Phoenix, AZ region viable for house hacking?

Question

I currently live in Philadelphia, PA and my goal within the next 2-3 years is to relocate to Phoenix, AZ. I am interested in achieving some level of financial independence with "house hacking," which seems entirely doable in Philadelphia but not so much in Phoenix. I am approaching this casually at the moment, but it seems that the number of multi-family homes in the Phoenix and surrounding areas are very limited -- I guess it's a difference of culture or the fact that land is so cheap in the southwest that there isn't much demand for a duplex/triplex/4-plex.

At any rate, I'd like to hear from anyone who has invested in this region. How did you find you find multi-family properties? What were the specs of the property and how much did you pay? What are the rents like, and did you face any major challenges that were unique to the region? If it helps any, I would be a first-time home owner and I would most likely purchase the property with an FHA 203k loan. I have decent credit (750ish at the moment) and I expect to have close to $20-30k cash set aside for the down payment.

Aaron K. · Answer

House hacking is doable anywhere the question is just how much you have to pay out of pocket at the end of the month and the answer for Phoenix is likely some.

Ben Leybovich · Answer

@Chris K. - So, basically whether you want info on house hacking, or syndication, Ben Leybovich is your man lol

It's called House Hacking - find it on Amzon, Charles.

Chris K. · Answer

@Charles Heuer

Take a look at the book that @Ben Leybovich and @Patrisha Leybovich wrote on the topic. There's a lot more to it but it is literally about house hacking in Phoenix, AZ.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information

Wes Blackwell · Answer

@Charles Heuer

Whether you're in Phoenix, Sacramento, or any other market out there, tenant patterns are generally the same:

Single Family Home: Best quality tenants, and longest term too. Wish they could own a home, but aren't ready yet for whatever reason (no down payment, debt to income ratio too high, etc.)

Duplex: Not too much different than a single family home, as you're only sharing one wall, a fence, and a driveway. Tenant quality is probably going to depend on neighborhood. for example, if you live on a street full of duplexes, the population density is going to be higher and higher quality tenants will shy away from that. Plus you lose the luster of being in a named neighborhood.

Triplex: These are super rare, and it's really going to depend on how it's laid out, size of units, etc.

Fourplex: Most of the time these are two duplexes stacked on top of each other, and often they are surrounded by other fourplexes. So essentially, it's like living in an apartment complex. You still may have some great tenants, but it's really going to depend on the quality of the property and size of units. 2/1's with 800 to 1,000 sq ft is pretty standard fare. I'd avoid 1/1's as the turnover rate can eat your profits alive.

Charles Heuer · Answer

Good advice, thank you very much. Since you have experience in the region, would you say that potential tenants seek out MFH (2/3/4-plex) rentals over traditional , largeapartment complexes or SFH rentals?

Wes Blackwell · Answer

@Charles Heuer

@Aaron Klatt nailed it... house hacking is a viable strategy in any market. The only thing that changes is the price and the amount left over to pay at the end of the month.

The real goal of house-hacking is to reduce your monthly obligation to the mortgage payment, essentially allowing you to control a property for far less per month than would normally be required.

If you're getting a duplex, you're more than likely still going to have to come out of pocket at the end of the month, but that also depends on how much you're putting down.

With a fourplex, your goal should be to get as close to living in the property for free is possible. You're probably not going to end up with any cashflow, but if all the bills can be paid and you can live in one unit for under $500/month, you've likely shaved at least $1,000 off your monthly payment by renting out the other units, and can use that $1,000 in savings every month to save for the next property or make improvements to the current property and increase it's value and get more rents.

The real problem with this projection is that no one has a real estate crystal ball, and far too much can happen with the economy and politics in the next 2-3 years to be able to accurately tell you what the experience will be like in Phoenix.

A real easy way to experiment with this would be to look up 2-4 unit multifamily properties on Realtor.com or MLS, see what the units are renting for, deduct one of the unit's rents for you to live in, and then use a simple loan calculator to see what your monthly PITI would be vs. the gross rents. This is the same thing I do with investors looking in Phoenix, Stockton, Sacramento, etc. so the process is essentially the same no matter what market you're in.

Phoenix, AZ region viable for house hacking?

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