All Forum Posts by: Brian Volland

I will say that I've seen a number of stand alone homes with studios up to quads in the backyard in the Phoenix area. Clearly it is a strategy that works to some degree. Is the guest home separately metered for any utilities? Is there parking available next to the guest house? If no to either of these, have you thought about how you'll bill your tenants? Will you build a driveway?

Just some thoughts.

Welcome to the community! This is a great place for help and answers to a lot of questions, especially for the beginning investor. I hope you're able to find everything you're looking for. 

You can reasonably assume that you will not always have CapEx expenses, a vacancy, or repairs. Hopefully, the property is in good enough shape and your tenants are gentle enough to the property that the balance of your reserves will continue to grow. So, at what point so you say, "I have set enough aside for (vacancy, repairs, capex)" and start using those funds to help fund other investment?

As I start to build my road map for my first multi-family, I've of course been analyzing with CapEx, PM, Repair, and Vacancy. The question is, how much do you cap these reserve "pots" off at?

Here is what we've come up with but, considering my lack of experience, I'd like more experienced opinions on this. Since each property is different we chose to use percentages, mostly. Also we're trying to stay conservative so that we don't end up using credit cards if at all possible.

CapEx - This is indefinite up to the value of the home. Considering we are only putting 5% gross rents into it, that'll take some time but we figure we'd rather be prepared for complete catastrophe.

Vacancy - 6 months total gross rents. If we can't fill our vacancies in 6 months, we're doing something very wrong.

PM - indefinite. Even though we'll be owner occupying, setting it aside will give us some buffer if rates go up for some reason so we can reposition. Or it can be tapped for repairs if needed.

Repairs - 10% value of property. 

Thoughts?

@Ryan Dossey, thank you for the template and the advice. I'll look in to List Source and we'll see how that goes.

@Stone Jin, I am analyzing all the properties I find assuming rents don't change and ALL occupants, myself included, paying posted rent. So no freebies for me. If i see that rents can be increased based on surrounding properties, it's an incentive to pursue the property but not something to factor in to offer price since it's a hypothetical and not actual numbers.

I do plan on living in it. As far as the 1% rule, I've been able to find those or at least felt confident enough that I could reasonably offer and meet the 1% rule. The issue I've been facing has been that deals that work out right off the bat tend to be in terrible locations. 

Now I haven't run the numbers on the Tolleson duplex as I'm trying to avoid 1/1 units only (I'd like to get small families so 2/1+), but I can tell you that next to it is an industrial lot that runs the length of the block and that it's within about 300ft of a train stop for medical waste. Add in that homes surrounding are stockpiling cars/debris and that parking for the property is on the lawn and that puts this property right in an E rating and off my potential list.

I'll, of course, keep looking. I just hope to see something that works that doesn't also make me recoil at the type of tenants it would likely draw. Time will tell. @Stone Jin, thanks for the input.

Just to elaborate, I'm not looking for true turnkey properties. I'm looking for MFRs that could pass a VA inspection. I think price wise I'm in a good range for the area. I'm just having trouble finding properties that cashflow period, much less well, on this side of the city.

I'm shooting for between 100k-300k in a C+ (on anew A-E scale) or better neighborhood and in well kept condition. Basically turn key but with room to update or improve.

I am just starting to look for small MFRs on the west side of Phoenix (Glendale/Surprise/Peoria/etc). 

At this point, showing up to the game as late as I am, is my best bet to find another investor who is trying to offload and/or cold calling owners? 

The MLS hasn't been very promising so far nor Craigslist when it comes to cashflowing properties.

Clearly, based on a number of recent posts, the Phoenix area market is heavily in the seller's favor right now. Before I moved here a little over a month ago I was hoping to be able to find $200/door for a small multifamily. When I got settled, I immediately got added on to an MLS search that alerts me daily of new and changed properties fitting my search criteria which i then analyze. So far it's been disheartening to say the least as most of the properties won't even positively cashflow due to the low rents I've been seeing unless it is bought cash. We've only driven around and seen 12 properties so far in the Glendale area but even those properties are asking $200k+ and they are in areas asking $550-625/mo w/ debris and garbage piled near doors/open lots. Not ideal for house hacking. I've since dropped my ideal cashflow to $100/door since $200/door seems unobtainable.

So, two questions: At this point, showing up to the game as late as I am, is my best bet to find another investor who will throw me a bone and/or cold calling owners? I have time as I don't intend to purchase until June-ish next year, but I'd like to know where I should be looking to, at least, really analyze a property instead of getting stopped immediately at cash-flow.

And two: For those of you financing your purchases, what is a reasonable cash flow to expect at this point in Phoenix and west Phoenix? I'll be using a VA loan which already cuts into profits, but I'd still like to have an idea of what the current "norm" is.

Okay, I was mistaken, third question: From what I've seen of the west Phoenix area so far, most multifamily are nice 30+ unit complexes and not a lot of small MFR. The small MFRs I've seen have generally been in bad (think D or E on a scale of A-E) areas. Is this basically what I should expect or do I just need to drive more and find the pockets of nicer areas? Any tips on how to locate them?