All Forum Posts by: Terry Zannella

@Miguel Bautista I replaced 20 windows on an older 4-plex in Phoenix, about 18 months ago and it cost me about $11K. I know prices have gone up a lot since then, hard to think that much though. A key factor is going to be whether or not your window sizes are standard or not. I was given a few quotes that were a bit higher at the time, because the windows were so old that they had to be custom ordered. You may be in a similar situation. I agree with Jaron Walling and think you can get better pricing if you call around. My property manager connected me with All State Solutions, LLC for mine. I'm not affiliated with them, but they did good work, relatively fast for a good price. Again this was 18 months ago, maybe they can help. Not sure if I can post contact info here, but they are hard to find online. Easiest way is to look them up by their Contractor License number online at AZ Registrar of Contractors. License# 326619. Hope this helps.

I have a HELOC on 2 separate investment properties in Phoenix through America First Credit Union.

I have investments in Phoenix, North Dakota and Minnesota. I don’t have a crystal ball and therefore will not make a prediction, however I think there are certain important things to keep in mind.

First, Taylor and Jake are spot on. Ken McElroy is massively successful and has put out a ton of great content to get educated on. I always like to listen to people smarter & more successful than myself.

Jakes’s words about waiting on the sidelines resonate with me. I was waiting for the world to end when gold and silver were climbing in 2011. I bought metals and waited six years instead of purchasing RE at the time. Back then that sounded prudent to me. Obviously I missed a prime buying time.

I started purchasing RE again in 2017 and thought I was too late for appreciation, but was content with cashflow. At the time I thought the market was too hot.

I Still think the market is too hot, but I’m buying anyway because I have money I want to invest and I know how to find cash flow. If Values continue to increase great, I’ll refinance and repeat. If prices go down I will buy even more.

At the end of the day I believe there’s always a reason to either get in the game or stay on the sidelines, regardless of the market. When everything was cheap a lot of people were scared it wouldn’t go up and they didn’t buy. When everything is expensive people are afraid it will come down.

Final thoughts, forget about the market, find a good property that cashflows, take advantage where you can (low rates right now), and hold on till you’re ready to sell, or execute your  exit strategy.

I have gone through this once and based on my experience I think Ujwal and Drew provided great insght.

A couple minor items I would add. First, I would call the current PM to verify receipt of your notice (assuming you didn’t drop it off in person). This will also allow you to prevent a scenario where the PM claims they didn’t receive it.

My experience involved leaving 1 PM that had poor communication and consistently refused to acknowledge my requests in writing and would later attempt to claim that I never corresponded with them. 

Next, along the lines of getting your new PM involved, I asked my new PM the same questions you asked above. They said don’t worry, and they took care of a majority of it. They wanted to earn my business and made my life easy. How could I refuse? They have been a great company to work with for a couple years now. Good luck!

Hi Kolbi,

 I’m currently in the Air Force and have lived in and owned rental properties in both Phoenix, Arizona & San Antonio, Texas.

Personally those are two of my favorite states, They both have great jobs, growth, local economies, demographics, etc. 

I would be cautious about looking for the “best” place because like everywhere else they have both advantages and disadvantages and I believe it’s up to you to determine what is “best” for you. 

Regarding investments, all of mine in both states have done well with appreciation, low vacancy, good cash flow etc. 2 differences come to mind. 1 - Property taxes are higher in Texas. 2 - In general, similar properties are more expensive in AZ.

Now to clarify, neither of those are a problem for the following reasons.

1 - The lower purchase price in Texas offset the higher property tax, and as long as the property cash flow‘s that won’t be a big factor.

2 - The higher purchase price in Arizona is typically offset by higher rents which will usually provide you similar returns.

Since I believe both places can provide good returns, how would I go about making the decision? I would look closer at each individual city you listed and determine exactly what it is you’re looking for.

Do you want to be close to friends or family, if so where are they? Do you prefer to be in a large dry climate such as Phoenix, smaller mountain town such as Flagstaff, or a bit more humidity (and grass) in central Texas? Do you need a VA hospital/clinic?(Phoenix, Dallas, San Antonio and Corpus Christi have them).

 Hope this gives you a few ideas...

@Todd Dexheimer

Yes, I am able to still find deals in Phoenix the same way I think others can find deals in any other “Top/Heated/Popular” market.

I have a great investor minded realtor, and we know exactly what we’re looking for in that market and how to make it work (off-market, small multifamily, value-add, C class properties in neighborhoods that I believe have potential).

Is it easier to find deals elsewhere, Yes. Are there higher returns elsewhere, Yes. 

So why do I think Phoenix is right for me (and not necessarily anyone or everyone else)?

Similar to @Mike Morawski I think in terms of where I want to be (even though not physically there currently), it’s where I want to invest.

*BTW, I appreciate your offer to discuss further Mike, I’ll message you.

I have properties in 4 states (small multi and single family). Got into them all for different reasons and with different strategies. As I ponder the future I’m going to consolidate to an extent (both location and strategy) and work on scaling.

I like Phoenix because I’m a bit lazy and comfortable there. I have a great team (Realtor, Propery Manager, GC and individual subs). I used to live there, and still have family there. I have completed 4 deals in the market (1st was bad, next was ok, last 2 were extremely successful). I want to continue the pattern.

So, instead of finding a new market at the moment. I’m happy with my ability to create deals instead of finding them. David Greene just wrote a great article about this on 3 June, and I highly recommend it.

Just my thoughts...

@Mike Morawski
Hi Mike, thank you for the information and reference. I find myself looking at other markets from time to time for comparison to where I’m currently investing (Phoenix).

I have a question, because you mentioned Dallas a couple times. I look at Dallas and most of Texas as a reasonably affordable area with good opportunities for appreciation, landlord friendly environment, and a lot of the other positive factors that are often mentioned.

I do have one concern about the state of Texas as a whole, that I don’t see discussed too often and that is the amount of property taxes.

I am not against taxes, but rather curious from someone who has invested there. Do you find it hard to find good deals when factoring that in? Most properties I run numbers on look great until I add those in.

Curious about your thoughts. What benefits do you see that offset that specific expense, or am I missing something?

Thanks.

@John Warren It's funny you mention the owner occupant. I actually had one submit an FHA offer, which was at a great price except we couldn't work it out because all units were recently rented. They just took a look at our second building (which is vacant), and am expecting a similar offer from them on that one. I'll chew on the emotion vs cap rate thought. Thank you for your input.

Hi there,

I’m looking for some advice on how to determine whether to (a) Cash out Refi or (b) Sell, in order to reinvest profits after a successful value add on 2 diff 4-plex’s.

Details:

I own 2 near identical 4-plex’s in Phoenix, Arizona. One street apart from each other in an older neighborhood with a lot of similar properties. 1st Building rehab is complete/re-rented (higher rents), and the other rehab will be complete soon (1 - 2 weeks). I also have interested tenants for the 2d building. Contractor has been completing work as scheduled.

Purchase Price: $275k ea Down
Payment: $69k ea (25%down)

Purchase costs: $8k

Out of pocket costs: $77k ea

Current Mortgages: $205k ea

Renovations: $65k ea building

ARV: $550k-$575k ea based on comps

New Rents: 4k per 4-plex per month (1k ea unit)

Actual Expenses: 1.2k per month (Mgmt, Vacancy, Maint, Capex, utilities, landscape, taxes, insurance)

NOI: 33.6k (2.8k per month x 12)

-I can Sell at $550k (a buyer recently made an offer at that price), a separate 1031 buyer is supposed to provide an offer early next week.

or

-I can Refi (local lender who I do business with and knows the property details will offer terms up to 80% LTV, ~4% fixed, 10 year balloon, 25 year Am). I verified this info 2 days ago.

*Same lender above will loan on replacement property, similar terms, if I sell and purchase another property.

My thoughts:

-C Class properties (that I like), good tenants (all paying), good location, good property manager & good lender make me consider Refi and look to purchase another 1-2 properties in same neighborhood and repeat.

—Refi both at 550k ea (assuming they appraise), 75% Cash out Refi = 825k minus 410k mortgages - 130k rehab - ~10k refi fees = $275k to buy more RE

*Neighborhood comps for un-renovated 4-plex = approx $450k ea

or

-Selling and locking in profits from both buildings then 1031 into 1 larger commercial property may offer chance to scale up to larger property (with another value add).

—Sell both at $550k = $1.1M minus 410k mortgages - 130k rehab - 88k (approx 8% commissions/fees) = $472k to buy more RE

Concerns:

Refi: With 4-plex valued with comps instead of NOI, I'm at the top of market for them right now, which means minimal room for further value add/appreciation and now might be great time to sell, though I am happy with Cashflow.

Sell: What can I find as a replacement? I have a great realtor who consistently has off market properties, but can I find one that makes sense within 1031 window? Will any efficiencies of 1 bldg offset costs of having 3-4 separate 4-plex’s?

I tried to keep this brief and include relevant details, let me know if I’m missing anything.

I appreciate any thoughts or insight into how you would make a decision.

Thank you.

Terry

Eric, I didn't realize we had AD AF in Fargo (I've been here less than a year). Thanks for the info on the local meet ups. I will look into attending those. Wow, 25 deals in 15 months is pretty impressive. We travel to Fargo once a month or so, I'll definitely reach out the next time we go. Lunch/Coffee sounds great.

Ken, it was more of a statement, just wanted to list a few of the specific areas I was looking at in case someone such as yourself happened to be involved in the same areas. I am always trying to learn, so yes I will take you up on your offer and e-mail you soon.