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There are many things to remember when investing in real estate. Having a little bit of knowledge can help any investor be or remain successful. Dan Hines is here with us, today. Dan is Regional Manager here at Mynd Property Management, and he is going to give us his top five reasons why investors have found success in Elk Grove.
Alex Osenenko: Boys and girls, this is Alex with Mynd Property Management. Today, we’re talking about Elk Grove and investing in real estate, specifically in Elk Grove and how to be successful doing so. My guest today is Dan Hines. Dan, how are you?
Dan Hines: Doing great, Alex. Thanks for having me on. How are you doing?
Alex Osenenko: I’m doing great. So, Dan’s got a wealth of experience. He co-founded Raymond Property Management, which managed 1400 units in the Sacramento, Elk Grove area. And since about six months ago, Dan’s team joined Mynd and Dan is now Regional Director here at Mynd. So, Dan, let’s talk. Specific, let’s unpack some of the reasons why investors are successful in investing, specifically, in the Elk Grove area. Let’s hit me with the top five reasons, in your opinion, investors can be successful there.
Dan Hines: Top five. Well, first and foremost—diligence. Researching the area buying the property right. So, that is the number one. Elk Grove is a very high-demand, strong area. People flock to Elk Grove because of the school district. There’s lots of quality newer construction. So that’s reason number two.
So, one, make sure you know the area and make sure you’re wanting to buy there. Make sure you understand the basic expectations of who your residents for your tenant base will be.
Staying on top of market trends and growth. That also feeds into step number one. And, really what that means is a lot of people say that you will make your money on the purchase. You have to buy it right. So, you need to understand the timing, being in tune with what correct market rates are. It all goes back to the underwriting and making sure you’re really confident in the overall structure of the deal on the property.
Alex Osenenko: Do you have some tips and tricks on that, maybe? Sorry to deviate, but, maybe one or two little top tips on how to buy right? Especially right now when we’re in, what? August, September, 2019? Some people say the market is kind of hot and it’s going to cool down. I mean, what are your thoughts on that and how do you buy right today?
Dan Hines: Figure out what you think the worst case scenario is and if you can live with that, then consider doing the deal, meaning I think there’s a lot of investors that grab this pie-in-the-sky type of situation. If everything goes right, they’ll get really aggressive with their vacancy rates. They think that just because the property is new—and I’ll touch on this little bit later—just because it’s a new property they don’t think they need to factor in for expenses. All of those things still exist. It’s still real estate. These things come up. So, be conservative but still cautiously optimistic, but make sure that, if everything goes wrong—if the property is vacant for longer than you think, if you have to replace a water heater six months in—make sure that those things still pencil out and it’s a deal you can live with.
Alex Osenenko: Is Elk Grove’s main—and sorry to deviate, I’m just super curious on this particular pocket in and around Sacramento—do you think it’s more of an appreciation market where you buy and sort of hope for appreciation or do you see properties’ cash flowing?
Dan Hines: So purchase prices are pretty strong out there, so it won’t be a huge cash flow play for a lot of investors and unless you’re bringing on a lot of equity. It’s definitely a strong appreciation market. And then, turnover rates are usually very low. The submarket of Elk Grove, it attracts a lot of people that want the high-quality schools, that want the peace of mind that comes with newer property, higher-grade construction. There’s a lot of quality elements. That’s what attracts people. So, it’s traditionally a very stable more, more stable I would say, than other submarkets of Sacramento.
We are seeing property owners that have held properties for a handful of years to have a nice cash flow situation. But Sacramento, it’s been a very strong, quickly-growing market. So, purchase prices have been strong and there’s also quite a bit of new products going up there again, too.
Alex Osenenko: Gotcha. So we go back to the five reasons. One, you said, is know the area. Two is know your numbers? Number two?
Dan Hines: So number one is diligence. Number two is know the area. Three is staying on top of market trends and growth. Number four, and this is something that a lot of people overlook, know what your overall goals and exit strategy are. I think a lot of investors get into a property and hold on to it for too long. Maybe they don’t realize that they’ve already extrapolated 70% or 80% of their total potential value and they just sit in it for way too long to get that extra 5 or 10% with the value out. If you want to park some capital for a handful of years and exchange that for something better, know what that looks like and set things up correctly from the very beginning so you can participate in some of that.
Or if you’re the investor that you want to capture the equity and have that resident pay down your debt, and you just want to hold this as long as you can, put your blinders up, don’t pay attention with the neighbors are selling for, don’t get distracted by, do I think this is a good time to jump? Just be clear on what your goals are and be clear on what you want your exit to be in the very beginning.
Alex Osenenko: Gotcha. And so, that was number four—understand and build a strategy. Have your goals in place. And then, execute your real estate investment strategy based on those particular goals. Because some folks can be 10 years from retirement, some folks could be 30 years from retirement, and some folks can be in retirement. And that’s different goals. Obviously there’s different life paths and different situations. So set goals, then manage investment against your goals, not against cycles or what’s popular or what everybody is doing. Dan, what’s the last one, five?
Dan Hines: So in order to execute, you need to have a great team. So, from a CPA or tax preparer to a property manager, professional representation if you’re clinging on selling, build your team early. Have people and resources around you that you can lean on and learn from, that you can trust—a team that you think has your best interests at heart and get out there and execute
Alex Osenenko: Gotcha. Look, if you’re still watching, we have this whole series on both Elk Grove and Sacramento. You can just go to Mynd.co, go to Resources. Type in Elk Grove or type in Sacramento and you’ll see a number of these more insightful interviews about the area and how to go about investing.
We also run a number of events. Twice a year we run a MasterMynd event, we call them. So if you want to learn more, you check out our events and sign up for one of those events. Again, if you need property management services, we are here for you. Otherwise, I hope this video really helped you out. Dan, thank you for your time.
Dan Hiles: All right. Thank you.
Real estate investing can prove incredibly rewarding for many investors. So, having a little bit of knowledge can be the difference between lucrative returns and staying afloat. This is why it is key for investors to be diligent when researching the market or property in which they are looking to invest. This means staying on top of market trends and setting the right rents, as well. And, because a maintenance emergency is almost guaranteed, it is key for investors to have a dedicated team to answer the call when one does occur.
This is why hiring a property manager can be such a good decision. With a wealth of knowledge in the market and an established maintenance and management infrastructure, the right property management company can make the experience of renting a property easy and stress-free for any investor.