All Forum Posts by: Karthik Bujuru

 Karthik- I would agree with the sentiments that others voiced.  Your cashflow is severly limited and there are much better properties available in San Bernardino or other Inland areas... If your ultimate goal is to own 5 rental properties work $200k each- why not just half the price and double up on the properties? IE. have 10 rental properties worth $100k each which you can find around Apple Valley and Victorville (it's been a while since I looked there but I remember properties that are cheaper and did remember seeing something that $100k grossing $10k).

@Karthik Bujuru Hey man, I was looking at your post and numbers from the images. Something is not really right. You said $1035 monthly incoming out of $743 PI, where is the Insurance, Taxes goes. What about CapEx and maintenance so forth. Sorry to turn you down, I think you are missing something. It's first deal and you gotta get it right at least not to lose money of pocket every month. It's even worse with out of state and you cannot deal with the issues unless you have list of numbers for all handymans. Think about it.

Another for PM given you are out of state. Although to be honest I would say that you really should not buy a first rental property out of state as your first unit, it is just asking for trouble. You need to understand the business and for that you need to do it yourself with something local, less than 20 minutes drive from your home ideally. There must be something cheaper in your area of CA. If not, save more.

I 100% agree with @Joseph Hennis on this one. No Utilities included either and landlords usually pay water, sewer, trash.

Good thing you still have a month to close. You may be able to get out of this one alive. This is a no brainer bad deal

If you are investing out of state why did you choose Phoenix? Why not the mid west where you can get some serious cash flow?

@Karthik Bujuru So I hate to knock your deal... Cause you may have well thought out investment goals that makes this property a good fit... But, I'm not seeing it, or sold on it, based on the calculations you showed.

From my perspective, that deal stinks. 1035/mo in rent divided by 178000 is 0.58%. It is half the 1% rule. Generally if I buy a property at 1% rule when it reaches 0.5% it means it is time to sell my property, not buy.

Also, you have definitely miscalculated the expenses. This property is negative cashflowing every month even if you self manage it. Repairs expense runs 10-20% and capex 10-20%, you didn't include these expenses.

Not only do you need a PM, but you should have already thoroughly researched, vetted, followed up on references, and selected your PM well before purchasing the property. I had a decade of REI experience and did all that research before selecting a PM and buying a property in Phoenix, and still I went through 7 PMs in 5 years trying to find a competent and honest one, but never could, and each time I made a mistake and had to switch it cost me thousands. Seems as though the single most important success factor for your out of state investment has been a complete afterthought for you. I wish you all the best.

What happens when your Phoenix property appreciates 25%, but your higher price tag goal area from now also appreciates 25%? You'll be even father from affording it. You'd bring that Phoenix money back, and you'd only be able to buy inland empire. 

So why not just buy inland empire now? It's starting to get hot...no pun intended.

I'd have to agree with @Dick Stevens. I don't know what your rent is on this but why is your cash flow so low? Did you take out a huge chunk of equity? $50 cash flow and you'll be in the red with one repair and or just brining it up to rental quality after a move out. I think the bigger question should be what can you do to get a better return, or (I know it sucks to say), should you be exiting out of this sooner than later. 

Buying an out of state rental as your first one was probably a mistake.  Is it really worth the aggravation and liability to make $50 per month under a best case scenario?  If you have a moderate repair for say, $300, it's going to take you 6 months to recoup the expense... and that's assuming nothing else goes wrong in the mean time.