What's up with Arizona?

Question

Hi, my name is Austin Bull and I'm a new REI from Arizona. I'm 26 and work an hourly job as a mid-level plumber. The hurdle for me right now is that with my pay rate, I can only get pre-approved for a little less than 300k by myself.

I want to get into the game in Arizona because I think the market is one that will still grow. But your average 3bd, 2bath house in a decent neighborhood seems to be at least 350-450k right now.

Should I keep looking in az? Should I go out of state to get in the game that way?

I'm planning on house hacking, so I should be able to afford a 350-450k house with roommates, but I don't know if the banks trust that since this is my first property and the DTI would be like 55-70+% on those loans.

I'd like to avoid co-signing with my parents, but may have to . Any other glaring options you all see that I may be missing?

Thanks!

Account Closed · Answer

I have one that will be coming available soon near Grand Canyon Univ. that would be a good choice. What I've found is any property near a drug treatment center or near "the zone" is subject to break ins and squatters. So anything within 6 to 8 blocks on either side of  I-17 and anything south of I-10 I stay away from.

Mick Hofmann · Answer

I would definitely connect with a lender to talk about options. There are lot of loan programs out there that you could qualify for. Are you open to a duplex or triplex, 4 plex? Sometimes you can use the rents from those to qualify for a home.

Austin Bull · Answer

@James Wise, Thanks for the comment. I'm thinking the same thing. AZ seems like a great opportunity for investing. I plan to start here and then perhaps move on in the future.

Austin Bull · Answer

@Susan Thelen, Thank,you for the detailed response and the great information. I think the biggest thing I got out of your comment was to contact a mortgage broker. Being new to REI, I think I should take advantage of soe professional expertise in lending instead of trying to learn it all myself before getting my first property.

Austin Bull · Answer

@Jake Kain, I'd love to come to some local meetups. Which ones would you recommend? Thanks!

James Wise · Answer

I would agree with you that Arizona is a growth market. I recommend you keep saving and take care of your own home before thinking about going out of state to buy cheap rentals from dudes like me. Always, always, always take care of home base first.

Susan Thelen · Answer

Hi Austin,

Thanks for sharing your situation and seeking advice. As an aspiring real estate investor, it's important to carefully consider your options and make informed decisions. Let's discuss a few points to help you make a decision.

• 1. Local Market Assessment: You believe that the Arizona market still has growth potential, which is a positive sign. It's crucial to research and analyze the market trends, including factors like job growth, population influx, and infrastructure development. If you have confidence in the long-term prospects of the Arizona market, it may be worth pursuing properties there.
• 2. Budget Constraints: Your pre-approval limit of around $300k may pose a challenge in finding a suitable property within the desired price range of $350-450k. However, your plan of house hacking with roommates could potentially bridge that gap. While it may lead to a higher debt-to-income ratio (DTI), it's essential to carefully evaluate the associated risks and consider whether you can comfortably manage the financial responsibilities.
• 3. Financing and Loan Options: Banks generally assess the borrower's creditworthiness and evaluate the risks associated with the loan. As a first-time property buyer, there may be some hesitancy from lenders due to the higher DTI. However, it's not impossible to secure financing. You can explore different lenders and loan programs that may be more flexible or cater specifically to investors. Consulting with a mortgage broker or loan officer can provide valuable insights and help you find suitable options.
• 4. Co-signing with Parents: While it's understandable that you'd like to avoid co-signing with your parents, it could be an option worth considering if they are willing and financially capable. Co-signing can strengthen your loan application and potentially increase your borrowing capacity. However, it's essential to have an open discussion with your parents about the implications and ensure everyone is comfortable with the arrangement.
• 5. Exploring Out-of-State Opportunities: If you find it challenging to meet your investment goals in Arizona's current market, exploring opportunities in other states could be an alternative. Look for areas with strong rental demand, positive economic indicators, and potentially more affordable properties. Conduct thorough research on the out-of-state market, local regulations, and property management considerations before making a decision.

Ultimately, the decision depends on your specific circumstances, risk tolerance, and long-term goals. It's recommended to consult with a real estate professional, financial advisor, or mentor who can provide personalized guidance based on your situation. They can help you evaluate the pros and cons of each option and make an informed choice.

Best of luck with your real estate journey!

Jake Kain · Answer

@Austin Bull Come out to some of our local meetups! There are a lot of individuals doing the same things you're looking to do out here. I'd be happy to share the ones I know of with you.

Aj Parikh · Answer

Hi Austin, I am a huge fan of out of state investing and Long Distance Real Estate Investing was one of the first books I read before I built my portfolio in Cleveland. One of the strategies I used was working with a couple of turnkey companies and getting started in a mid-west market. I would love to connect and help out so feel free to reach out.

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