All Forum Posts by: Cara Lonsdale

My suggestion before investing in either on of these areas would be to invest in a trip down here to walk the dirt.  My husband and I wanted to consider AZ City because the prices were SO LOW and seemed too good to pass up.  We made it a day trip to go there and look.  It was like a ghost town.  Yes, there is alot of new construction, because developers were out there peddling AZ City as the new Ahwatukee, but failed drastically.  So many people have abandoned their properties, and we drove down streets with multiple for sale signs....street after street.  Then to walk through them, we experienced alot of termite infestations (which isn't uncommon for AZ, but just surprised us that it was left untreated), and missing pipes and electrical.  The vandalism is bad there.  If you have vacant units, they will most likely be stripped out if not secured properly.

I am glad to hear the one poster's good experience in AZ City, but from what my husband and I saw by driving the market, evaluating the infastructure, and economy, we VERY QUICKLY drove back home.

And please don't be fooled by my location.  I may live in Scottsdale, but I am not above different areas for investment (which is why we took the trip).  I have rentals all over the Valley, and consider everything if it makes sense.  AZ City didn't make sense.

I am coming late to the discussion, but I wanted to share some thoughts....

There are going to be pros and cons to every area.  Some of my best cash flowing properties are in Northeast Phx.  However, my property in North Scottsdale is a solid rental with a long term tenant and insane equity increases.  I have a property in Peoria that doesn't do much equity-wise, but is a cash cow in rental rate, and there is always a line out front when it does turnover.

So, it really will depend on your goals.  As a flipper, I would suggest certain projects.  As a Buy and hold, I would suggest others.  If you are looking for equity vs cash flow, there are projects for that too.

Fine tuning your goals is the first step to matching you with the best project to pursue.

I call Troy Bashford at Amerigo Property Inspections.  He is very thorough, and not too expensive.  You can google him fairly easily, but if you need his contact info, just PM me and I will gladly provide.

Your cash flow seems a bit low for the rental rate coming in.  So, either the purchase price is very high, or your expenses are high.  I would push back on this a little bit, and do some further analysis.  Without more details, it is hard to help you break it down.

Have you ever considered Munds Park just South of Flagstaff?  There many be some gems to consider there, and the area is a growing hot spot for Phx dwellers escaping the heat for the Summer.  Plus, it is 30 minutes to NAU, so it has a growing population and economy.  Just a thought.

Why do you have to make the initial purchase through your LLC? Do you have the option of purchasing the property yourself, and then Quit deeding it to the LLC?

If so, I would explore that route in order to take advantage of the better rate and terms the conventional loan can provide. Since it's a 1-4 unit, it would be a shame to not have that opportunity for savings.

This sounds like a convoluded version of what an Open Title policy is supposed to be used for.

Traditionally, you can get an owners policy that is open.  It is available at the time of purchase, and is intended for a quick turnaround to a new owner.  Flippers can use this to save on expense for the new owner to eliminate the need for 2 policies within such a short period of time.

However, I don't know why you would use this during a distressed Seller's redemption period, AND I don't know how it would be useful to you as the investor if you are not the end purchaser.

Furthermore, I don't know how the lender would even be affected.  They have the lender's policy for their protections, so the owner's policy is spearate.

It definnitely raises red flags, and I would ask more questions if I were you.  It doesn't sound right.

 It sounds like you need to go to pen and paper for this one.

Calculate what you will net at the completion of the sale.  Remember, just because you calculate $35K in equity doesn't mean that is what you will net after sale.  Consider closing costs (even without a Realtor you have costs of sale), and capital gains (people always forget to calculate this as a cost of sale).  Circle that number.

Then, calculate your net cash flow from the rental.  Be sure to deduct all expenses like mortgage payment, taxes, insurance, repairs, and so forth.  The taxes will be a little more difficult as so many of the items just listed can be deducted, and it is harder to add back in that value, but just know that it is there.  Take this net cash flow number and calculate how many months it will take you to equal the net proceeds from the flip option.  

Then, have a discussion with your partner/spouse (you mentioned a "we").  YOu MAY find that the regular monthly cash flow is more valuable to you than getting the quick flip money now because it not only builds a healthy monthly revenue for you that you can build on (not only for saving for the next project, but also to help you qualify for larger projects), but also will, in theory, build in equity as well.  

Building wealth comes in many forms.  You have to decide for yourself which path you want to take toward that goal.  THere are no wrong answers, just preferences. 

Many posters have already hit the highlights.  

You earn your VA through service.
You receive a specific amount that can be used.  
You cannot lose your VA unless there is an abuse

For the most part, you use your VA loan 1 at a time. You have to refinance it or sell the property and "release" it in order to use it again.

There ARE circumstances where you can have 1, and use it again. However using your VA for 4 different properties is probably not going to be approved by the VA. The overage idea is to allow for a vet who is transitioning to go from one house to another without requiring a sale prior to the next purchase. I have never known someone with 3 outstanding VA loans. I think this would probably be considered an excessive use of a program intended to help vets with housing after coming back from service.

Some other notable items about VA:

They are assumable loans.  (However again, it would tie up the loan until it is paid off or refinanced)

They do not require mortgage insurance.  So, that is a benefit that makes your mortgage payment less for putting 0 down.

Lastly,  @Michael Dunn, Thank you for your service!

The short answer is no.  You will not be able to purchase both as an owner occupied placing 5% down.  You could choose one or the other, and be able to do what you are talking about, but once you go over 4 units, it becomes a different story.

Now, that doesn't mean you can't still purchase them with conventional loans.  IF they are parceled separately (1 parcel # for the duplex, 1 parcel for the 4-plex), then you can buy 1 of them as an owner occupied placing 5% down (as mentioned above), and then purchasing the other one with a conventional loan and 20-25% down.  You can close them simultaneously, or in quick succession, so the Seller shouldn't care if you do it this way, or by 1 loan.

By having them untied, it will give you more flexibilty down the road too, in case you want to sell one and not the other, or refinance one.  And as mentioned, the conventional loans will give you more favorable terms and rates than a commercial loan ever will.

Those other sites like Realtor.ca should be able to give you an idea of what things are selling for.  If you have some time, attend an open house within the community.  Usually Realtors hosting the open house will have a comp sheet for the neighborhood that you can take with you.  That should provide some more precise numbers.