All Forum Posts by: Wes Blackwell

@Aaron Barber

ROI is all relative. Can't get the 1% rule on a $400k house in California, because the loan to purchase that property with only 5% down is $1,200 less per month, so why would anyone pay that much in rent when they could buy it for way cheaper.

Ultimately, take a look at what ROI the average property offers in any given market, and then when something performs better than that you may be looking at a "deal" for that market.

For example, if the average 1% rule score near you is 0.6%, then a property that offers 0.8-0.9% is probably a deal comparatively even though it doesn't hit the 1% mark.

@Justin R.

For that big of a project, you really ought to be getting quotes from the contractors who will be doing the work. That's $20k per unit which sounds reasonable, but like @Lia Martinez said it's really going to depend on what you're starting with.

@Gerald Donaire

Well, you've basically got two options for this duplex in Stockton:

1) Flip it

2) Hold it

To flip it, determine what the current market value is (your agent should have already done this for you), what the property will be worth after you fix it (looks for renovated comps in the same area, realtor can help), what the repairs to reach ARV will cost (contractor can help estimate), and how much you can get it for, which is all negotiation.

To hold it, determine your PITI and holding costs after purchase, and use current rents and pro forma market rents to see if that's worth it to you to hold it.

That's all there really is to it.

1. What is the property worth now?
2. What would it be worth after you renovated it?
3. How much would those renovations cost?
4. Does the current rent offer positive cashflow with your financing?
5. Would you be able to increase rent after buying or renovation to get cashflow if it doesn't now?
6. How much can you buy the property for?

Those six questions answer just about everything you need to help you make this decision. Best of luck :-)

@Oren Goltzer

Two options really:

1) Keep it and hire a property manager to manage it for you.

2) Sell it and invest in something with higher ROI or more local

Property manager could get rid of the headache for you and basically turn the deal into monthly mailbox money. Less returns because of property manager fee, but less headaches sound like it would be worth it to you.

Other option is to sell and find the same or better ROI more locally which also gets rid of the headache problem.

If you decide to sell, you probably want to get rid of tenant and make a few slight cosmetic renovations prior to listing so you'll get the highest offer price for the home.

Depending on the lease, that would probably put you in the fall season where there is a lot more activity going on here, as it slows down a little for the hot summer here in Phoenix.

@Manuel I Contreras

This opinion is going to be way to the contrary of the others offered, but the suggestion that you buy your wife's grandmother's home in Phoenix for $120k less than it's worth because she can't afford to pay her debt is absolutely ridiculous. How is this even an option?

Since this is your grandmother's house and she can't afford to pay her debt, you should probably do what's in her best interests, not anyone else's.

First, if it's a temporary situation of why she can't pay her debts, have her call her lender and see if they can forgive the debt or give her time to pay it back.

If keeping it isn't an option, then it should be sold with a Realtor on the open market for the highest price possible. 

The equity in that home is your grandmother's nest egg and must last her the rest of her life. If there's no way for her to afford to keep it than it should be sold for as much as possible to help her make the transition.

She already can't afford to pay her bills, so why should she sell her house at a discount? How does that even make sense?

If this was some random person and not a family member, more power to you in striking a deal that can help solve their problem and net you a profit. But this is a family member who could live another 20-30 years for all you know and the equity in the home is all she's got.

She ought to sell the home for full price, make $150k, then use that money to buy a condo or manufactured home on land for cash. Debt problem solved. Maybe your wife will inherit it when she passes and you can rent it out or sell it and get a larger profit then. Not take a huge discount and get fleeced by a family member so you can make a profit.

Maybe I'm reading this wrong, or there's more to the story that I don't know, but it sure comes off that you're about to rob a family member of their equity so you can profit, and that just doesn't sit right with me. 

@Shawn Abe

As Pamela said earlier, one of the biggest indicators of a strong market is job growth, and that's because it leads to population growth, which leads to increased demand, which leads to higher sales prices and higher rents, which are both a great thing for real estate investors.

Phoenix was #2 for job growth last year, and as a part of the Arizona Sun Corridor from Prescott down to Nogales, the region will more than double it's population by 2050. 

Who's moving here? Baby Boomers and Californians. Arizona is the #2 retirement destination second only to Florida, and the median home price here is half of what you'd pay in Los Angeles just six hours away. 

So barring the break up of America (serious), massive climate change, or simply running out of water, Phoenix looks like a safe bet for the long haul.

As far as the next few years?... No one here can tell you that. If we could predict the future we'd be way too busy spending our wealth to answer questions here. Especially considering that we have a presidential election coming up and the democratic candidates couldn't be ideologically further from the Republican incumbent.

So I guess it really depends on goals, strategy, desired ROI, etc. But I'd say it's a safe market for the long run if that means anything to you.

@Yuhua Lin

You're probably better off looking for SFR than MF in those areas, as there have only been 8 sales in the last year for multifamily properties. They don't come up often, and when they do they go fast.

Remember that Elk Grove is essentially a suburb of Sacramento, and what are suburbs full of? Single family housing. New construction is mostly on the outskirts of the metro area since that's where there is room to build, and the homes are mostly bought by people looking to escape the hustle and bustle of the metro area and get quieter neighborhoods with less crime and better schools.

BRRRR might be a challenge in this area as 70% of the homes are built after 1990, which really isn't enough time for the property to get beat up enough to get you a bigger discount. Bones will still be good, roof has already been replaced, along with carpets once or twice. Just dated cabinetry and countertops really.

Perhaps try looking in some of the nicer neighborhoods in Sacramento for mid-century homes that are older and might be better for this strategy.

@Keith Torsen

Thanks for the compliments! More than happy to help! As you stated, there is A LOT more than just the numbers when it comes to investing, and I understand that every buyer is a person, not a paycheck. The more informed you are, the better investing decisions you can make, and the better off you'll be. Happy my information has helped you.

You're not the only one in your situation, which is why many people are leaving California in droves. We're seeing a lot move from Stockton or Sacramento to the Phoenix, AZ area. And even more coming from Los Angeles or Southern California.

Just look at the difference in median home price according to Zillow

Los Angeles: $686k

Sacramento: $327k

Stockton: $301k

Phoenix: $242k

That $85k difference between Sacramento and Phoenix equates to roughly $581/mo saved on your mortgage every month. That's insanely huge. And can be the make-or-break amount for most deals or investments.

Not suggesting you move to AZ, but as others in the San Francisco Bay Area are already experiencing, perhaps the local market is getting too expensive for your strategy at your income level.

I get messaged by people from the Bay all the time who want to invest, but realize the numbers don't make sense locally, and want to see if they can make it work in Sacramento.

And I have the same kind of people from Sacramento who want to see if they can make the numbers work in Stockton instead, saving a little bit of dough or having more options to choose from.

Then I get investors who realize none of it makes sense for their budget or strategy, and that's when they consider looking out of state. 

Arizona is a good option because it's only one state away and less than a 2 hour flight. Easy to get to in case you need to visit the property or something goes wrong. 

Plus way more landlord friendly, huge growth projections (double the population by 2050), and simply way more affordable for Middle Class Americans.

So, just something to consider. Real estate in Sacramento and Stockton is only getting more expensive as the Bay Area investors and buyers come in seeking relief from the crushingly expensive housing market in the Bay.

@Gerardo Hernandez

Here's an article I wrote that contains everything you need to know about the future of short term rentals in the Phoenix Metro Area:

https://www.biggerpockets.com/forums/546/topics/715624-the-future-of-phoenix-short-term-rentals-airbnb

@Antonio Sanchez

Anything that can connect the high-paying jobs of the Bay Area into cheaper housing markets and allow workers an easier commute than driving 2-3 hours into the city every day will do wonders for home prices.

I do a lot of deals in Stockton and Sacramento, and Bay Area migrants and investors get an almost reverse-sticker-shock as they can't believe how cheap the housing is compared to the Bay Area. 

But as @Terry Lao said, it will probably take twice as long and cost twice as much as projected, so plan accordingly. Ultimately, I think it's inevitable, so if your plan is long-term then you're probably good to go.