Hey Yaumari,
Welcome to the exciting world of real estate investing! It's fantastic to hear about your journey from helping friends and family to taking the plunge yourself. I remember when I bought my first investment property..it felt like navigating unchated waters, but it was one of the best decisions I ever made.
The BRRRR method is a powerful strategy. A colleague of mine in Scottsdale recently used it to turn a fixer-upper into a profitable rental within months. It's incredible how reinvesting can accelerate your growth. As you build your portfolio, consider exploring markets like Austin or Phoenix..they're vibrant and full of potential.
If you're ever up for swapping stories or diving into market insights, I'm just a message away. It's always great to connect with fellow enthusiasts who share the same passion.
Hey @Christina Haws
First off, big congratulations on completing your first flip! That's a huge achievement, and it sounds like you navigated some real challenges along the way.
Your story reminds me of a project I took on years ago. Thought I had the perfect team lined up, but midway through, the contractors didn't quite deliver as expected. Ended up having to find new folks to finish the job, which was a lesson in vetting and trusting your gut. It's tough when unexpected costs pop up, but those experiences definitely make us sharper for the next deal.
Switching gears from renting to selling was a smart move given the circumstances. The market can be unpredictable, and being adaptable is key in this business. Sometimes the best plans are the ones we adjust along the way.
If you're ever in the Phoenix, Chicago or Austin area, I've got some connections with knowledgeable brokers and other investors who've been through the dust and come out on top. Might save you some headaches on your next venture.
Keep pushing forward..every project is a new learning opportunity. And who knows? The next one might just go smoother with the lessons you've picked up.
- Jasper / Pat Aboukhaled
Turning investment visions into reality in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC
Hey @Connor Laux
Welcome aboard! It's always inspiring to see someone channel their competitive spirit into real estate. When I hung up my own jersey (though mine was more weekend warrior than college athlete), I found that real estate gave me that same drive and excitement.
Lincoln's a fantastic market with plenty of opportunities if you know where to look. I remember taking a leap on a property that others overlooked..it wasn't glamorous, but with some elbow grease and a bit of creativity, it turned into a great investment. Sometimes the best deals are the ones that require a bit of vision.
Don't hesitate to connect with local investors and maybe even consider exploring markets like Austin or Scottsdale down the line; they've been keeping me busy and have some interesting dynamics worth learning about.
Feel free to reach out if you ever want to share stories or need a sounding board. The real estate journey is a thrilling one, and it's even better when shared with folks who get the passion.
Looking forward to seeing where your dedication takes you!
Hey Karina,
I totally get where you're coming from. When I first dipped my toes into real estate investing, I felt like I was doing all the legwork while my agent was just along for the ride. It's not unreasonable to want an agent who's proactive and truly has your back.
An investor-friendly agent should be more than a door opener..they should be a strategic partner. They can point out why a property might not be the best investment, highlight hidden gems you might've overlooked, and keep you in the loop even when they're swamped. It's about synergy and shared goals.
I had a friend in a similar situation who felt like she was always chasing her agent. She eventually found someone who not only brought her deals but also offered valuable insights that aligned with her investment strategy. It made a world of difference for her portfolio.
It might be worth having an open conversation with your current agent about your expectations. Sometimes a little nudge can realign the relationship. But if that doesn't help, considering a switch isn't out of line..especially if you feel opportunities are slipping through the cracks.
You're not being needy at all. Wanting an agent who's engaged and supportive is just good business sense. And hey, if you ever think about expanding beyond Louisville, markets like Austin and Scottsdale are buzzing with potential right now.
Keep pushing forward, and don't settle for less than you deserve.
All the best,
- Jasper / Pat Aboukhaled
Turning investment visions into reality in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC
Hey Mark,
I’ve been there....stuck with a property that felt more like a money pit than an investment. Given your situation, it sounds like you’re facing a classic investor dilemma: do you throw more money at repairs to sell at a higher price, or do you cut your losses and drop the listing price? Let’s unpack it.
Market context
I’ve been working in the Phoenix and Austin markets for 20+ years, and while each is different, both are currently going through some fluctuations. In Phoenix, the inventory is tight, and that’s been propping up prices, even in a cooling market. In Austin, a lot of sellers are finding themselves stuck, too. Buyers there are taking their time and negotiating hard. So, if your place isn’t pristine, it’s going to sit on the market longer than you’d like.
Repair vs. Price Cut
Here’s the thing: spending $50k on repairs might help if it significantly changes the condition and appeal. But be realistic....what are the key issues that have people turning away? If it’s just cosmetic, like a fresh coat of paint or minor fixes, it’s probably worth it. But if you’re looking at structural repairs, that money might not get you back the return you’re hoping for.
One of my good friends had a duplex in Phoenix that seemed like a lost cause. He didn’t want to pour more money into it, but it also wasn’t selling as-is. He ended up partnring with another investor who was willing to front the repair costs, and they shared the profit on the sale. It wasn’t a perfect scenario, but it allowed him to walk away without losing his shirt. Maybe something simlar sitation could work here?
Alternative Options
If a straight price cut doesn’t feel right, consider creative financing. Seller financing or even partnering with another investor to share the repair costs could attract different buyers. I’ve seen this work for niche investors who are more focused on cash flow potential than buying turnkey properties.
Hope this helps bring some clarity. Don’t hesitate to reach out if you want to brainstorm more!
Jasper, the Pat Boukhaled investor team,
Turning investment visions into reality in Phoenix, AZ - ranked #1 for residential real estate growth and opportunity by PwC.
Hey Bob,
I hear you. I've worked with dozens of investors who have tested both the standard and premium listings on Zillow. From what I’ve seen, the value of a premium listing really depends on a couple of factors: the local market's activity and how saturated it is with similar rentals. Let me break it down a bit from personal experience.
A buddy of mine out in Scottsdale tried Zillow’s premium listing for his condo a few months back. He had used the free version before and decided to go "all in" this time because the rental market was tight, and he wanted to stand out. The results? His unit got more attention and inquiries, but funny enough, the renter he ended up signing had found his original free listing weeks earlier and only called back because the timing was right. So, while it did boost visibility, the premium status didn’t clinch the deal.
Another client in Austin had a dfferent experience. He ran two almost identical rentals..one had the premium listing, and the other didn’t. We found that the premium listing got about 40% more inquiries. That might sound good, but keep in mind that quantity doesn’t always equal quality. He ended up sifting through a lot of unqualified leads. On the flip side, another client of mine used the premium option and got a highly qualified tenant almost immediately. It really came down to the fact that it was a slow market period, and his rental stood out because there weren’t as many options at the time.
From a tech perspective, Zillow’s boost can help in areas where renters rely heavily on mobile searches. I would consdier where your target demographic is looking. If your area has a lot of young professionals glued to their phones, the premium boost could help push your listing to the top, which means more eyes.
Hope this helps..or at least gives you a few ideas to consider
Jasper, the Pat Boukhaled investor team,
Turning investment visions into reality in Phoenix, AZ - ranked #1 for residential real estate growth and opportunity by PwC.
Hey Jacob,
Glad to see you’re diving into the Chicago real estate market! It’s always exciting when someone new jumps into exploring different neighborhoods and investment strategies. I’ve been working in this space for over 20 years, and I’ve seen firsthand how choosing between neighborhoods versus suburbs can significantly impact your returns.
City Neighborhoods: Wicker Park, Logan Square, and Bridgeport
If you’re eyeing Chicago neighborhoods, I’d suggest considering areas like Wicker Park, Logan Square, and Bridgeport. They’ve been strong for rental demand and have shown great appreciation over the years. I had a client a few years back that Ali Bakir @ morpheasy (the broker I use in Chicagoland) helped, who snagged a duplex in Logan Square for about 650K. At the time, we weren’t sure if it would be worth it because the area was still finding its footing. Fast forward to today, and his property is now valued at 1.2M, giving him a great mix of cash flow and long-term equity. He even made a solid friendship with one of his tenants, who now handles some of the property managment for him.
These neighborhoods are perfect if you want a vibrant urban lifestyle while also reaping strong rental returns. The median price in the city hit 379,925 as of June 2024, reflecting a 6.3% increase. That said, the initial investment might be higher, and managing an older property here could come with its own set of chalenges.
Subs: Naperville, Glenview, and Oak Park
On the other hand, suburbs like Naperville, Glenview, and Oak Park offer a different kind of stability. Prices in these areas increased by 9.8% to an average of 325,000. These locations attract families and long-term renters, providing more predictable appreciation. I’ve had other clients who preferred this approach..one even found a gem in Glenview at a time when the suburb wasn’t as well-known, and today his property’s value has grown by 15% in the past three years alone.
With the anticipated drop in mortgage rates in 2024, the suburbs might be a solid pick for someone new to the market, especially if you’re looking to build equity without dealing with the volatility of city investments.
So, for a first-timer, think about your goals: high appreciation and some hands-on work? Go with city neighborhoods like Logan Square or Bridgeport. Want more stability and ease of management? Look at Naperville or Oak Park. Seems like the highest ROI is in a purchase price of 500k-700k, if you go above or below that, it's a less attractive return in that area. Happy to dive deeper if you need more insights if you like. Feel free to PM me or just ask here!
Pat
Hey @Robert Cardinal
Calculating the After Repair Value (ARV) is a critical step when analyzing a property for a BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy. It's basically your North Star for making decisions, whether you're flipping or holding a property for the long-term. The ARV helps you project the potential profit by estimating what a property will be worth after renovations. Here's how you can approach it, tailored for someone just getting into the game:
Start by Pulling Comparable Sales ("Comps"): To estimate ARV accurately, look for properties in the same neighborhood that have sold in the last 30-75 days and are similar in square footage, number of bedrooms, lot size, and overall condition. Adjust for any differences..like if one property has an extra bathroom, a finished basement, or newer features. Try to focus on properties that are within 0.5 miles of your target property to get the most relevant data. This is especially true in areas like Worcester, MA, where property values can shift block by block depending on school zones or proximity to city ammenities.
Renovation Costs: Once you have your target ARV, subtract the estimated renovation costs. This step is crucial because it determines how much you should actually pay for the property. Get quotes from at least three contractors to compare, and always factor in a 10-15% contingency for surprises. In my experience, when working with properties similar to those in Massachusetts, unexpected expenses like mold remediation or structural issues can easily blow up your budget if not planned for ahead of time.
The 70% Rule: A quick sanity check is using the 70% rule. This rule suggests that the purchase price should be no more than 70% of the ARV minus the renovation costs. So, if the ARV is $300,000 and the renovations are $50,000, your maximum purchase price should be around $160,000. Check with a Local Real Estate Agent: A good investor-friendly agent is your best friend here. They can provide access to local data, like recent comp sales that aren't yet on public sites, and help avoid costly mistakes by fine-tuning your numbers based on current market conditions.
Consider Using Multiple Valuation Methods: For more complex properties or markets with rapid changes, triangulate your ARV using a few different approaches, like the sales comparison, cost approach, or income approach. This way, you’re not overly reliant on a single method and reduce the risk of basing decisions on incorrect estimates.
Example Property: Scottsdale High ROI home
One of my clients purchased a property in Scottsdale in 2014 for $400,000. This home recently sold for $950,000, reflecting a significant appreciation of $550,000 over the 10-year period. For context, this increase translates into a 135% appreciation over the original purchase price.
If this property was purchased using a 20% downpayment ($80k), the capital gain alone represents a 687.5% return on the initial downpayment. Additionally, using a typical rent estimate of $3,000/month over the past 5 years, you’d see roughly $180,000 in rental income.
When you add up the appreciation and rental income, the total ROI easily surpasses 800%, making it an impressive case study in the Scottsdale market.
Good luck with your first BRRRR in Worcester! Feel free to DM if you want to dig into this more..I've been through the ropes a few times and am always happy to share what worked (and what didn't).
Cheers,
Jasper from the Pat Aboukhaled investor team
Turning investment visions into reality in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC
Hey Karl, @Karl Szymanski
I can definitely understand the temptation to do something close to home, but it likely will depend on whether you are planning to manage these properties yourself (which I personally, wouldn't since you are simply just buying yourself a new job) and where the best forecasted ROI is at. Now, granted I'm biased, but let's do a comparison of potential returns between Pittsburgh and Mesa/Gilbert AZ using a $400K property example and forecasted appreciation over the next decade. This can give you a clearer picture of where you might want to put your investment.
Mesa or Gilbert, AZ: A Look at the Numbers
For the Phoenix metro area (including Mesa and Gilbert), the forecasted annual appreciation rate is expected to be around 3.5% over the next 10 years, based on recent trends and projections. If you were to purchase a $400K property in either of these cities today, applying the 3.5% growth rate, that same property would be valued at around $566,000 by 2034. Mesa and Gilbert are growing rapidly due to strong population influx and economic stability, making them particularly attractive for long-term investments.
Why Mesa or Gilbert?
These cities are part of the thriving Phoenix metro area, but they also have their unique appeal. Gilbert, for instance, is known for its excellent schools, high quality of life, and strong local economy. It has been drawing in families and professionals, leading to steady demand and higher appreciation rates. Mesa, on the other hand, offers a balance of affordability and access to job opportunities, making it a great option for investors looking to tap into a more budget-friendly market with solid returns.
In contrast, Pittsburgh has a slightly different dynamic. The average annual appreciation rate is projected to be closer to 1.5% over the next 10 years, considering its recent performance and overall market outlook. A $400K investment in Pittsburgh would grow to about $463,750 by 2034. While Pittsburgh offers lower entry prices and a more stable rental market, the appreciation potential doesn’t quite match that of Mesa or Gilbert, making it a more cash flow-oriented market rather than one driven by property appreciation.
Because of leverage, that roughly $100K difference in appreciation is HUGE because I've had investors just putting 5% into the deal (so a 5x higher roi). If your goal is long-term growth with a balance of rental income and appreciation, Mesa and Gilbert stand out because of their strong job markets, high quality of life, and high rental demand. Both cities are expected to continue seeing strong appreciation due to the steady population growth and economic opportunities in the Phoenix metro area. In comparison to Scottsdale, these areas also offer more affordable entry points, making them ideal for investors seeking a combination of steady growth and manageable upfront costs.
Given the projected numbers, Mesa and Gilbert’s combination of vibrant rental markets, better appreciation, and affordability make them stronger candidates for higher long-term returns compared to Pittsburgh. If you’re comfortable with the Phoenix metro area and want to position yourself in a growing market with high potential, either Mesa or Gilbert could be a solid choice.
Let me know if you’d like to dive into any specific areas or property types within Mesa or Gilbert for a deeper analysis! Happy to help anyway we can
Cheers,
Pat
Turning investment visions into reality in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC
@Nathaniel C. that's a great question and it shows you're planning smart by thinking ahead about the tax implications. I've worked with a lot of investors who’ve done cost segregation, and the recapture part is always something that can catch you off guard if you don't think it through.
Let’s break this down step by step..just like when I helped a buddy of mine who had a similar situation a couple of years ago, only he was dealing with a multi-family unit, not a single-family home. The math won't be exact since I’m just a Realtor (licensed in Arizona and a couple of other states) and not a CPA, but I can definitely give you a rough scenario from what I’ve seen.
1. Initial Depreciation:
You mentioned a cost segregation study that resulted in $80k of passive losses. This means you accelerated a lot of the depreciation upfront. residential real estate is depreciated over 27.5 years, but since you took the bonus depreciation, you pulled a lot of it into the first year.
2. Depreciation Recapture:
When you sell, the IRS wants some of that depreciation back. Depreciation recapture on real estate is taxed at a flat 25%. So, if you claimed $80k in depreciation over the years (even if a chunk was in year one due to bonus depreciation), you’d owe recapture taxes on that.
Let’s run a basic example:
3. Capital Gains:
Now, you bought the property for $700k and put in $25k in renos, so your adjusted basis is $725k. If you sell it for $800k, you have a capital gain of $75k ($800k - $725k).
Capital gains taz is usually lower than ordinary income tax, but since you don’t qualify for the 2 out of 5-year exemption, you’re looking at paying full capital gains taxes. Based on your personal tax rate of 30%, this would be:
4. Total Tax Liability:
So, you’re looking at a total tax bill of $20k (recapture) + $22.5k (capital gains) = $42.5k.
Funny thing is, I had a client back in Phoenix who was in almost the exact same situation. He was debating whether to sell or roll into a 1031, and it took us a couple of long coffee chats to weigh the pros and cons. He ended up going the 1031 route and hasn’t looked back since.
Another like-kind propert could really help you keep your momentum going without taking such a tax hit all at once. I’ve worked with folks in both Austin and Scottsdale who did just that and continued to build cash flow over the years.
So while the recapture and capital gains can hit hard, there are options to consider. I’d definitely recommend talking to a CPA who can run your exact numbers and make sure you're thinking of all the angles. Good luck, Nathaniel! It’s smart you’re thinking about this now instead of scrambling when it’s time to sell.
Pat / Jasper
Turning investment visions into reality in Phoenix, AZ - Ranked #1 for residential real estate growth and opportunity by PwC