AZ investment properties: $60K for a 3bed/2ba house build in 2007, is it a good deal?

Question

Hi,
I just started with real state investment and I just bought one quite expensive rental property (TH) in SD before I got to know the wonderful BP. No wonder my rental doesn't  have a good cashflow. In fact, I doubt there could be any high cash flow property in San Diego.
Anyway, like many Californians, now I started looking into the AZ since it has such high foreclosures.
I just found there are many 3bed/2bath houses built in 2007 are sold just for around $60K. I was looking ate the zip code of 85138 and 85139. Those look quite like a steal to me as I figure that just the construction cost along should be worth that much money.
However, I don't know if they are good deal from the cash flow point of view.

As an example:

The average rent  for a 3bed/2ba I found from craiglist is about $750, but I don't know how long it takes to rent it out.

1. Vacancy rate, I guess the vacancy rate could be quite high as the location is about 20 miles away from the Phoenix.
2. High property tax. Even the house is on sale for about the $60K, about $43/SQ, the yearly property tax is still about $1.7K, or $1/SQ. Is it possible to appreal for a lower property tax?
3. High HOA. As those are new built neighbour, the HOA is generally $70/month.
4. ALL cash deal. As the purchase price is small, I don't even know whether banks/brokers are interested in such small loan amout. Or the high loan application cost might justify applying for a loan instead of cash. Then it's against the OPM rule.

So overall it doesn't give good cash flow, but how about appreciation?

Could someone give me any suggestion on whether or not I should still pursue on this path? It would be highly appreciated, especially from people who are familar with those areas (85138,85139),

Rich Weese · Answer

Don't forget the wonderful smell of cows on your way to and from your Maricopa home each day.....Yummy. You can find homes in much more desireable area, for not much more cost. Rich

Nick J. · Answer

I love the town of Maricopa!

The problem is that your 2 potentials don't work well in Maricopa.

First issue going to be rental rates/vacancy. While Maricopa is a great community, you'll be hard pressed to find a long term tenant that will rent in Maricopa but work in the valley(Phoenix Metro). For that to happen, you'll need to find a qualified tenant thats like me, would love to live in Maricopa and wouldn't mind the drive. Not a lot of people are willing.

2'ndly Appreciation isn't a word that Maricopa will see anytime soon. I could be wrong but I doubt I am. Maricopa blew up in size during the boom. It literally is a 'Boom Town'. Before the housing boom, it was nothing more than a farming community with an Indian Casino.

It will be a while before any significant appreciation happens there in that great little town/community.

Jerry Jones · Answer

Guys, thanks a lot for all your information. So far, I have been checking out the properties in chandler (85226) area. Not much inventories there. Should I just simply wait for the banks to release the forclosures or I should be looking for other areas like Gilbert?
Right now, I am just checking properties on the MLS with redfin. I am wondering if it's effective way to find great deal.
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Levi Gale · Answer

Because you are an out of state investor I donâ€™t see any reason why you shouldnâ€™t familiarize yourself with several areas.  When a deal pops up in an area that interests you perform your due diligence, run your numbers, and jump on it.  I wouldnâ€™t limit myself to just locating deals via redfin, however Iâ€™m not aware of how good the service is.  The bottom line of your post shows you have the right idea; network! Leverage other peopleâ€™s time to create inflowing deals create win-win situations.

I really canâ€™t say stick to a certain area, because deals are all over the County, and I think this post has already pointed out several.  Check them all out, hop on ARMLS.com and research some numbers that apply to your areas of interest.

John Morgan · Answer

Jerry,

Maricopa is decent, but to echo the sentiments of many, you will not get the long term renter.  Many are buying second/vacation homes there while others are short selling or foreclosing to move closer into the city.

Gilbert and the north east Queen Creek will yield properties from 60Kto 100K and pull in 800- 1200 per month in rent.  These will also give you a more long term renter as well as a faster rate of appreciation on the asset.
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Nick J. · Answer

Just fine for long term holds. I agree, better tenants will be found in the east valley but the price is also higher. I'm not opposed to long term holds in the west valley. Just stay away from MARYVALE at all costs regardless......That area just continues to decline.

Rich actually had a great point, some people can't handle the smell of cows all day every day.

Levi Gale · Answer

Everything Motivated said about Maricopa is correct.  I would like to add that Maricopa is still one of the top growing areas in the County; however itâ€™s a far cry from the boom days.  A far far far cry.  IMO appreciation is possible, but I donâ€™t think I would risk it over there.  As for cash flow you can get that all over the Phoenix metro area, and even the west valley.  For better tenants I would say Tempe, Chandler, and west Mesa.

Nick, I have a question about Peoria for you.  I and am working on my first flip there, and I know your feelings on the west valley I believe you said avoid the area between the 17, i10, and the 101.  Obviously flips are rather thin, and Iâ€™ll post how it goes probably in the next month.  But the question is what do you think about the area for long term holds?

Jerry Jones · Answer

motiv8td,
Thanks very much for your reply, I really appreciate it. 
While my CPA recommends me to buy real state in Vegas, I personally feel AZ has better potential.
Could you please recommend me some potential good neighbourhoods in Phoenix area? Thanks so much!

AZ investment properties: $60K for a 3bed/2ba house build in 2007, is it a good deal?

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