All Forum Posts by: Josh Young

@Teena Phoolka I manage a few furnished rentals and recently rented one in Gilbert to a traveling nurse, but I wouldn’t advise you try to target just traveling nurses. You should focus on the features of the home and market the home, not who you think the perfect tenant might be, lots of people rent homes for lots of reasons. 

As far as HOAs go, most have a minimum 30 day rental, so it’s no problem for a medium term rental, but some are longer, so you just have to read the CC&Rs. 

@Senen anthony Virocel I’m an agent in Arizona. I help investors get the best return when selling investment properties, sometimes that’s just a clean up and sometimes it’s a full gut remodel, just depends on the property and the situation. Shoot me a message if you want to connect for a call.

@Greg Heden you will typically not get a very good return on the improvements unless you bought distressed property that needs improvements to be livable. Obviously it depends on the comps, but generally speaking over improved properties don’t necessarily bring in very much more rent (maybe 5% more), but they do get more applicants and rent quicker (unless they are overpriced, then they will sit). The things that are most important are cleanliness and great photos.

@Harley Emelia lots of people who think it’s cheaper to rent than buy because they can’t plan for more than a year or two at a time. People who move here from out of state. Families with kids. Couples who work from home and need home office space. Older people who want a big enough house that’s their kids will stay with them when they come visit. People who just like having the space and can afford it. I will say the renter pool is probably a little smaller than it would be for a 3bed 2bath, but that just means it might take a few weeks to get it rented instead of a few days. Message me and I’d be happy to jump in a call with you.

@Harley Emelia you might think the cash flow isn't great, but if you run the numbers on purchasing a different property at today's interest rates you will realize that what you have currently is pretty good.  You can also see the cash flow is the smallest part of the overall return, equity gain is where the big money comes from. And cash flow will improve over time, your rent should increase more than your expenses will.

Ernie Garcia and Verde Investments' redevelopment of the Fiesta Mall should be a tailwind. The fact that you are south of the 60 is more desirable too, so maybe push it to 4 or 5%, but I like to be conservative in my projections. I'm very confident in this area long term, we have population and job growth, and lots of development projects. I like the idea of never selling and just wait until you have more equity and then do a cash out refi, so you are getting tax free money to buy more properties

@Harley Emelia  You need to calculate your Return On Equity ((Cash Flow + Principle Paydown + Projected Appreciation)/Equity). Make sure you use net cash flow, so you are accounting for maintenance, repairs, cap ex, vacancy, and property management; based on the numbers you provided your net cash flow is probably $2k per year. The 4% interest rate is an important part of this calculation because the principle paydown portion of your payment is significant, I'm going to guess it's about $9k per year. The projected appreciation is tough to assign a value to, but 3% is a good conservative number, so maybe $21k per year. So if you have $245k in equity and your return is $32k per year that's a 13% Return On Equity. So, you have to ask yourself, if you sold it, could you get a better return than that by investing in something else? There are also tax considerations, such as depreciation and IRS Section 121 Exclusion.

I would probably keep it as a rental for two years and then consider IRS Section 121 Exclusion; I would probably still keep it as a rental at that point, and if interest rates get below 6% I would consider a cash out refi to buy another investment property.

If you do keep it as a rental I would recommend you pay for pool service, this is something that should not be passed on to the tenant as it can cost you big time if not properly maintained. Landscaping can go either way, but I usually have the tenant pay for it.

@Stanley Blackman I really like the idea of partnering with a contractor. I recently partnered with my contractor on a flip, he is also one of my close friends and we trust each other, but it has been good because our interests are aligned. 

One thing I would be cautious of in your situation is if you are only bringing $120k in land value and nothing else and he is bringing $800k to build the house and managing the build.  It seems like he is bringing more capital and more work, so why is he giving you half the profit instead of just buying your land and keeping all the profit for himself?  

Is he making a percentage of build cost like most general contractors do, so when he says $800k does that really mean $600k and he is getting paid $200k as the general contractor? I do really like the idea of partnering with a contractor but not as much if they are making money on the project outside of the profit share, that could be a conflict of interest.

What would happen if he went over budget and the house ends up costing what it's worth, do you sell and basically get nothing for your land? 

What would happen if he ran out of money half way through the build? 

I would have the conversation about these things beforehand so you are on the same page and then I'd write it all down so you are both in agreement.

@John Kim you need to calculate your Return On Equity ((Cash Flow + Principle Paydown + Projected Appreciation)/Equity). Make sure you use net cash flow, so you are accounting for maintenance, repairs, cap ex, vacancy, and property management; based on the numbers you provided your net cash flow is probably less than $1k per year.  The 3% interest rate is an important part of this calculation because the principle paydown portion of your payment is significant, I'm going to guess you owe about $300k on your loan which would make it about $7k per year. The projected appreciation is tough to assign a value to, but if it's low maybe use 2%, so maybe $10k per year. So if you have $200k in equity and your return is $18k per year that's a 9% Return On Equity, or if you have $300k in equity that would be a 6% Return on Equity. So, you have to ask yourself, if you sold it, could you get a better return than that by investing in something else? There are also tax considerations, such as depreciation and IRS Section 121 Exclusion.

@Ben Coplin I sent you a message to connect. I live in Gilbert, I'm an investor, and I also help other investors as an agent and property manager. I'd be happy to provide some insight/guidance.

@Jared Haxton why don't you do a cash out refinance and keep it as a rental; then you'd have the cash to buy your next home too.