Vet Trying to get into local market

[Cody Williams]

Hello I am Cody,

I am trying to start my journey and i want to get into my local market. I have some concerns though. Do to the influx of Californians to my town the deals in my town seem out of reach. The median Income for my area is only about 45-55k a year and now a home is 100k+ more than it was 3 years ago. So basically I'm looking for some guidance if I should stay in Bullhead City AZ or find another market close so I could use a VA loan?

[Mark Ernst]

Welcome Cody! 

Affordability is a big driver. Typically you want renters to make 3x rent, or another way about a 3rd of their gross income for housing. Renters are going to be on the lower end of the Median income. Let's say they make 4k a month or 48k a year. They could afford up to around $1300 a month maximum. rent. That's less than most mortgages for houses there in Bullhead, let alone the rest of the costs involved in a rental. Expect 50% (50% rule) of your rent to go towards property costs, not including any mortgage. So net on $1300 a month is likely around $650 a month for a cash purchase.

Prices on houses went up really fast. They are currently slowing, declining or staying steady. They may (and likely will) reverse and decline based on higher interest rates, higher unemployment, and the recession that's coming. (or here)

Do your due diligence, find an area with decent prices and rents. Then use the 1% Rule (200k house should rent for 2k a month) the 50% rule, then if it still makes sense look into it deeper. If you can't find an area that supports these, then maybe wait or try something else?

Can you find a duplex or triplex and live in one area, then rent the others? Can you find a fixer, fix it up, live in it, and then sell in a few years with no tax consequence? (typically 2 years) Are you in an apartment, and could buy for the same cost as renting? Tip for new people starting out - Buy less than you can afford or want - don't buy a property as a "Dream home" it is an investment. 

Maybe partner with someone? Lots of options. 

Good luck!

Mark