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SACRAMENTO INVESTMENT NEWS & UPDATE

Chris Ryan Intelligent Investment Solutions! February, 2020 Stone Creek Volume 3 - Issue 2

Sacramento Rent Trends: Managing Investments to a The average Sacramento rent for single family homes Profit. remain, relatively, unchanged this month, as compared Over this last decade, Sacramento has to January. Sacramento is still ahead of the national experienced a healthy residential rental average at ~+.2%, with other neighboring cities market. Many economic events have experiencing slightly higher increases in individual rent contributed to an unprecedented increase rate, based on location, condition, and neighborhood in the “realized” median-rents for both amenities. With additional rent control legislation single family and multifamily homes. In proposed, investors seem to be on the fence. Residential most cases beating the national averages! For Investors, Sacramento has investment purchases on a downward trend. This could been a good place to invest in real estate. Unfortunately, for many 1st-time be due to new home construction near completion. Investors, their estimated net-cap ( profit margin ) has never been realized. This is, in part, due to inaccurate advice complicated by the absence of a Median Rent $/sqft comprehensive rental analysis. Successful Investors know that there is a direct $2650 $5.50 relationship to the analysis and the actual profitability of their investment. $2475 $4.69 The most underrated contributors to an under-performing are $2120 vacancy, turn-over, and lack of capital improvements i.e., deferred $2082 $3.88 maintenance. The key to improving the cap-rate can be found by following $1590 $1792 some simple rules: 1.) Provide your property at, or slightly below market value! $3.07 The lower rent pays you back with a longer, uninterrupted tenancy, 2.) Making $1360 $1060 $1184 small, “reasonable” increases to the rent will also eliminate vacancy and $2.27 $1.74 turnover cost. These cost can far out-weigh any increase in rent you might $1.46 $530 $1.26 realize - annually., 3.) Keep you property maintained and in good order. Don’t $1.03 $1.46 $0.84 defer repairs that could cause your tents to look elsewhere. $0 $0.65 1BD 2BD 3BD 4BD 5BD How to Prevent Tenant Lawsuits. Sacramento Rent by City As a , you need to be hardworking, proactive and attentive in order to prevent tenant lawsuits. No Call for information about your area! one wants to go to court. In fact, most landlord-tenant claims and lawsuits could have been easily prevented. City 1 BDR 2 BDR 3 BDR 4 BDR By implementing excellent Sacramento $1,255 $1,450 $1,675 $1,728 practices, you can eliminate the majority of reasons why a tenant might sue you. Citrus Heights $1,150 $1,383 $1,633 $1,888 Screen Tenants Properly: Although it might take some time, it is extremely Elk Grove $1,475 $1,695 $1,895 $2,150 important to screen any potential tenant. Check their background, credit history, and criminal record. Thorough screening typically prevents future Rancho Cordova $1,275 $1,495 $1,750 $2,225 problems that might arise – such as a tenant who trashes your place, one who doesn’t pay rent, or one who lets undesirable individuals move in. Roseville $1,400 $1,650 $2,000 $2,395 Document Everything: contracts set the rules that both and North Highlands $622 $1,250 $1,683 $1,825 tenants agree to follow in their relationship. A lease is a legal document that includes all business details, such as the rent, terms of tenancy, limits of Carmichael $1,025 $1,275 $1,673 $1,785 occupancy, fees and deposits, repairs, entry to rental property, and other Folsom $1,388 $1,477 $1,866 $2,355 restrictions.

Rocklin $1,533 $1,522 $1,925 $2,388 Stay On Top of Repairs: When a tenant requests for repairs, set up a time that works best for the tenant to come and inspect the damage. Tenants will Fair Oaks $1,026 $1,388 $1,622 $1,833 respect you if you let them know when you plan to stop by. After the inspection, schedule the repair immediately. Orangevale $1,026 $1,366 $1,634 $1,843 Know the Laws: Each state has its own housing laws. As a landlord, it is El Dorado Hills $1,398 $1,467 $1,897 $2,466 important to be familiar with the landlord-tenant act that in your area. You need to know all the state statutes regarding rent, obligations, rights, security Placerville $1,150 $1,323 $2,000 $2,085 deposits, and . Rio Linda $655 $1,2250 $1,628 $1,833 There are many more to consider, but these would be the top four! For more information, please contact us at any time. Gold River $1,388 $1,666 $1,996 $2,433

ALL INFORMATION CONTAINED HEREIN IS NOT GUARANTEED. CALBRE: 01525591 Page 1 of 2 Sacramento County Sales Trends: Opendoor, , and the Sacramento real estate market predictions for 2020. Is iBuyer Business Model. the Sacramento housing market 2020 shaping up to Instant buyer, or iBuyer, disruptive continue the trend of the last few years as one of the business model represents one of hottest markets in California? The latest real estate data the most disruptive changes to from shows that the current median home value in occur in real estate. Its’ intent is to Sacramento is $374,970. Sacramento is currently a transform how consumers buy and seller’s market – which means there are a lot of qualified sell houses – while inducing change a relatively stable industry. Billions of buyers in the market place and not enough homes for dollars have been invested into iBuying since 2014, and the field is led by sale in the market. The home prices have risen by 5.2% ambitious, well-funded, and well-equipped disruptors. Opendoor & Zillow, over the last year and the market forecast is that home charge a variable fee for services, on average of 8-9% and rising up to 14% prices will continue to increase by 5.4%. Since 2015, the for risky properties. This is higher than the standard 5-6 % fee charged by median home price in Sacramento has increased from traditional real estate Brokers delivering full service! The only advantage to the $235,000 to $375,000. Outlook is optimistic. higher fees is - the “certainty” of the transaction. The only real incentive for using Opendoor or Zillow - is to the home sellers, who have a large equity For Sale Sold Pending stake in the property. Opendoor and Zillow claim to eliminate all of the hassle 2500 2000 2279 and uncertainty of selling a home with a transparent, typically lower than 2188 2059 1763 market, offer. In other words: Any repairs, inspections, or holding fees (and 1875 1741 1525 typically there are many) are directly deducted from the offer price! This is a 1548 1536 1563 1288 high price to pay for convenience! 1212 1203 1233 Opendoor and Zillow, claim to make “fair market offers” on the homes they 1250 1181 1220 1050 purchase? As indicated in the previous paragraph, this is a current point of 938 968 813 contention. Since the iBuyer business model launched the evidence strongly 625 575 suggests that they are not. Third-party data suggest a discount to market 313 461 338 value of up to 14% and an average of 9% - but is varies based on property 1331 1461 1234 1183 317 891 0 100 risk, condition, and repairs needed. SEP19 OCT19 NOV19 DEC19 JAN20 FEB20 The second-tier of iBuyer companies, including Redfin, Rex, Knock, Purple Bricks and others don’t have the national footprint, funding firepower, and transaction volumes of the leaders. The commission model is typically a flat Median For Sale Sold fee without any of the normal broker sales services. This places most of the $700k $641k sales and marketing process directly on the shoulders of the Sellers while $638k charging 2% plus the ”platform fee.” Typically 5% in total fees, with very few $589k $571k $583k $584k $575k services delivered. Purple Bricks has since withdrawn from the U.S market, unable to complete with full service brokers. $513k The conventional real estate sales model has gone through its’ own changes! $450k $427k A number of factors have forced a reduction in the standard commission $388k brokers now charge for full service! To stay competitive most brokers have $385k $385k $385k $385k reduced the listing and selling commissions commensurate with market $325k $380k $375k demand. The average sales commission of 6% has been on the decline for $263k several years now - settling at and average of ~ 4.5%. This includes the broker $430k $427k $597k $422k $429k $412k $200k compensation to the buyers agent. When comparing conventional brokers - to SEP19 OCT NOV19 DEC19 JAN20 FEB20 iBuyer brokers - not only is the overall commission less, the total number of services provided, are greater and the resulting sales price is, on average - is SP/Orig LP% AVG. CDOM higher! Sometimes, you really can’t build a better mouse-trap! 115% 50 99% 98% 97% 98% 97% 100% 98%

86% Real Estate Sales & Listings 40 GCR (Gross Cap Rate) subject to change - based on terms. 57% 1137 Smith Ln. #8 3701 Sardinia Island Wy. Sacramento 39 39 30 Roseville 38 3 Unit, 2 Bath, 900 sft. $ Bed, 3 Bath, 2822 sft. 29% 34 33 MLS: Off Market Sale MLS: 20003266 28 29 Sold: $190,000 Price: $538,000 Rent: $1800.00 Rent: $2600.00 0% 20 GCR 9% GCR 6% AUG SEP19 OCT NOV19 DEC19 JAN20 FEB20 2525 Stansberry Ln. 11828 Marsyas Way. Sacramento Rancho Cordova 4 Bed, 2 Bath, 2220 sft. 4 Bed, 3.5 Bth, 3470 sft. MLS: 19073881 MLS: Coming Soon Sold: $404,000 Price: $610,000 Rent: $2250.00 Rent: $2600.00 11344 Coloma Rd. #542 GCR 7% GCR 5% Gold River Ca 95670 1155 Wilson Ave. Bus: (916) 638-7916 5350 Yvonne Way Chris Ryan Tim Wesely Lincoln Mob: (916) 955-4753 Sacramento 5 Bed, 3 Bath, 2711 sft. Mob: (916) 606-1486 3 Bed, 2 Bath, 1502 sft. MLS: 19075698 MLS: 19058898 CAL: 01407482 Sold: $275,800 Price: $500,000 CBL: 01525591 / 01312295 Rent: $1800.00 Rent: $2550.00 GCR 8% GCR: 6%

ALL INFORMATION CONTAINED HEREIN IS NOT GUARANTEED. CALBRE: 01525591 Page 2 of 2