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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I just invested more money into my mutual funds and my 401k. I will add more this year.
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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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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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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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Austinhousingbubble says
You should try the bacon of the month club for your parents.
http://www.thepignextdoor.com/bacon/traditional.html
Excellent investment as well for that old maid aunt.
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Scottsdale, AZ
I hear you Roberto. Most of the good stuff has dried up. Lots of SFH still available in central phoenix/south mountain though. But I'm still skeptical about buying rental properties now that the government is on their way to that foreclosure-to-rental conversion plan. That's going to dump a ton of properties onto the market when it hits and (most likely) drive down rents.
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EightBall says
never touch the stuff.
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I just realized that the stocks I bought last year doubled in value this year. LOL.
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APOCALYPSEFUCK is Tony Manero says
Hahahahahahaha..
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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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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
"18,000 foreclosures coming..." save your lol, 1.5 years ago, Phoenix had over 50,000 foreclosures in the pipeline! Thus, you actually just quoted one of the factors encouraging me to buy now, rather than wait.
As to the government to rent rather than sell foreclosures objection:
who cares? Most of the foreclosures are going to investors anyways... And I view the government as probably the least capable competitor for me. Will their hired managers advertise on craigslist? Show properties on a moments notice? Upgrade them the way I do? Sure!
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roberto,
You really think it's a bad idea for an outsider to try to invest there? I was just briefly looking at 4-plexes and more on redfin in Phoenix, and it seems like the numbers are great, but it worries me that they almost seem too good to be true. Wouldn't it be possible to find someone out there to help guide me to areas that are ok, or is that unrealistic?
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bubblesitter says
bubblesitter says
The problem is the stock market can fall harder and faster than the real estate market.. look at 2008. On the other side of the coin it can rise just as fast also...
The thing is..if your predictions of another 40% drop in the housing market come true... The stock market is going back to 6000 or below... People predicting higher interest rates should know people will flee the stock market in mass numbers in the coming years... if interest rates rise.
Boomers won't have any equity left to tap from their homes, so they will quickly start withdrawing in large quantities from their 401Ks for basic necessities... Right now they are still funneling into the market because there's no where else safe to put their money.
This will change if housing crashes again... and interest rates rise... It's like a see saw.. .right now we are back close to 2007 stock market highs... as if everything is magically better.
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swilliamscc says
And the stock market will crash around that time too... People think low rates are just helping the housing market... Low rates are the only reason the stock market is back close to peak levels too!
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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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Los Angeles, CA
Ok people the 'when rates rise' question is a joke. They wont and cant raise rates. Interest on national debt would destroy the empire.
I predict rates will be super low like this the rest of our lives. Like Japan.
The FED will raise THEN lower the rates just enough to churn the loanowners into one refi after another to extract the maximum in banking fees from the debt sheep (see last 30 years of rates see sawing up and down but always down even more).
Roberto is gonna do very, very well because he knows his farm and manages them himself.
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Los Angeles Owner says
I sold my stocks,now try selling your house. :)
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Madison, WI
Wow, cheap taxes, and lots of home for the money, hard to find in my area, having some larger rentals is not bad at all, if you price em just right your always going to have tenants.
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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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Real Esate is an interesting game. All the boys I know. Some well known big boys. They aren't doing as much as one would think. Anything a investor hates is equity loss. Especially on a turn, making payments. They payments cause jitters. Mostly the experinced don't care and wait for the landing.
ArtimusMaxtor - MasterPP your hometown investor rapper.
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One more point. If you aren't paying cash, you are renting from the bank. Stop saying I own. You don't own a thing until the bank can't take it from you for missing one payment.
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$500 a month in expenses and nothing put aside for repairs. Only makes money because you are doing the work yourself. Sounds like a bad investment to me.
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Scottsdale, AZ
robertoaribas's website
swilliamscc says
1. maybe it sounds bad, because you are really bad at math? I use $1000 a year for expenses, 11 months rent for income, and i come up with a 25% ROI not even counting loan payoff...
"another liar...claiming to own homes..." jacktard, my name is in my profile, the county website is www.maricopa.gov you can look up all my purchases.
Some other factors: TODAY there are less than 19,000 homes for sale on the mls here. We are selling 7000+ a month... 2.5 months inventory? that is tighter than 2005. Those 18,000 foreclosures in the pipeline are not enough to have more than a small effect at Phoenix sales rates.
asking prices have been climbing for over half a year, you can verify this on housingtracker.net
If you care to look back to 2005 and 2006 on zillow, I called the bubble. I got 100 to 1 negative comments on there, and I sold 4 of my investment properties then. Now, the same data that drove that decision, is telling me to buy everything I can get, right now... What is your track record again? swilliamscc says
how stupid is that? I guess you don't own your car either, if you drive it without paying the registration it could get impounded... and you don't own your tv, because if you don't pay your income tax the IRS could liquidate it.
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Beverly Hills, CA
EightBall says
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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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MARICOPA AZMA Median Price Sales Volume
Community Zip Code 3Q2011 % Chg* $/SqFt 3Q2011 % Chg*
All homes $125,000 -7.4% $69 24,171 22.1%
according to dataquick real estate news home prices were down 7.4% in the 3rd qrt. in Phoenix yoy and still dropping.
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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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63 male
Las Vegas, NV
bgamall4's website
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swilliamscc says
But bottom feeders are scooping up the lower valued homes. Some say it is an Asian invasion but I don't know for sure. Homes valued over 200k are probably getting killed.
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63 male
Las Vegas, NV
bgamall4's website
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ContStinks DeGroot says
My daughter has done a search of low end housing in Las Vegas. The inexpensive deals are being scooped up. From what the guy says in Phoenix, that is happening there too.
Don't call me a liar. We have looked carefully at houses in Las Vegas. What you need to know is that some areas are hot and many are not. We would not want to live in the "not" areas.
So statistically you are likely right. But you aren't understanding the dynamic. Banks crash the areas they want to crash and keep other areas afloat. So do the cash buyers.
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Baltimore, MD
$600/year for insurance and $1000 /ear property taxes on a rental sounds very low to me.
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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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Yes, prices are falling in many (probably most) markets. I do know Phoenix is on the rise - especially in the low end. And the part about lying and realtors need not be repeated - it is a given. That is part of the game and you need to always keep it in mind but don't let it get in the way of making deals.
Imagine if we avoided all liars? Forget lawyers. Don't sign up for any services in the USA as all are scams - cable TV, Internet, cell phones. And banks, too. Health insurance would have to go. Heck, the whole medical system is a big fat lie.
The way I look at it Realtors kind of are normal.
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Hold on there Horse Face. OK, you can still call realtors liars - fair enough.
But you have an issue with attacking people who probably know a lot more about the subject than you do.
I know you are pissed as you lost a lot on your home and you blame realtors for it. But don't vent your anger at others.
These discussions are not Binary. There is no right or wrong answer. Some of us are actually on the ground and know what is really happening.
I actually wish prices were still falling - I made MUCH more money when prices were falling. Why? Fewer buyers meant great prices at auction - with enough margin to flip. I have cash so I can buy. My only regret was not entering the market back in 2009 when investors were making 40K a flip.
Now San Jose - that is another story. Definitely still on the downslope.
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63 male
Las Vegas, NV
bgamall4's website
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GlobalRoamer says
It is always a good time to buy if you are a realtor. But we know that isn't true. Again, location and how banks are handling comps have a lot to do with what crashes and what doesn't crash as fast.
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I'd respond. But I don't feel like laughing.
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47 male
Lafayette, CA
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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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Foothill Ranch, CA
zzyzzx says
In escrow on a rental in Vegas (Henderson). Those numbers are right on.
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Scottsdale, AZ
robertoaribas says
I wasn't trying to discourage you.
Also, you are not competing with the government. You are competing with firms that bought homes from the government at a value that was probably one third to one half of what you paid. I hope I'm wrong on that value.