All Forum Posts by: Mark Y

Great idea. This board has a lot negativity towards newbies. I'm not just referring to this thread either. There are a lot of posts that tell the newbies what NOT to do (great job), but very little telling people WHAT to do. It is almost as if the seasoned vets are afraid to share information. Some of them write about charging for "mentoring".

In addition, some of the advice given is a bit condescending. Suggestions to invest in your hometown, but when it is impossible to puchase a home for 70% of value, the suggestion is to "move".

I have a college degree and make $100k / year so I don't think I'm stupid. Real Estate investing isn't my forte but it is something I'm sure I can learn. In the short time I've been reading this web site, I've learned what not to do and a little about what to do. But I haven't learned squat on HOW to do it.

There is a lot of conflicting "advice" as well. People say to attend your local REI club meeting, then the next post says how most of those people don't even own properties and what you hear at these meeting is suspect.

:crying:

So you're blaming the newbie. It is one hell of a stretch to draw that conclusion based on your "evidence".

It was good. Very informative, although I have nothing to compare it against.

One of the things several people were talking about was the following example:

Purchase a $200k house from a distressed seller for $150k.
Take out a loan for $160k, getting a check back at closing for $10k.
Use the $10k as a safety net in case cash flow issues arrise. Damn sure don't spend it.

I ran the 2% rental / purchase price by some people. Meaning, you should be able to rent a house for $3000 / month if you purchase in for $150k in order to be on the safe side cash flow wise. While the idea is sound, it isn't happening anywhere in Phoenix. And I didn't get an ideas where it is happening either.

The going rate for rentals in the greater Phoenix area is about $1 / square foot.

The other thing that was interesting was investing in pre developed land.

Comments /opinions on the above would be great.

I understand what you're saying, but I'm telling you, it isn't happening in Phoenix. Any house you were to purchase in Phoenix for $100k is in a ghetto, and you sure as hell aren't going to rent it for $2k / month. Fat chance.

There are a lot of people that have REI in Phoenix, and I'm sure they're not buying on this 2% rule. Not even close.

I'm going to attend the AZREI monthly meeting tomorrow and ask some questions with respect to this. I'm not trying to be argumentative with Mike's advice, but I'm just not seeing this.

I would LOVE for someone to tell me WHERE in Phoenix you could pick up a house for $100k and rent it out for 2k / month.

Either I'm completely naive or dumb as a rock. Somone PLEASE tell me how they pull this off. I'm having a hard time believing this.

I'm going to my first REI meeting this Monday. Hopefully, I'll make some contacts with people who can help me along.

I found a realtor that "specializes" in investment properties. All I was given was a list of properties that are selling for appraised value. Not much use for what I intend to do.

I'll post my experience of the meeting after Monday.

Mwarden: That is a very nice detailed explanation / formula. Well written.

Being a newbie myself, where do people find these "deals" that allow these formulas to "work"?

Everyone on these board advocates putting as little down as possible. Doing this requires taking out a larger mortgage (it also means you now have to pay PMI). A larger mortgage requires you to ask for higher rent in order to satisfy the cash flow requirement outlined above.

As you said, the market dictates the rent, not the property owner. I've looked at properties from whole sellers, etc and haven't found anything close to fitting this formula. I'm beginning to think that the Phoenix market is not for REI, or I just don't get this "business". I'm having a real hard time believing that I'm the only one that can't find a $150k SFH, where I can put down 10k, and have a $1000 / month mortgage. Then rent the home out for $1700 just to cash flow $150 / month.

This is just not happening anywhere I know of.

EDIT: A $150k home in Phoenix is in a slum and sure wouldn't command a 1700 monthly rent. And if you could score a $250k home for $150k by some stroke of genius, you would be damn lucky if you could get 1700 in rent.

The more I read, the more I need to read. Maybe I live in the wrong area for REI. I'm in Phoenix and I've yet to come across properties that you can get for anywhere near $0 down and have cash flow. I'm new to this so I haven't been looking all that long.

Yes, the above would be ideal, but I'm sure not seeing it. I have some "dead" equity in my primary residence. I wanted to take out a HELOC and put some money down on a rental. The goal being to have some cash flow, some tax breaks, and another source building equity. I plan on holding so long term there should be some appreciation.

If someone knows something about Phoenix and has one of these "$0 down, cash flow" properties in their back pocket please send it my way. ;)

I sure as hell can't find them.

So the OP could come up with a larger down payment, OR purchase the house for less.

The regret I have is that I put one in. I'm glad I sold that home and someone else has the headache. I live in Phoenix and if I had to guess, I'd say that 80% of homes have pools. I'd also estimate that 90% of these go UNUSED after the 2 year novelty wears off. You're then left with a money pit.

My advice, they're a PITA.