All Forum Posts by: William Wiebolt

@Damien Lee I use the 1% rule to quickly analyze rentals from a high level. Basically, you're usually good if your rent/mo >= 1% of cost. In your example, to pay $375k, you'd need to get 3,750/mo in rent. Granted it's a lot less attainable now than 10 years ago when I started, but it's still a good rule of thumb to rule out properties or take a closer look quickly. Sometimes deals surprise me, like a house I'm buying for $260k and it gets 1,975/mo rent with low HOA. Pretty decent return with low interest fixed term mortgage. But yeah in general, if you can get 1% for rent, you'll generate 10% cash return after all expenses (or thereabouts). Just something I've been using since I started and it helps me quickly determine viability.

Also, $500/mo HOA is almost always a pass. Unless you're getting 5x the monthly HOA fee, you're almost certainly going to crush your cash flow. In PHX, condos actually have their values held down if they have high HOA fees. Because it's impossible for a deal like that to make sense for anyone other than an end buyer. Think about how much the HOA fee would add to your buying power if you add it to the mortgage payment... 300k mortgage payment is close to 1,500/mo.. so basically the $500/mo when added to a mortgage payment would allow you to buy an additional 100k of property.

Cheers

 Yeah not many people are talking about it. Here's the direct link to the guidance put out by them. They did it late on a Friday afternoon and there was no buzz. https://www.fanniemae.com/content/release_notes/du-do-release-notes-07292017.pdf

Didn't read the whole thread. But FHA loan debt to income limits are going up to 50% on July 29. So, I think we have a year or two left to play. But that probably means it's inevitable that the market is going into a bubble again.

My opinion (I read through about 70% of the thread), is if you are looking at turnkey properties and don't have a clear cut edge in buying them, just wait until you have the time to invest in your own education. You need to have an edge in my opinion, or an investment isn't worth it. I personally won't touch residential properties as strictly cash flow investments - I love buy and hold, but I do it when I see a good buying opportunity in a specific market that I think will see appreciation in the next 18-24 months. If you find an opportunity like that, then it really gets fun. To close the book on the TK thought though, I think if you find the right TK guy in the right market, and have the right financial cicrumstances (such as potentially investing your money out of an IRA instead of being exposed to the stock market), then it could make sense. Otherwise why bother.

As a heads up, I think FL is a good buy and hold market right now (pockets of it, anyway). I need to put on my big boy pants and make a move, because there are areas where the climate is right. I wouldn't be surprised to see a 15-20% gain in value over the next 18-24 months in many of the central FL markets. And rental rates are actually pretty good too, better than the 1% rule of thumb by quite a bit. I'll post again if I pull the trigger.

Lastly, I think 55+ communities are good spots for buy and hold in both AZ and FL. I haven't run into as much competition on them from fellow investors either, so maybe a bit ahead of the curve on this one Idk. But I see very low risk as long as you know the market. These boomers are going to retire at an exponentially increasing rate for the foreseeable future, and I think we'll see an increase in buying. The main thing I'd have to research is where the new master planned devs are giong in and when. 

Oh, and if you have some guts, I am buying in on this zipcode in AZ: 85021. Specifically the portion south of Northern Ave and north of Glendale Ave. Lots of commercial properteis changing hands in there right now, renovations happening on them and there are some really tasty prices on newer condos right now. As the neighborhood gets revitalized I think there are some 100% returns and home runs in here, but gotta be careful and do research. Location is good because the light rail is close too.

Cheers all this one got long sorry.

Will

@Ryan Kraft @David Faulkner Exactly right on the Trump call. North Dakota just went through an oil boom, and while I don't expect anything that crazy to come out of coal country, it has been a LONG 8 years for producers. The ones who survived without filing bankruptcy are definitely antsy to generate some revenue and pay down their bridge loans. The ones who are reorganizing obviously have an incentive as well. I am unfamiliar with coal country but have made a few calls. There is some foreclosure activity from what I can tell. Need to do more research.

Another interesting thing to keep in the back of your head. My plan is to invest in farm land once we are cashed out of the AZ/FL markets. If it wasn't for a bin buster crop this year farmland would be down further than it is now. Some areas around here have lost 40-50% of its value, and there is always a market for renting it. I think we've got 2 years of declining land values, maybe less if Le Pen wins in France. But too early to tell. In any event, keep it in the back of your head - it's a very attractive investment for both the financing/cashflow/appreciation side as well as the tax benefits.

@Ryan Kraft you are correct about blackstone. My thought is that they do not anticipate holding the assets into perpetuity, in fact without saying too much I am fairly certain that is the case. They weren't creating a new asset class, they were buying undervalued assets and seeking appreciation. They always find a way to get as much leverage on the things as possible, so they can make as much money on the way up as possible. Right now we've all been squeezing tenants, pushing the rents up. The rents are still weak relatively speaking, but at least they cashflow at 80/20 financing now. 

If you know something I don't know, fill me in. But I am fairly confident in saying they will sell the properties over the next 3 years. Whether they work a deal with an Opendoor or something like that, I don't know. I just know that this was the plan 2 months ago. I use property radar to track all the IH2 and other entities. So far nothing is moving. I'll definitley post if I see movement or if I hear anything.

I'm not necessarily waiting for them to sell. Moreso, I'm watching for it in case it happens earlier than I expect. Because if it does start happening, I will either need to liquidate quickly or lock in some long term debt and rent the houses. I plan to be out of the AZ rental market in the next 18 months, and I think that should be fine. 

@Francisco Garcia Jr Interested in your thoughts. I have opportunity to pick up 4 houses in Ancala, but they would need about $100-150k each in my opinion to get them presentable. My gut has been telling me we need to get into the higher end market a little more than we are right now, I would think it should follow eventually here. Are you talking the new builds in PV where they are knocking houses down and rebuilding? Or what developments in Scottsdale are you talking?

Our rentals are almost all in queen creek. We're flipping all over the valley, but primarily in the Chandler, Gilbert, Mesa, area. 

@David Faulkner

As a parting thought.. I've been searching for a market to get into that was hammered by coal over the last 8 yrs. If anyone is from coal country or knows of a good spot to take a look at I'd appreciate a heads up. 

@David Faulkner wow you guys type fast... I agree there will be a point in the not so distant future where either builders nut up and throw their hats in the ring in AZ, or Blackstones of the world decide it is a good time to start unwinding their portfolios, or both. I watch their supply very closely.

Agree with you on the financing piece - I just heard today for the first time that people are waiving appraisals and such. There is no way the market can continue rising as fast as it is now. I think we will go through previous highs and set new ones, but I wouldn't risk anyone's money finding out. It is also interesting to me that the foreclosure auctions have gotten so crazy. In my opinion people are paying retail for most of these properties. Until this year, we had literally bought every property we own (except maybe 20) from the auction. Never had an issue. I had to start working with wholesalers to pick up properties at a reasonable margin and I think over the last month we've picked up more than 50% from wholesalres and off market.

It's a crazy market, but a lot of fun. Just gotta keep buying them right, then there's no issue. I will watch closely what our competition ends up doing

We are in central FL, so commenting directly on Miami is not something I can do with any level of accuracy. 

Regarding the central FL market, I attribute the price drops to builders taking over the market. They are offering real estate agents bonuses for bringing clients to them, and offering buyers incentives to close. So that makes it very tough for the average family to compete when they try to sell their 5 year old home without the latest and greatest upgrades. The builders got ahead of us down there; we beat them in AZ. It's all good though, rent is about 20% higher in FL than it is in AZ so we'll still eat. And there is an opportunity right now to pick some houses up from sellers in these developments with a strong builder presence.

If you are curious what I'm talking about, just check the area out that these houses are located in. Click on a couple of the new builds that are for sale and read the listing descriptions - their giving everyone goodies. The development is called Providence and its in Davenport FL. 

I'm very bullish on FL market though, at least the area we are in. I have noticed it has followed AZ market since we got in in 2012.  Typically about 12-18 mo behind. Now the builders are holding it down by doing things that are unsustainable. I'm definitely going to buy a few more houses in the area and hold them for a year or two. It's much cheaper for consumers to buy in FL than it is for them to rent, and we have had a large amount of demand from the tenants wanting to buy our hosues from us. So it's coming, people are starting to come out of their foreclosures and getting comfortable with buying.

Regarding condos, I have had good luck in AZ but only own a few in FL. Haven't tried to sell them yet, so I don't really know. I do believe Miami was hit harder on the upswing by outside money though, so the condo market could have gotten pushed too high. If you have an address for me I'm glad to look. 

They have some crazy HOA laws in FL though, and the fact that their state is a judicial foreclosure state vs nonjudicial (AZ) is also a consideration. Govt. does everything slower and less efficiently than private sector, so naturally AZ cleared out their glut of foreclosures much quicker than FL. That is what I attribute the lag time to, if you look at AZ vs FL foreclosure rates you'll see its lagging behind about 12mo or a little more.

Cheers