WatchA year ago, I posted 3 condo rentals I was buying. The market has changed, and such cheap condos are now impossible to find in Phoenix, ( I know this is antithesis to the bears on here, but I could see each one easily for $15K to $20K more now), and while I did stumble into one more by luck, the deals are few and far between. One tenant moved from one of my condos to another, and I evicted one tenant out of the 4 ( I had one I've owned for 15 years) but all in all, I've had less vacancy and repairs than I estimated when purchasing them.
So, I'm buying single family homes with mortgages. The latest one is $76K for a 4 bedroom 2.5 bath 2 car garage home near downtown. The area is shitty, but my other inferior 4 bedroom half a mile away is rented for $1095 a month. Factor in $1000 a year for taxes, $600 for insurance, $50 a month for HOA, and 4.5% loan with 25% down, and my monthly expenses will be around $500.
Note, I do not recommend doing this from out of state. I do a lot of my own maintenance work, and have local contacts to help inexpensively when I need it. I have a partner who helps with the management, as I am often too busy to get over there when necessary. See the Las Vegas thread to see how the inexperienced can get hurt in a market they don't know, and don't live in.
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Just freeze-dried my third ton of potatoes.
Restored a Vietnam-era flame thrower.
When cannibal anarchy hits, I'm going to be rich in what matters: durable foodstuffs and ordnance.
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Knew too many people (boomers) who lost their ass in both real estate and equities either because they timed their exits wrong or through blind faith/insouciance. I never really understood the American obsession with either, and for the most part, invest in what interests me. I have a 401K and some other crap, but I never look at it.
Investments to date: my wife's career; artwork; rare auto parts; rare hi-fi/recording components/parts; running shoes.
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Homes and condos will drop another 30-50% in the west. One year of slight increases in prices when the Fed is spending trillions to temporarily keep mortgage rates way too low and unsustainable is not a trend. When rates return to fair and are market driven, home prices will collapse again. It's coming.
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Oh! and I just paid my taxes for the year, so tack that on as an investment in the country. Huzzah!
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63 male
Las Vegas, NV
bgamall4's website
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ContStinks DeGroot says
It is very risky. However, it is probably far less risky than doing the same in Las Vegas.
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Scottsdale, AZ
robertoaribas's website
Agreed on the bay area... I finished my graduate work at Berkeley and got the hell out of there. Ok I went to LA next for a few years, but I finally learned, and left forever!
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Wallingford, PA
Thanks Bgama and Tony, Phoenix is off the list, especially when there a 1000 small towns that:
Offer nice homes for less than 100k
Have their property tax under 1k/yr (have control of expenses and pensions)
Have reasonable weather
I thought I had heard "everything" when I first moved to PA and was told stories of people needing to move because of high property tax (which only go up -- a lot) in this part of the state -- big problem. Last year I was in the credit union getting a fantastic rate 2% cd and spoke to a manager to find out whether homes for sale were being priced anywhere near appraisal and the tax issue came up. She said some the loans they were making were for people needing to pay their property tax. The "savers" can never save enough in this current environment...
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Scottsdale, AZ
Buster says
No.
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I just realized that the stocks I bought last year doubled in value this year. LOL.
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Just checked trulia. 18,617 foreclosures on the market (auctions and bank owned only) better buy quick. LOL Total boom coming.
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Scottsdale, AZ
robertoaribas's website
In the areas i'm buying, I think the 75% price drops might be helping the market...
I bought 3/2 condos for 40K, that rent for $800 a month each. Really, how far are they supposed to crash? one had sold for $165k in 2006, this isn't 2002 pricing, this is below 1990 pricing...
the home I'm buying now is a 2005 built 1700 ft home with a 2 car garage and a yard. my $76K price to purchase is $45 a square foot, far below build cost, with the land thrown in for free. new builds a few miles away are in the 140K range for the same size home...
with a sub $500 mortgage on a home that will currently rent for around $1100, even if rents fall, I'll still make money, just less money. And that is far less certain than the tongue waggers on here think. Vacancy in the entire Phoenix metro is under 10% now, at the worst it was over 13%. Still not a good number, but moving in the right direction. The house is literally within sight of downtown, so if gas goes sky high, renters will trend inwards as they are already.
There is other good economic news here: employment is increasing, tax revenues have increased so state and local layoffs may be nearing the end for this cycle...
The future is impossible to predict for certain, but you have to invest on the data you can see, not on pure speculations that may or may come to pass.
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Gilbert, AZ
I have 3 houses rented out in Gilbert that I bought between 2002 to 2004. Each one started out as my primary residence and when I bought the next one I rented out the old one. The market in AZ started going crazy in 2004 so I stayed put in the 3rd house until two months ago when I moved into my 4th and started renting out the 3rd. The rentals are all about 10% underwater now, but for each one the rent covers the total mortgage,insurance,tax,HOA & prop manager so I'm not worried about them being underwater. Each rental is 3bed/2bath ~1700sf in nice residential areas and I get between $1200-$1400 rent. Each time a tenant has moved out I've found another within a week or two.
In hindsight I should have sold them near the peak, but hindsight is 20/20. I agree with Roberto that at today's prices, you can't go too wrong when the mortgage is $600 and the house rents for twice that.
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What a coincidence. When I was new to the game. I liked to exaggerate. Saying I bought so many houses. When in fact it was not true. Trying to inflate the market. I thought it was a good idea of course. However buying 10 over the course of time (the good times). Might have Ment at the present time. I really bought one and had one under contract. Hard cash dosen't always mean its a good deal of course they loose out to. Yet to be bent over the closing table. (its the HARD part in HARD cash.). Inflated markets just not going to happen of course. Keeps going south day after day.
I watch as Zillow and Trulia try to inflate the market every once and a while. Investors are fast fish sometimes learning by osmosis. I know some really smart ones. Then again I've seen some really transparent ones.
One more time rates are bullshit. Its the amortization.
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Beverly Hills, CA
Around here, most landlords keep the rent and neglect to pay property taxes, insurance and mortgage payments, but yet they will try to evict any tenant who is late with the rent! Many of these landlord-investor types are also Real-tards. It should be a federal offense to collect rents from people who actually work and not pay the mortgage payments, so you can keep the rent and buy more insider deals for 10 cents on the dollar, refi and not pay that mortgage. SLIMEBALLS ! I guess we all must take a weekend RE course so that we can be Real tards too?
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Robert - Well done. The nay-sayers are just jealous. I don't understand why people get pissed when they discover I made a few hundred thousand flipping houses but think it is OK I made the same on Apple stock? At least I took some vacant property and made it into a home for someone.
I fully agree with Robert as I also have properties in the Phoenix area. Auction inventory has been low for at least six months - a good indicator. People are bidding auction properties up to retail value - another indicator.
There are a LOT of buy and hold investors in Phoenix now. Rental returns are still fantastic. Sure, rents will go down over the long run - but returns will still be good if you paid next to nothing for the property.
I actually am leaving the Phoenix market as there are few flipping opportunities left (it was great for a few years though). I do have some rentals but don't want my cash tied up as flipping requires a lot of cash (financing is too costly for flips).
I'm searching for new markets that have flipping opportunities. Wahoooooo!
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It's best to put the childish twit who calls everyone a realtor on ignore. He's only here to troll.
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63 male
Las Vegas, NV
bgamall4's website
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GUAB says
I know Asians are betting on Las Vegas. Don't know about Phoenix.
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Headshots if you've got marksmen skills.
Body shots if not. You can let them bleed out a little and finish them off with your feet. Tenderizes the meat at the same time.
GameOver says
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I'm out of here.
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It is not that hard to believe his story. I currently have mortgages on 7 rentals and my primary in Solano county (Bay Area outskirts). All are positive between $400-$900 per month. I do some work myself, but over the years found two handymen that can do pretty much everything for $20-$25/hour.
My 8th rental has a verbal bank acceptance.
Bubbles naturally over-correct. 17 years ago my first house I purchased in this county (city of Fairfield) for $91,500 - it was a HUD house, and needed everything. That same house in the same condition and same area, you are lucky to get $91,500 right now.
The problem I have now is banks able to lend to me or refinance me at all. Even with 25% down, Fannie Mae/Freddie Mac regulations that most banks follow kick you to the curb after 4 mortgages.