All Forum Posts by: Stone Jin

@Jesus Lopez Jr My friend in Chandler recently bought a 3/2 and rented out 2 rooms at $650 per room.  This pays for his entire PITA and a portion of utilities.  He couldn't be happier living for free while his mortgage is being paid down by others.  

If anything, renting out by the room will be more popular as people realize that their $1200 1 bed apartment is unaffordable.

@Brandon F. Right so at 3% interest rate borrowing 430K for 30 years. Your principle and interest is 1800. You PMI is another 100-125. Your taxes is $200-300. Your insurance is 100. I'm not sure what your HOA is but let's call it 100. Total would still 2300-2500. I understand low down payment loans and house hacking. I'm just saying your numbers look too rosy. We've been investing for over a decade and can tell you that most of the time it's murphy's law when it comes to investing. The rule of thumb you see on the forums is about 1/2 your rent is used for everything other than debt service. Day 1 you get 3000 for rent. 1500 goes to cover everything other than debt service. 1800 is your debt service and therefore negative 300. I'm not shooting down your deal but I'm just letting you know that the numbers presented do not make sense.

@Brandon F. I'm not sure where you are getting the $1564 from but that seems super low for over 430K in debt. I did a simple calculation 3.5% rate fixed 30 years and for Principal and Interest it's over 1900, with HOA, PMI, Insurance and Taxes your monthly would easily be around $2300-2500. You were planning on taking out 750 to cover vacancy/management/capex/repairs and the $300 for utilities. By my calculations you would be negative cashflow starting day one and break even when you move out. Maybe I'm missing something. Are you getting a 50 year loan?

@Carlos Gonzalez You are the small MF guy in Phoenix.  What are your thoughts?

@Brandon F. Many of these small MF have utilities that are paid by the landlord, it's something to consider and check out. Even with historical low interest rates i can't see cashflowing $1000 with low down payment. 400K for a 4plex in a rough part of town, borrow 388K, PITA $2200. Rents are say $800 a door, so $2400 a month while you live in the 4th unit. Not considering Property Managememtn, Capex, Vacancy and reserves, you may get a couple hundred bucks a month, but will all that added in you likely will be negative cashflow.

Just for reference, we own condos/SFH/SMF in Phoenix area.

What do your numbers look like?

@Ryan Hoover

We primarily are in the east valley (chandler/mesa/aj), but have a few left in central Phoenix.

The long term play is to replace the income from my software consulting business.  Once there, I will consider more risky/appreciation investment vehicles.  

Investing out of state does not mean no appreciation.  In the midwest where you can buy value add properties, you can still capture that forced appreciation.

For example, last property I bought 

121K purchase price, 24K rehab, ARV 170K, Rent 1600, COC 14-16% with 20-25K of equity. We buy houses we would live in ourselves. The OOS strategy does not mean you have to buy turnkey or buy in crap neighborhoods. There are great neighborhoods in every city in this country.

@Account Closed Phoenix is still an appreciation play due to in migration and low interest rates, but I think the cashflow days are over.  300K homes in the suburbs rent for $1800, after PITA and expenses you might cashflow a couple hundred on a 60K investment.

@Ryan Hoover Our strategy for the last 3 years has been to sell properties we no longer wish to keep in the Phoenix portfolio and 1031 exchange into much better cashflowing property out of state. I don't see this changing as long as we have property that is not performing based on return on equity or unfriendly HOA or any other condition that affects our mental well being.

With that said, I think the Phoenix market for cashflow is game over. It's rare to find any MLS listing where you would cashflow more than a few percents (mid single digit) with 20% down. I think the people who are finding some success are the creative financing folks (sub2, lease option) etc.

@Michael Reisman Growing markets are great for appreciation.  Toledo is a cashflow market.  The properties that I'm buying have been that price for decades.  My last property I paid 120K for was sold to previous owner in 2000 for 120K.  However I can rent that property for $1600 because there is no supply for that school district.  I would do that deal all day long even in a stagnant job growth and population growth market.  

If you were in a small town with a population less than 20K people, then yes decline in population would be extremely detrimental.  I don't disagree those are important factors, but an investor will need to understand the micro economics of an msa to effectively invest.

@Jon Catterson We also have a portfolio.  We pay the bill from the city and bill the tenant for that exact amount.  I feel this will limit their waste of water if they pay for it.  I think it may vary by asset class.  I know many C class landlords would just add it to the rent and include water/sewer, our portfolio is B+-A and our tenants have no issue with it.  

Take a look at what's for rent now and the description will tell you who's more likely to be responsible.