Posted by Richard C on July 26, 2011 at 01:01:59:
@Chris in FL
Oops, somehow hit the Submit button too early.
I see you are a regular contributor here and generously sharing you knowledge and enthusiam.
Best to you and the brood, Richard C
Want to buy and hold SFH in Las Vegas or Phoenix - Posted by Richard C
Posted by Richard C on July 24, 2011 at 14:00:49:
Hi all,
Wanted to get some advice on how to decide on SFH purchases to max cash flow and minimize expenses.
e.g. buy properties built > 2000
Single Story vs Double Story
Better rentals with 3 br vs 4 br (at higher price )
Rent per square foot ( vs price per sq ft )
What about Condos ?
Gonna take a trip from LA to LV to Phx to check things out.
Thanks, Richard C
Want to buy and hold SFH in Las Vegas or Phoenix - Posted by Robert Campbell
Posted by Robert Campbell on July 25, 2011 at 11:49:43:
Other than cash flow, I’m curious why you think now is a good time to buy in Las Vegas and Phoenix?
Prices are still falling, and the first rule of money is to avoid losing your capital.
Why not wait until those markets hit bottom and then buy?
Thank you.
Robert Campbell
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by aristotle
Posted by aristotle on July 24, 2011 at 21:16:10:
Richard, these two markets are very similar in terms of cash flow and numbers. But the Vegas job market is still pretty bad compared to Phoenix. I work with a team in Phoenix that buys properties within in your criteria. If you’d like to have us show you were the the best areas are for rentals, let me know. We can also show you the types of rehab we do on them as well. Thanks.
Re: Want to buy and hold SFH in LV or Phoenix - Posted by Richard C
Posted by Richard C on July 24, 2011 at 14:04:52:
Oops forgot to ask whether LV or Phoenix are better long term buy and hold.
Been told that Phoenix has more diversified economy and thus better growth potential.
Thanks, Richard C
Re: Want to buy and hold SFH in LV or PHX - Posted by Richard C
Posted by Richard C on July 25, 2011 at 14:20:41:
@Robert Campbell
There are decent cash flow deals now in LV / Phx for capital that is not earning anything ( 5%-12% ).
I don’t know the SFH rental market and best areas for such so …
“Prices are still falling, and the first rule of money is to avoid losing your capital. Why not wait until those markets hit bottom and then buy?”
Curious, what indicators do you use to tell when they hit bottom ?
Best, Richard C
Buy and hold SFH in Las Vegas/Phoenix/FL - Posted by Chris in FL
Posted by Chris in FL on July 25, 2011 at 12:44:14:
I can’t speak as to Las Vegas or Phoenix, but I can tell you why I am buying like crazy in Florida right now. House prices are very low, and rents are still strong as ever. I can buy single family houses that cash flow at break even or better with just 7.5 year mortgages (decent houses, no war zones). I am buying REOs and short sales at approximately 50-70% of the value of comparable houses being sold today (including all of my repairs and clean up) - I have equity when I buy. If I wait even two years, I already lost two years of mortgage paydown - fyi, on a 7.5 year mortgage, over half of the mortgage payment is principal paydown (and I am not making those payments; my rents are covering them). Regardless if the market goes lower or not, my properties are on their way to being free and clear, fast. Also, if the market goes lower still, I have a great plan for that - buy even more houses, even faster!!!
In yesterday’s market, appreciation was making me wealthy (right up until it imploded), but cash poor (deals did not cash flow nearly like they do now). In today’s market, I couldn’t care less about appreciation - I am going to get rich on cash flow. I can own more houses, faster, at better prices, and get them all free and clear in 7.5 years. Back when everyone wanted to buy, it was hard to cash flow properties with 15 and 30 year mortgages.
Biggest reason I am buying now: I don’t know what the future holds… I know my plan works great now, today, and I intend to make the most of it. Maybe my private lender will decide next year that he doesn’t want to do any more lending, and I will have trouble replacing him. Maybe house prices will recover more quickly than anyone thinks or predicts. This I promise you: many people will miss the boat - I won’t.
Rule for building wealth: sell when everyone else is buying, and buy when everyone else is selling.
Best wishes,
Chris in FL
P.S. - Years of experience tells me, when I find a great cookie cutter (method of finding and funding real estate that I can rent out and make money on), make lots of cookies. The method won’t last, and soon I will be looking for a cookie cutter (again)!
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by Robert Campbell
Posted by Robert Campbell on July 25, 2011 at 04:29:36:
If you buy SFRs and use 40% for total expenses, what kind of cap rates can you get in Las Vegas and Phoenix if you buy in middle class areas - i.e. not the 'hood.
Thanks
Robert Campbell
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by Richard C
Posted by Richard C on July 24, 2011 at 22:25:51:
@aristotle
Thanks for the tips. Hoping you can share a bit more info ?
Can you give me an idea of what price range you’re
investing including rehab and closing and the rental income ?
Don’t know what kinds of deals are being made.
I see a lot of bank owned properties which are sold as is etc.
I would be interested to know what are the better rental areas so I scout around a bit online.
Best, Richard C
Re: Buy and hold SFH in Las Vegas/Phoenix/FL - Posted by Richard C
Posted by Richard C on July 25, 2011 at 14:05:41:
@Chris in FL
Thanks for sharing your expertise ! 
If you don’t mind, what kind of interest rate do you get on those 7.5 year loans ( amortized right ? ) and they put a 1st trust deed lien on the property ?
So, the private lender doesn’t share in any equity on sale ?
Best to you, Richard C
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by aristotle
Posted by aristotle on July 25, 2011 at 09:35:50:
Robert, it’s not ideal to use cap rates when dealing with single family homes. There is only one stream of income. I recommend investors look at cash on cash return, and expenses. I also look at price per sq.ft.
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by aristotle
Posted by aristotle on July 24, 2011 at 22:58:48:
Richard, if you would like to discuss more in detail, please email me at: akumpis@mac.com. I can also send you some examples as well.
Re: Buy and hold SFH in Las Vegas/Phoenix/FL - Posted by Chris in FL
Posted by Chris in FL on July 25, 2011 at 22:18:23:
Richard,
Glad to share… Rates 8-9%, fully amortizing, and terms 6-8 years. At first we negotiated each mortgage, but eventually settled on 8.75% and 7.5 years, and now that is what we do on all of them (12 done so far; 2 more in the works now). I wanted longer terms, so I could buy slightly more expensive houses, but private lender is in his 80s, and doesn’t want longer terms. I am still searching for someone who will do longer terms, so I can pick up a few 3/2/2 houses in nice areas. I give him all first mortgages. At Christmas I gave him a $100 gift certificate to his favorite restaurant and told him ‘no reciprocation - it would defeat the purpose’. Will probably give him a bonus every now and again, since he is a large part of me getting wealthy. Also, we drew up a clause that he gets a percentage of my profit IF I sell early; starts at 10% of my profit in the first year, and declines to 0% when the mortgage is paid off… Basically rewards him if I sell early and make a big profit (seems fair to me) - I don’t plan on selling any, though I won’t rule out the possibility.
Best wishes,
Chris in FL
P.S. - I searched for over a year to find this private lender… Relaxed the search some, but still keeping feelers out for someone that will do 10-15 year terms. I am buying 2 & 3 bedroom houses, most block, most 1 bath but a few 2, in working class neighborhoods (no war zones), under $30K including all repairs. With 10-15 year terms, I could get some 3/2/2 houses in nice areas (approx. $60-70K).
Buy and hold SFH in Las Vegas/Phoenix/FL - Posted by Robert Campbell
Posted by Robert Campbell on July 25, 2011 at 14:25:05:
The real estate timing model I use tracks these five key indicators:
- Existing home sales
- New home building permits
- Notice of Defaults
- Foreclosure sales
- Interest rates
Robert Campbell
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by Robert Campbell
Posted by Robert Campbell on July 25, 2011 at 11:59:52:
For an average, run-of-the-mill middle income area, please give the purchase price and gross monthly rent for both Phoenix and Las Vegas.
That would be great. Thanks again.
Robert Campbell
Re: Buy and hold SFH in Las Vegas/Phoenix/FL - Posted by Richard C
Posted by Richard C on July 25, 2011 at 22:53:32:
@Chris in FL
Looks like a win / win here as the retiree is getting about 9% ( taxable income ) as opposed to maybe 3-4% in more conservative investments.
You get “100% financing” so you can do as many deals as he will agree too.
He doesn’t get any depreciation deduction right (you do ).
Well, in 8 years you’re riding off into the Sunset with all free and clear cash flow properties.
BTW, Who does the Prop Mgmt on all these ?
Congrats, Richard C
Buy and hold SFH in Las Vegas or Phoenix - Posted by Robert Campbell
Posted by Robert Campbell on July 25, 2011 at 14:13:58:
Can anyone else give me some average purchase price and monthly rent numbers for the Phoenix and Las Vegas housing markets.
I’m talking about middle class neighborhoods - not low end or the high end.
Thank you.
Robert Campbell
Re: Buy and hold SFH in FL - Posted by Chris in FL
Posted by Chris in FL on July 26, 2011 at 24:41:35:
Richard,
You summed it up about perfectly. I am happy as a pig in mud, and so is he. He gets paid on time, every time, and makes a great, safe, hassle-free return on his money. I am loading up on great deals, and waiting for the sunset! Beauty of it is, with 7.5 year mortgages, over half of every payment is principal!
Currently, I manage them all myself. At 30, just the management is still very part time. I still spend more time on searching, making offers, buying, repairing, and getting them rented initially than I do managing what I already own. If my buying machine continues it’s current pace (about 10/year), it won’t take long for that to shift, and I will know it is time to slow down. My initial goal was 30, but I am already there, and would be bored to death if I quit now. Don’t see any reason to stop yet, so now I am aiming for 40-50 total, but flexible to adjust based on the market, the amount of management hassle, etc. My 9 year old is in training now (so far he loves it; especially the ‘how much money will we make’ part), and may start doing some management at some point (hopefully). He rode with me a few days recently, and I included him in the decision-making on one that we have under contract now. Ideally, that one will be a gift to him at some point… The rest, he will have to earn! First plan is a gradual transition to my kid(s) - other one is 4 years old… Second plan is hiring out some or all of the management one day. One beauty of rentals is, if the cash flow is right, you can work as much or as little as you want. I did much of my own repairs in the early years, but now I hire out most of that. Better to spend my work time shopping, planning, studying, etc. I have been giving some thought lately to back-up management - how I can keep things covered as my family starts to spend more leisure time away from home. The disadvantage of it being ‘all in the family’ is that the family will often vacation together… Ah, the difficulties are immense (lol). It is a different world than how I grew up - poor! One of three kids with a single mother (divorced and almost no child support from father).
Needless to say, I think we are in a time of great opportunity for those who choose to make the most of it.
Best wishes,
Chris in FL
Re: Buy and hold SFH in Las Vegas or Phoenix - Posted by Kevin Rogers
Posted by Kevin Rogers on July 30, 2011 at 24:41:11:
Phx or surrounding towns 850 to 1300 for SFH. I have 1 in
litchfield 4/2.5 getting $1200