All Forum Posts by: Cara Lonsdale

Congratulations on your first investment property!  What a great start to building wealth!

You will find that as you add to your portfolio, they get easier to add.  Even the funding alone is easier since you now have a cash flowing property that can help you fund your seed money faster.  That is a great example of OPM working for you!

Can't wait to hear about the next one. :)

These are all good options. You have already laid out both scenarios.  It sounds like you are just having trouble pulling the trigger.  Is that because you don't know what your Real Estate goal is?

If your goal is to have a cash flowing portfolio of rentals.  Congrats!  You are off to a great start with your first one that cash flows.  Plus, that is the cheapest that money will ever be for you.  2.65% interest rate?  For an investment property (purchased as an owner occupant), that is insane.  Why would you want to sell that from your portfolio?  You can use this property to hedge any others that you add that may only cover themselves, or require supplement until they are paid off.

HOWEVER, if you have decided that your goal is to use Real Estate as a stepping stone to build wealth by upgrading the property you hold each time (condo to house, house to 4-plex, 4-plex to 8 unit, etc) then I think you are right to sell now while you think the property is at the top of it's appreciation.

It will be hard for anyone on BP to tell you what to do as we don't know your goal.

You are right.  You have the ability to sell while limiting your capital gains tax because you lived in 2 of the last 5 years.  So, if that is important to your next steps, it's certainly worth considering.  Down the road, you can also use the 1031 exchange to defer taxes as you go from property to property, as long as they are like for like.

I hope that helps get the ideas flowing....

I would follow the laws of your state @Daniel Liu.  Since Landlords are going to be monitored even more now with the price gouging issues surrounding the fires in LA, I would be extra cautious. What does your Realtor say?  I would start with them.

I am not based in LA, so I don't know your exact laws, but I think I can still provide some initial direction for you to find answers, and maybe offer an idea to research.  

The question that you need to ask is what is the 10% increase that is allowed based on?  Is it the last rental rate you charged, or is it the going rate in the area + 10%?  If it is the going rate in the area, you are most likely okay to proceed as you stated that your rental rate was under market by 20%.  If it is last rental rate charged, then you may have to get creative to accomplish what you want to while still working within the law.

Here's an idea to explore.....If it is a 10% increase over the last rental rate you charged, consider using a step pricing lease if allowed by your state.  This would give an initial rental rate, and then step up every 3 months slightly until you reach your target rental rate.  If your rental rate is below the market anyway, a Tenant might consider this to be win as they would get the lower rate in the beginning and just rise to the level they were looking at everywhere else.

Step clauses can be written right into the lease, or created by using 3 month lease terms with an auto-renewal at the step up rental rate price.  You can consult with your Realtor to create this contract and make sure that it conforms to the laws of your city/state.

Your concerns are completely valid.  @Fetch Phoenix

I'll add something that may apply....your current policy may already exclude wind and/or fire, which means that you could already be without protection.  Wind is one of the subtle items that Insurance companies are starting to exclude.  It gets tricky because wind can be argued as the cause for almost anything, besides water.

Is there a way to complete some preventative measures like cutting trees back around the property...?  I know it won't help if 100 mile an hour winds come like in LA, but perhaps it could be a start..??

Funny thought...they make interior fire sprinklers.  I wonder why they don't make roofline sprinklers or some other product like that.  Indoor sprinklers are so effective.  It seems like there ought to be a way to do it.

What is more important to you @Nithin Kumar...the cash flow, or the appreciation?

If you cash flow $1K per month for 36 months, and then sell with the ability to pull back your original investment, would you consider that a win?

What about having to break even, or even feed the property every month $200 for those same 36 months, but at sale, could net a $75K-$100K profit?

Above are just hypotheticals, but they bring to light the point, which is, evaluating opportunities requires apples to apples comparisons.  You need properties to do that.  Anyone can tell you they think there are deals out there, but ask them to show you which ones, and then evaluate it for appreciation as well as rental strength.  You rarely will get both (at least not right now in this current market).

If you want to explore different opportunities within various areas of the Valley, get a seasoned investor-friendly Realtor who is competent.  Start with the Arizona Department of Real Estate website and verify credentials, search licensees by entering their names.  It will give you their time as a licensed professional, the education they have completed for the current renewal schedule, and any disciplinary action against them.

Initially, your search may be discouraging @Yael Doron.  Our market is somewhat shifting, but it is still showing signs of thriving, with many opportunities for growth.  So, your focus may need to pivot from high rental cash flow to little to no cash flow as a rental with an appreciation upside.

I would recommend taking your $150K to $200K and securing a solid equity position in something that will cover its expenses and maybe provide a small cash flow, but then is poised to appreciate nicely over the course of the next several years.  In the end, it may be the same amount of money or more, but it will just have to be structured differently as you navigate the shifting market.

Northwest Valley would be a good option.  Southeast Valley would also be good.  There are also case by case opportunities within the North Phoenix market where rental rates are stronger.  You are priced out of Scottsdale quite a bit, but you might find something adjacent which would provide some good opportunities. 

Hi there Did you find success with HUD homes? I see there are like 4 in the whole Valley right now, so I am guessing it was not a great avenue for you...?

However, have you ever gone downtown to the steps near the capital and witnessed a Trustee sale?  They are wild, and exciting.  Alot of unknowns as you don't have the ability to walk the property beforehand, but interesting process, and pretty good deals exist there.

While the Trustee Sales are cash purchases, there are many hard money options that can turn over the funds in time for the 24 hour funding required to complete the purchase.

If you are interested, let me know and I can go into more detail, as well as make some other suggestions for you to consider.  The Greater Phx market has many avenues to explore, depending on your goals.

Would love to hear an update on your progress @Bree Jimenez  did you move forward on a project?

Don't want to bombard with too much info @Christopher Jennings.  You have gotten so many great tips already.  

Just want to mention that sometimes it works out better to raze an existing property down to like 2 studs and rebuild around it so that it still is classified as a remodel versus a complete new build.  This can sometimes help with regulations and building codes.

Just my 2 cents. :)

Phoenix is a huge city, and there are still growth opportunities within it.  However, Greater Phoenix is not solely reliant on chip companies.  Historically, we net roughly 65K Californians annually.  For many reasons, Californians flock here.  Lower property taxes, affordable housing compared to LA (CA buyers are usually cash buyers because what they net from their smaller home in CA can get them a bigger home here, often covered by what they net from their CA sale), allergies (smog), and politics.  As we have all seen, Californians are leaving in droves over the past couple of years, and fleeing to Florida, Texas and yep...Arizona.

As long as we continue to stay under LAs housing market for affordability, we are going to continue to net those homeowners wanting an upgrade to a bigger house or lot.  Additionally, the beach is still within reach...just a short 1 hour flight or 6 hour drive.  

The Greater Phx area also has more places to expand, but be cautious of "island" developments that are separated from bigger cities.  In my opinion, it is better to choose an area with a path to progress.  Consider San Tan Valley.  Several years back, this was the expansion from Queen Creek, which was the expansion from Gilbert, Which was the expansion from Chandler and Mesa....you get the idea.  When you have a new area that still has easy access to an established city, it can flourish.  When you have an "island" it often dies on the vine until the path to progress catches up to it....think Arizona City.  When that area was built, people flocked to it for it's affordability, but over the course of several years, it became like a ghost town.  It has only been in recent years that it is starting to see growth again.  The path to progress is slowly catching up to it now....slowly.

There are many outskirt areas to consider.  The North up along I-17 where the Taiwanese chip plant is going in.  Even Northwest has alot of development going in, and the 303 is offering good support to connect freeway access over there. In the Southeast, Coolidge and Florence, where the path to progress is leading from San Tan Valley, and even way out West in the Buckeye and Goodyear areas are opportunities for growth.