All Forum Posts by: Adam Frantz

I also am an OOS investor from Seattle area who invests in Chattanooga. Is there something specifically you want to learn about?

Quote from @Account Closed:

As a final tribute to water (rain) we drove around the peninsula through the Hoh rain forest for our last NW trek. Boy, was that depressing. I don't miss Seattle a bit. ;-) (I know Shoreline is "different", but it really isn't in the grand scheme of things.) Lots of sweet water from the cedar river watershed into Lake Washington is great boating two days out of the year.

So, now about Arizona, some fun facts from a hot place: Lots of lakes and sunshine.

• Arizona is currently below 1957 water usage levels due to increased conservation methods and the decrease in water used for agriculture.

• Arizona has five times (5x) more water stored than we use and has never mandated municipal or residential restrictions on uses throughout our state’s history.

• It is unfounded to group Arizona in with other Western and Mountain West states when it comes to the shortage along the Colorado River because we’re far less reliant than competitor markets.

• Only 36% of the Arizona water supply is provided by the Colorado River; Nevada is 100% reliant, its California’s predominant water supply at 60% and makes up 30-40% of Colorado’s.

• Arizona is a national leader when it comes to the reuse of water. California sends more water back to the Pacific Ocean each year than the City of Phoenix uses in total. Not including the other cities around Phoenix 

There are actually two Arizonas.
First there is Norhern Arizona with ski slopes. Wah, you say? Yep. Base is at 9,200 ft and summit at 15,000 ft. The top of the Cascades in Washington run only around 7,000 ft with Snoqualmie Pass Ski at about 3,000 ft base. So, Arizona gets lots of snow. We're in the rockies you know. 

Then there is what we call the valley of the sun where most people live, Phoenix, etc. Lots & lots & lots of green golf courses and parks. It can get to 115 on a hot day in the summer, but winter beats Seattle's summers. And, during the summer we get Monsoon. Big rains. Lots of lighting and excitement. (none of that 3 week long grey sky stuff). In the south of Arizona there is skiing near Tucson as well.

I forgot to mention that up north in Arizona is a big hole in the ground that people fly in from all over the world to gape into for some reason. A river flows through it. They ought to make a movie with that name.

The drought is temporary & caused by a solar minimum and we will have too much water in about 6 years when the solar maximum returns.

And, if the ice caps melt like some worry about, we will be above the 2 feet rise in the ocean table. In fact, if it gets high enough, about 2,200 ft rise, Arizona will have ocean front and we will turn the area into resort beaches.

So, I have suggested they divert the Columbia river this direction rather than dumping it into the ocean, which causes the ocean to rise, but nobody listens. ;-)

 

I appreciate your perspective Mike. This is all really good information about AZ and how they are setting themselves up for any water concerns. I am glad that you found a place that you like much better than Seattle. The dark winters here certainly can take a toll. 

So it seems like Vegas has certainly figured out a solution that is more long term and AZ is taking steps to mitigate water shortages in the future by reliance on other sources than the CO river, but southern CA may have a real issue unless farms there significantly reduce their consumption in order to favor residential use over agricultural. Seems like a good opportunity for farmers in a different watershed to start replacing produce grown in southern CA. Thanks all for the input. I certainly learned a fair amount. 

Quote from @Darius Ogloza:

Underestimating human ingenuity/technological prowess is probably one of the oldest parlor games played since the dawn of civilization.  

Case in point: presently, the Mississippi floods thousands every few years in MO, IA, AR, LA.  A pipeline to NM, AZ and CA would go a long way to solving the water issue for both Midwesterners and West Coast residents.  Combine that with desalination and you are most of the way there.   

Markets are not perfect but they are more efficient than any group of prognosticators.  When land in Salinas KS starts seriously closing the gap with to Newport Beach waterfront, I will take heed of climate change's effect on RE values.  Until then, anyone who wants to sell CA waterfront cheap to avoid climate problems, please keep me in mind as I am buying.    

 I am not denying that those markets remain hot, nor am I suggesting that anyone sell off good performing assets due to climate concerns. I certainly think that human ingenuity can solve some of these problems in advance of them becoming problems. For example, Tuscon, AZ has been banking their share of CO river water for years in aquafers because they know that AZ has junior water rights to CA. What puzzles me, is that there don't seem to be any pipelines being dug or thought towards a solution before there is a problem, and yet these areas are growing in population and the housing markets continue to perform well. The markets are reflecting the present, but if we are supposed to be investing for the future, I find it difficult to see how growth in those markets will be sustainable without some drastic measures. 

I keep hearing folks talking about hot markets in CA, AZ, and Las Vegas. I left CA about 10 years ago due to concerns about water. I am confused though why many of these areas are on the brink of having water shut off and maybe power if the dam can’t run and yet they are still growing markets with high housing prices. If you are investing for the future, are these not concerns of yours? What am I missing?

Quote from @Kerry Noble Jr:

I dont know how comfortable you are with investing long distance.....but with 350k......you could purchase in cash, long distance, and then refi into long term financing

for instance you could find a property in STL for 150K and under in cash.....with good cashflow.....and finance into long term financing.....but use the cash as leverage into better deals....just a thought

Thanks for the reply. I only look to invest out of state, since my area is out of my price range. With that said, I thought about your idea, but wouldn't the refi only cover up to 75% of the purchase price of the house. So then I would have long term financing from a bank for 75% of the house and 25% in remaining HELOC. It would seem to me that this particular strategy could only work in a BRRR situation to completely pay off the HELOC, but please correct me if I am wrong.

My wife and I have purchased our first duplex out of state using money from a cash out refi. The property is stable and income producing with reserves attached. Rather than doing the long haul approach of saving up enough money over the next couple years to have enough to buy another property, I am considering using a HELOC on our primary residence to fund the next deal. We have considerable equity (about $350k) since we bought before the big upswing.

My questions then become, what is the best way to underwrite a purchase with a heloc (do you add in the heloc interest rate on top of what every other money we are using to buy the property)? Also, is it best to just take out enough for the down payment and repairs and let a bank handle the rest or buy more equity using the heloc money to hopefully get more monthly cash flow from the rental to pay down the heloc?

Thank you so much!

I have been striking out on my offers in other markets that I have been focused on, so now am expanding my research to include a third area, Des Moines, IA, in an effort to increase my deal flow across the 3 markets. I am an OOS investor with $125k of cash to deploy. I am looking for recommendations on good and bad areas and any insights that folks have on this area. I am looking for small multifamily, buy and hold, that appreciate and at least break even on cash flow. 

@Aaron W. @Matthew Crivelli

Thanks for the input gentlemen!

My wife and I just got the money from our refi and now have a big chunk of change in our checking account. While we are excited to get our first property, we are still searching for the right one. My question is: Does anybody have a good recommendation about where to place this money while we are in search mode? 

We can leave it in the checking account but there is very little yield on it and makes it hard to know how much other money is in there from our incomes and expenses. We don't really want to draw down any of the investment money to pay bills by accident. A money market account seems like a good possibility but we are unsure about the accessibility for when we need to pull it out. 

Any advice would be appreciated.

Thanks

@David Mo

Thanks for the reassurance David. We are searching around still trying to isolate the exact neighborhood in Milwaukee to invest in. So far, we are looking in the $100k-$150k price points for duplexes, which keeps us out of most of the really nice areas, which is ok because the price to rent ratios don't work out as well there anyway. We are also avoiding houses that are dirt cheap ($20k) and areas that have a bunch of dirt cheap houses because these don't seem like nice enough areas to us. We have been looking in River West, Washington Heights, Martin Drive, Park View, and surrounding areas.