Casa Grande, AZ · Member since 2020 · 17 posts · 34 votes
I’m 20 years old and live in Arizona but I was looking at a cheaper markets to invest in like Memphis Tennessee. I’m seeking advice on should I try to get a primary residence here in Az or a rental property in a cheaper market? I have about 15k to invest
Rental Property Investor · Phoenix, AZ · Member since 2020 · 7 posts · 14 votes
5y
Hey Jovann,
Its funny, because I live in Phoenix as well and found myself asking the same question about a week ago.
Things I would consider:
The market is getting a little pricey in the valley however I don't think it is going to slow down soon. So appreciation would still be a benefit of getting a property in Phoenix.
Another factor that you may want to consider is the return that you are looking for? Cash flow vs buy and hold.
Alone, 15k will probably get you a property that could benefit from renovations, something you could live in and fix up.
Also consider when looking in another market that you will need a team/network to help.
I was recommended to read David Greenes book on Long Distance Investing.
Feel free to message me if you have any other questions or would like to chat. Hope this was helpful!
Rental Property Investor · Phoenix, AZ · Member since 2020 · 7 posts · 14 votes
5y
Hey Jovann,
Its funny, because I live in Phoenix as well and found myself asking the same question about a week ago.
Things I would consider:
The market is getting a little pricey in the valley however I don't think it is going to slow down soon. So appreciation would still be a benefit of getting a property in Phoenix.
Another factor that you may want to consider is the return that you are looking for? Cash flow vs buy and hold.
Alone, 15k will probably get you a property that could benefit from renovations, something you could live in and fix up.
Also consider when looking in another market that you will need a team/network to help.
I was recommended to read David Greenes book on Long Distance Investing.
Feel free to message me if you have any other questions or would like to chat. Hope this was helpful!
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
5y
OOS investing will be as successful as the team you have established. 15K honestly won't get you far in most markets, I wouldn't encourage buying a property in a rough area. Can you house hack where you live with the 15K?
Having $15,000 saved up is a great start to your real estate journey and that's worth recognizing. It's also important to understand that you have to set up yourself for success by creating the right foundation on which to build. For some people that means starting in their market, for others it means starting out of state.
Do you know Memphis, or people you trust with 15K of your money there? That's what it takes. Are you OK with potentially losing all of your money due to poor management? These are questions you need to ask yourself.
Out of state investing is not for the faint of heart. It's still a lot of work and really only pays off once you're well established - and you can almost guarantee there will be bumps along the way. @Account Closed - I hear ya...
Casa Grande, AZ · Member since 2020 · 17 posts · 34 votes
5y
@Filipe Pereira thank you for the advice. I live in area where I can get a home for zero down. You think maybe should I get a primary residence and build equity while also continue to save until I have enough capital the for a rental rental property ?
Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes
5y
I think you should house hack if you can to speed up the process of saving up more funds for your investment journey. While you are saving money for the investment property you will also be building equity, of course. @Jovann Thompson
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
5y
@Jovann Thompson house hack a property in AZ. The absolute best way to begin imo with low money down and a high degree of safety. My advice is to buy the most desirable asset you can afford. This will lead to low vacancy and low turnover costs which is the biggest cash-flow killer. Also a desirable asset has a high likelihood of appreciating. Research house hacking if you haven’t already. It’s a great strategy to consider!
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
5y
@Jovann Thompson also read the book Set For Life by Scott Trench as soon as possible. That’s a great book especially at your age/season in life. Congrats on stacking some of them Benjamins.
Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 343 votes
5y
@Jovann Thompson I suggest you house hack in Phoenix, AZ. I see you live in Casa Grande, but you will not see any where near the same appreciation as PHX. Even though you have an In-n-out in town haha. Phx is the fastest growing metro in the country. Also if you can swing it I would buy a 4-plex because you will still be getting a residential loan. Scottsdale is a little pricey, but maybe Mesa is a good place to look. Depends on your price point. Another advantage is that you put less down so you can try to save some money incase you run into any issues when you first buy the property.
Be careful investing in properties or in an area because it fits your budget. Set up criteria that you are looking for when your investing and do not just buy properties because they are cheap or a "good deal". You get what you pay for and its a lot easier to lose money than to make money buying these "deals".
I would say that the best option for you really depends on your financing options. With $15k in cash, it will be hard to qualify for a conventional mortgage loan as an investor as banks usually ask for a 20% down payment on rental properties. This means that you will need to find a property which sells for about $75k, which is really hard in any market, not only Arizona.
Of course, you can look into alternative financing options such as hard money lenders, private money lenders, or a partnership if you'd like to buy an investment property for the sole purpose of renting it out, rather than living there. By the way, while I am not an investor myself, I talk to lots of investors through my work (I work for Mashvisor, a real estate data analytics company), and many choose to buy an investment property before buying a home. This is a really smart strategy if you manage to find a market - and a property - where you make more in rental income than you pay in rent for the place where you live.
In the case you have alternative financing options and decide to go for a rental property, the location you choose to invest in is key. I would analyze a few different, affordable markets to see what rent and what return I can expect there on average. Memphis is a great place to start with as cap rates there exceed the national averages, for both traditional (long-term) and Airbnb-style (short-term) rental properties.
Having said that, have you considered what rental strategy you want? In most markets return on short-term rentals is much, much better than return on long-term ones, so I would look into this option as well.
Meanwhile, if you don't have a home yet and would like to buy one, you can try house hacking in your local market. Where exactly in Arizona are you? In this way you can qualify for a conventional mortgage as home buyer, in which case you will get much better terms. Going back to renting out on a short-term basis, I am seeing more and more first-time investors doing lots of money with Airbnb house hacking. You can list a room or two in your home on Airbnb (or another vacation rental platform) while you live there and list you entire home when away.
Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
5y
Unless you live in a market where your average home is $1M and you have a reliable high W2 income and are able to build a portfolio of not less than 8-10 SFR you have no business doing OOS investing. Otherwise start local. If you have a small amount to invest you are better of buying and index fund and adding to it gradually.
Investor · Member since 2020 · 401 posts · 86 votes
5y
Originally posted by @Account Closed:
Unless you live in a market where your average home is $1M and you have a reliable high W2 income and are able to build a portfolio of not less than 8-10 SFR you have no business doing OOS investing. Otherwise start local. If you have a small amount to invest you are better of buying and index fund and adding to it gradually.
Why do you think like that? Refinancing is possible.
Property Manager · Kansas City, MO · Member since 2018 · 280 posts · 221 votes
5y
@Daniela Andreevska while short term rentals are a great and viable option, you’ll need to consider many more variables and be ready for them. Note that bookings have been greatly impacted with COVID and those who are doing well are experienced hosts / str operators. House hacking sounds like a wise option for you to speed up savings.
The short answer is no if you have a good person to manage it. I have a few that a family member manages. Get places where you won't need a lot of maintenance-ie invest the money for a solid home or do the work at the beginning to fix anything that could be a problem or need replacing in the near term.
You mentioned in a later post about splitting your mortgage payment three ways with your grandfather and girlfriend. Is that them paying you rent?
Investor · Tampa, FL · Member since 2017 · 589 posts · 251 votes
5y
Just keep in mind buying an investment property you are looking at 20 to 25 percent down. Not sure what size of a deal you are looking to get into though.
Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
5y
@Jovann Thompson Considering your situation carefully I would purchase a property local (Casa Grande, Maricopa, Coolidge) that needs some attention to detail with the intent to live in it for a year or two at the most. At the end of the year or two, rent it out and start the process over with your second property. Owner occupant financing is great as you can purchase with a very low down payment and as long as you live in it for a year it's completely above board and legal.
The greater Phoenix, Arizona market is on fire and with all of the growth Casa Grande is expecting you have an opportunity to get in early in an emerging market.
Find a property that needs upgrades in areas you have skills in or want to have. Learn to paint, repair, landscape, etc. to improve the property to a point and maximize the rental opportunity. A common mistake is to over-improve the property and or do things that aren't good for an investment property. Keep things simple, neutral, and easy to maintain so it's a good rental.
Rental Property Investor · Dunedin, FL · Member since 2020 · 23 posts · 32 votes
5y
@Jovann Thompson
First off, major congrats for getting started so young! You're asking the right questions and you'll be so far ahead by starting this young. I tell all my coaching clients I wished I would have started decades sooner.
#1, I agree with so many others here and recommend househacking in Arizona if you can. You're $15K will go farther as you'll need to put a lot less down as the first time home buyer. House hack away if you can. You'll likely get the benefit of appreciation, living cheaply, depreciation and eventually cash flow. Consider using that equity later as your personal bank to leverage and buy into other properties.
#2, out of state investing is definitely doable. I used to live in a higher cost area so began investing out of state with a trusted team. I currently have 12 doors in the Dayton, Ohio market, and I'm under contract for two more. Establish a relationship with a quality team, ideally turnkey. Or, if you have friends or family in an area reach out and ask for resources and relationships through them.
Best wishes and welcome to chat more if I can help in any way.
Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
5y
@Jovann Thompson you could buy a primary home with 3%-3.5% downpayment and live in it for a year while you fix it up. Then rent it out after 1 yr or sell and reinvest. Live in it 2 yrs to avoid capital gains
Casa Grande, AZ · Member since 2020 · 17 posts · 34 votes
5y
@Doug McVinua the housing is Coolidge is much cheaper and I also grow up there so I will just into a house there soon. Also I feel the casa grande will see a huge spike in the next few years. After I save more money, I was considering the doing the brrrr method in casa grande as my first official rental and keeping my primary residence in Coolidge.
Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
5y
@Jovann Thompson I like Coolidge, lots of opportunities! Remember anything you purchase as an owner occupant will be a low down payment, rentals are 20-25% Down Payment which is why I mentioned buying your first rental as an owner occupant with the plans to move a year later into a 2nd owner occupant property. That leverages your owner-occupant financing opportunity.
Once you own two or three you will have streams of revenue, cash flow, and hopefully appreciation that you can then begin leveraging to purchase more rentals.
Happy to help you find a great property in Coolidge!