I would really appreciate people’s opinion on the following deal in Phoenix:
Single family home, 4 br, 3 bath, 2200sqft home with pool.
Building Cost $93,000.00
Down Payment $27,900.00
Mortgage Amount $65,100.00
Closing Costs $2,000.00 ($3k seller contribution)
Mortgage Rate 5.35%
Amortization Period (years) 30
Deferred Maintenance Expense $3,000
Income: $1200 expected rent (estimated)
Expenses (estimated):
Property Taxes $104.17
Insurance $50.00
HOA $67.00
Property Management 8% $96.00
Building Maintenance 8% $96.00
Vacancy Allowance 10% $120.00
Total Expenses $533.17
Net Operating Income (NOI) $666.83
Mortgage Payments $(361.91)
Net Profit $304.92
CAP Rate 8.6%
Zestimate: $101K, assessed valued municipal $96K.
This will be my first deal and am looking for a long term buy and hold. Any views? Thanks!
That is a pretty nice interest rate and term. Where did you find that kind of a deal on a NOO property?
Hi,
My only question is why would you buy a retail property and make it a rental!
I invest in Phoenix and right now there are lots of $101k homes you could purchase in rentable condition for below $71k, in fact in this week market you should be buying at 35% below market value!
Even though you want to have a rental first rule of thumb is buy at an average of 30% below FMV / ARV and in the Arizona, California, Nevada and Florida markets you should be buying at 35% below FMV / ARV because if something happened where you determined that you needed to sell your rental property you need to pay roughly 8.5% just to re-sell the property!
Phoenix is still a soft market (Very Soft!!!) and property values have not hit bottom, so do not buy a rental at retail!
$101k / $93k is retail as far as I am concerned!
Take your time and you will find the right home at the right price!
GR
Intersting that you say that. I have been looking for several months and every place is going near municipal assessed value. I’ve placed offers on 4 places that were bank owned and all had multiple offers within 2-3 days and I’ve lost all of them. None are going for 35% below ARV unless they have missing AC units, substantial repairs, etc. I wonder if it depends on neighborhood…
Hi,
It very much depends on neighborhood! And the city your searching in within Maricopa County!
Assessed value has absolutely zero bearing on property value, you absolutely must use comps to determine actual value!
You made offers on four (4) places in several months! I make 30 to 50 offers to get one contract excepted, and might have to look at the listings on 150 properties to make that 30 to 50 offers!
We do this in a week or less as when we want to buy multiple properties we might make 200 or 250 offers in a month!
What are you making your offers on? Owner occupied properties being sold by owner will obviously almost always be for retail price! To get a discount you need to specifically look at REO’s and occasionally I might find an underpriced lender approved short sale that meets the 30% rule!
Look for REO’s that have been on the market for at least 2 weeks with no offers pending!
I buy properties in both Maricopa county (Phoenix Area) and in Pima County (Tucson Area) of Arizona and buy in Clark County (Las Vegas), as primary markets for single family properties (1-4 units).
But I have been known to buy properties in any state for portfolio, wholesaling or flipping as my market has no boundries!
I primarily invest in the East Valley area of Phoenix (Ahwatukee, South Mountain, Guadalupe, Tempe, Mesa, Chandler, Gilbert, and Apache Junction!
GR
My offers have all been in Avondale, Tolleson, Goodyear and Litchfield Park areas. Properties are all selling for in the $80-90K range for a property this size. All have been REOs. They sell within days of coming on the market usually with multiple offers. Based on that, I felt the property above was priced well. The only properties that sit on the market and are under this price range have a lot of work.
Hi,
I can tell your looking at the new (Less than 10 years old) homes out there, yes they have been going like crazy, however like I say lot's of properties and lot's of contracts!
If your not up to it I can probable find something for you, send me a PM with your criteria and range and I will look into it!
If I don’t make lot’s of contracts in a single week the market changes and available properties change and by the next week it’s a brand new ball game! Plus my chances of getting an excepted contract is pretty good if I pump out 50 to 100 contracts in a week and review 200 to 300 properties!
If there selling for $80-90k, how do you know FMV is not $104k to $117k as it appears you have not reviewed the actual comps! I am finding there are so many REO’s in Phoenix (Greater Maricopa County area) that most lenders have been pricing there properties below FMV just to find a buyer and get them off there books!
The reason I say this is most appraisers have been discarding the REO / Short Sale property sales and trying to judge market from arms length private party sales as lenders have been doing everything they can to reduce maricopa counties huge over abundance of REO properties!
GR
Hi,
I agree with GR.
The numbers you present aren’t very appealing to me.
8% CAP? I’ll borrow from you at that rate and you won’t have any of the hassle or risk.
You should be looking for 10-15% to make it worth the effort.
I don’t live in Phoenix. But 70% of ARV + repairs are my minimum to purchase a property. I’ve been bidding on about 6-10 properties a week since February and have accepted offers on 3.
5 months with about 125 offers over the course of that time to close on 3.
Keep looking and bidding. You’ll get the right deal eventually.
pete
I haven’t seen any other properties in the 4 months that I’ve been looking that can produce over $300 in monthly cashflow with a $30K cash investment. I’d like to see it if there is such a deal!
Making hundreds of offers would be great but I need an agent willing to do that. Not to mention that I’m doing this from afar so it’s a bit more complicated.
Seems like the PHX market has picked up incredibly in the past 2-3 months. I was looking a few months back and seeing properties for $40-$50k, renting for $900/mo. Now it seems those same properties are going for $15-20k higher!
Although $93k is wayyyy to high in my opinion.
Mainly I was looking at the following specs which seemed ideal for renters in the $800-$900/mo range-
2000 or newer
3bed/2bath (min)
1300 sq ft (min)
SFR’s
Typically going for $30-$35/sq ft
Has the bottom passed for the PHX market? I would think not with such an oversupply of inventory, but the investor demand is really causing an uptick in prices.
Thoughts anyone???
Hi,
It very much depends on where in the Maricopa county (Phoenix) area as city to city and area to area are different!
Right now there is a lot of inventory here and more foreclosures coming so I do not believe the Phoenix market has hit bottom, although we have kind of thought it’s been skipping bottom for a while! The summer buying season has been a real boom to the market however it’s short lived because by end of August it will be over and the next time things will pick up is when snow birds come in, in November!
There are a lot of older properties here that can be gotten in fairly decent shape but the new homes less than 10 or 15 years old have been harder to come by, but not impossible!
GR