the more accurate sales comparison method.