Recent Investor Sales
It has been heavily reported lately that investors are returning to the Sacramento marketplace. Unlike the specuvestors of the bubble years, these investors are banking on rental income, not appreciation, as their primary source of profit.
I used some fairly best-case assumptions for valuing these deals. This includes no financing costs (100% cash deal), 1% property tax, 6% property management fee (minor maintenance included), $100,000/year gross income for the investor, 100% occupancy, and they get their asking rent.
So how are these deals working out? Judge for yourself:
7442 St. Tropez Way: Asking rent: $1250. Price paid: $163,760 on February 2, 2009. Price to rent ratio: 130:1. After tax ROI for first year: 5.9%
8474 Sunblaze Way: Asking rent: $1450. Price paid: $430,000 on June 20, 2008. Price to rent ratio: 297:1. After tax ROI for first year: 2.8%
1416 Lockhart Way: Asking rent: $1650. Price paid: $292,000 on May 20, 2008. Price to rent ratio: 177:1. After tax ROI for first year: 4.5%
1849 Acari Ave: Asking rent: $1250. Price paid: $161,500 on November 7, 2008. Price to rent ratio: 129:1. After tax ROI for first year: 5.8%
9108 Jonell Ct: Asking rent: $995. Price paid: $216,000 on January 16, 2008. Price to rent ratio: 217:1. After tax ROI for first year: 3.8%
Are these returns any good? I guess it depends on how you like to spend your time. It's tough to get 6% from any passive investment these days; the 10-year T bill is yielding 2.7% right now. Personally, any active investment that yields less than 5% per year is just not worth it, so I wouldn't be a landlord at these returns.