Hello BP members!

I am new to REI and joined BP several months ago. We live and Turlock, CA and are looking for buy and hold multi family opportunities for cash flow. Unfortunately our area will not support cash flowing properties (at least ones listed on the MLS). I have looked at other cities up to 2 hours away and it looks like the same story to me. Hard to cash flow even with 25% down. This has led me to look out of state, something I would not have thought about even 2 months ago. I read Brandon Turner's  book on rental property investing and am working through David Greene's book on Long distance investing.

I am looking at both OH and AZ as possibilities of areas to invest. OH because I spent about a month and a half there in 2012 doing missionary work and AZ because my sister in law and her husband live in Gilbert. I did not realize how beautiful AZ is! I love the low maintenance landscaping! I tried to convince my wife to let me do this to our front yard but she was not interested :( 

Anyways I started I thread asking folks where they invest in OH and have learned a great deal so I figured why not do the same in the other area I would like to invest. Check out the thread here. Where in OH are you investing and Why?

Wanted to know for those of you investing in AZ where are you investing? I am looking at Phoenix and  suburbs like Mesa, Gilbert, Chandler. Any other I should be looking at? I would love to get $200 per door cash flow if possible, but am quickly learning this is a unicorn in Northern OH and maybe the same in AZ. I am flying to AZ in December for a wedding and would love to meet up with investors or RE agents and learn about the area. 

If you are near to me in CA I would love to meet with you and discuss what you have learned about investing in AZ.

Thanks you all for your input!

I stopped investing in AZ and started investing in north west ohio. I think if you get on wholesaler lists you may have a shot at finding cashflowing properties, the MLS is not going to yield much result in Phoenix.

I think with Maricopa county being one of the highest growth counties in the country, there is just a lot of demand from retail buyers and investors that are just trying to start. 

I'm actually transitioning my position in Phoenix into properties in Ohio.  Trade 1 for 3.

Good luck

@Stone Jin , looks like another vote for my OH investing strategy! Or you are just pushing me away from AZ... :) 

@Kevin Moules

My best suggestion when you're having a hard time finding cashflow with 25% down is to take your 25% and look into investing in a market where that same amount equates to 50%.

More money down = more potential for cashflow. Plain and simple.

That being said, you can still find cashflow here... I would look into 2-4 units (same 25% down, residential loan) as it's a little easier to get cashflow positive than on single family homes with those same terms.

For example, here's a decent looking fourplex in Mesa:

https://www.realtor.com/realestateandhomes-detail/...

I just pulled the first thing off the MLS that looked like it makes sense and ran the numbers for you.

It's priced at $443k, so so with 25% down and interest rate of 5% your monthly PITI would be ~$2,375. Gross rents for this property are $3,375. That's a thousand dollar spread before other expenses (utilities, maintenance, etc.) and might not get you quite $200 per door but like I said I pulled this offline in just 5 mins.

Deals are out there, you just have to take the time to do the analysis :-)

@Kevin Moules my business partner and I live and invest in Arizona. We buy properties around Gilbert and Chandler, Arizona but not in those cities because the cash flow isn’t very good in those cities. But most of our properties cash flow $200 a month. We are using the lease option model in order to make the numbers work for us. We are pretty active at it. Last year we did 16 of these and this year we done 2 and are in the middle of the rehab with 6 more. So they are out there, you just need a system and a team to find them, acquire them, get them ready, lease them out, and manage them.

@Wes Blackwell , you have been on my to call list for over a month!! :) by the time I am able to call you its past 10 and nobody wants to deal with that. I spend my lunch hour calling customers and scheduling jobs so I run out of time to call my RE folks. Wanted to let you know I am not leaving you hanging. Thanks for your input. I know you also look for deals here in CA in my neck of the woods. Did not know if you come across anything that makes sense.  Your Mesa deal looks good, however at that price point, and 25% down it pretty much wipes me out. That being said I guess I was hoping for something up to 250K making some CF. Looks like Phoenix area properties are within the ballpark of what we are paying here in CA from what I have seen online. Is that a fair assumption? I am talking central valley here, I know you have written a bit about stockton but that place just not where I want to be at the moment. Thanks for your input!

@Shiloh Lundahl , I had to loop up the "lease option model" you speak of. I tell you, there are more ways to make money in RE than I can shake a stick at. Where do people come up with these things?? :) Read some articles here on BP, the lease thing is very interesting. Has its risks of course but just another way of acquiring rentals. I am listing to a podcast night now, maybe 67? that the guest is talking about subject to properties which sounds like the same as a lease option. Although i could be missing something there. How are you finding properties with this method? Direct mail? Driving for dollars? I like the thought having almost none of your money tied up in a deal like this. I would not try this on my own without a mentor who had done it before to help guide the process. Thanks for your input!

@Kevin Moules

Hey thanks for the compliments buddy! I know I've written a lot about Sacramento and Stockton and still do business out there. Trying to add just as much content on here for the Phoenix metro area too!

So here's a quick look at two Arizona properties to consider. Not recommending them per se, just giving you some food for thought to compare with the central valley back there in California.

14 S 31ST AVE, Phoenix, AZ 85009 - $235,000

"Four-plex with 100 % occupancy. Cash flow inmediatly, don't miss this investor opportunity - units are all currently rented. There are two 2-bedroom 1 bath units and two 1-bedroom 1 bath units. All units are individually metered for electric - landlord pays for water,trash & sewer. There are 5 paved uncovered parking spaces at front of building. Gate access to additional parking rear of building, which is unpaved. Near I-10 and I-17, downtown; walking distance to schools and supermarkets. ~8 % CAP/ROI. No Showings, do not distrub the Tenants."

Gross Rents: $2,040

PITI at $235,000 with 25% down and a 5% interest rate: ~$1,260

Gross Monthly Spread: $780/mo

Yearly Operating Expenses per MLS: $5,689

Monthly Operating Expenses: $474/mo

Net Monthly Spread: $306/mo

Cashflow Per Door: $76.50

...

6216 W MARYLAND AVE, Glendale, AZ 85301 - $240,000

"ONE OF A KIND WELL LOCATED FOURPLEX. 10 MIN TO UNIVERSITY OF PHOENIX STADIUM-CARDINALS. 20 MINUTES TO CHASE FIELD. 30 MINUTES TO SKY HARBOR AIRPORT. NEAR ALL SCHOOLS. 10 MIN TO WESTGATE SHOPPING CENTER. BRING ALL BUYERS AND INVESTORS. THIS PROPERTY IS BEING SOLD AS-IS"

Gross Rents: $2,600

PITI at $240,000 with 25% down and a 5% interest rate: ~$1,286

Gross Monthly Spread: $1,314/mo

Yearly Operating Expenses per MLS: $3,762

Monthly Operating Expenses: $313.50/mo

Net Monthly Spread: $1,000/mo

Cashflow Per Door: $250

...

Of course, you'd also have to consider whether or not these properties are in a condition that works for you, or in neighborhoods you're comfortable investing in, or if the numbers are 100% accurate. But at first glance, these are properties that may have the potential to fit your criteria. 

@Kevin Moules You might make one last effort to consider your own backyard. Consider doing a mail campaign to find off-market leads. You can get suggestions for your audience working with a list broker.

For instance, there are about 2200 Senior Homeowners with Low Financial Stability Scores (FSS) in Stanislaus County: 20+ year ownership, home value up to $350,000, age 60-89.

These are good potentially motivated sellers as they are often ready to downsize or transition to assistance. It's also likely that they have fallen behind in updates and maintenance so they won't be expecting as much money for the home. 

@Kevin Moules

Here's one out in your neck of the woods for comparison's sake. At that price-point I could only find duplexes, so you'd have less ROI than a fourplex like above in AZ obviously.

1014 Roselawn Ave, Modesto, CA 95351 - $240,000

"Opportunity knocks! Recently remodeled duplex featuring new tub, tile flooring, vanity, paint, kitchen granite counter tops and blinds. close to schools, freeway and shopping. tons of potential here!"

Gross Rents: $1,675

PITI at $240,000 with 25% down and a 5% interest rate: ~$1,286

Gross Monthly Spread: $389/mo

Yearly Operating Expenses per MLS: Not Listed

Monthly Operating Expenses: Not Listed

Net Monthly Spread: N/A

Cashflow Per Door: N/A

...

Unfortunately the expenses weren't listed, but likely by the time you account for utilities, vacancy, maintenance, etc. you're probably pretty dang close to breaking even. The property has been on the market 46 days so it's probably overpriced and maybe you could get it for $10-15k less (haven't checked the comps). Immediately bump the rents to at least $900/unit (I'd recommend posting an ad on Craigslist and seeing if you could get $1,000) and those two efforts combined would increase your gross spread to nearly $800/mo. You'd end up with a little cashflow at the end of the month for sure. But just store it in the bank for future repairs. 

...

144 Floyd Ave, Modesto, CA 95350 - $250,000

"Adorable Cottage ready for New Owners. Featuring Hardwood Floors, updated Kitchen with Granite Countertops and Stainless Steel Appliances, Brand new Carpet, Crown Moulding, Chair Rail, Fresh Paint Inside and Out. Conveniently located in the center of the city."

Another potential option may be going with a single family house and perhaps putting a little more down. Cashflow would be a lot less, but as long as the property is paying for itself you'd still get the principal paydown, write-offs, etc. Plus this house is in FANTASTIC shape and surely in much better condition than any of the other properties I showed you, and would definitely attract much better tenants as well.

So basically, it's a trade-off in less hassle of tenants and property condition vs. cashflow. Ideally, you try to get the best of both worlds but those are pretty rare. Plus it's such a seller's market that getting leverage as a buyer can be really difficult. 

So hopefully these posts give you some food for thought and help you better consider all of your options :-)

my guy @Wes Blackwell out here throwing alley oops!!! lol great insight and information man!

@Wes Blackwell , you the man! Who is your boss? Tell him you deserve a raise! :) @DJ Dawson I totally agree. He is doing legwork for a guy in CA has has never met, that is excellence! Wes, Thanks for bringing up the two AZ properties! They got me really excited on what is available. Where would you recommend looking in Phoenix proper? Any investing maps that you are aware of? 

As you found out, the price point only leads me to duplexes here in my area that do not CF although they may just par for themselves. And because I have lived on realtor.com lately I have run across that property in Modesto for a while. However like any good investor there is nothing like knowing your market, and that duplex would be in a D class neighborhood in my newbie opinion. Ill have to look at the Floyd property. Now I really have to call you, I mean your not my agent and your already analyzing deals! Ill say it again, you the man!

@Chrissy Arnold , thanks for joining the convo all the way from CT! Goodness I love this site. You make a very good argument. I have sent out a handful of hand written yellow letters to houses I have driven by but that is about it. Never heard of a list broker before, however on the podcasts folks talk about list source all the time. Would I not be able to get the same info there? Not trying to offend you, just trying to learn. For the price of a round trip ticket to OH I could probably send out a good stack of letters.. hmmm.... hamster wheels are turning. I have my eyes on a handful of duplexes that are run down I need to find out who the owner is and send out more letters. I will PM you to learn more about what you do. Thank you!

@Kevin Moules

Hahaha thanks for the compliments. I'm all about creating value for people and as agents we have access to critical information on the MLS that can really help investors make better decisions about which properties they decide to move on. I have other clients in your exact same shoes that are trying to make the decision between Sacramento / Stockton and Phoenix.

Real estate is truly neighborhood by neighborhood, street by street. And so my general recommendation is to find a property where the numbers work for you first, and then decide if the neighborhood works for you. There's no sense in looking in a good neighborhood where the ROI isn't there, and neighborhood quality is a supremely personal point of view.

For example, an investor from the wine country in Napa and an investor from the worst parts of Oakland will have a totally different opinion on the exact same neighborhood. So my general recommendation is invest in a neighborhood if you'd be willing to live there if you had to. Not if you wanted to lol, but if you had to. And only you can determine that. 

There aren't any investment maps of the Phoenix metro area that I know, and probably for good reason. The Phoenix metro area is HUGE. So for one person to know all of it that well is bologna. Plus, the best person to know it all is an agent, and we can get in super hot water with the state department of real estate by giving neighborhood ratings, etc. Trust me, I did in California for my map of Sacramento and Stockton. No bueno!

So, the first step is to know all of your numbers: 

• What's your budget? 
• How much are you pre-approved for? 
• How much are you putting down? 
• What's your interest rate? 
• What ROI are you looking to get?

Then, take a look at all available options and run the numbers. 

• What's the asking price? 
• What's it really worth? 
• How much can I get it for? 
• What are the current rents? 
• What could the rents be? 
• How much money will it take to fix it up to get those rents? 
• What are my expenses? 
• What's the ROI?
• How does this compare to other properties I'm considering?

Then, once you've found several properties where the numbers could work, analyze the neighborhood. The first step is to drive by the property and get the gut feel of it in person. If stray dogs are running the streets, there's trash and furniture out on the curbside, and suspicious looking characters loitering around up to no good, it's probably not a neighborhood you want to invest in. 

If you can't drive by, do a virtual driveby on google maps. It's not nearly the same as being there live in person, but it's as good as it gets if you have to do it remote. If you're investing in another state, have your local agent act as boots on the ground and go scout the area for you and send you some live videos. I just did this for a 12 unit apartment complex some investor clients of mine were considering. I walked all around the property, up and down the streets, and sent them like 10 minutes of video. Almost as good as being there in person.

Lastly, check the local crime maps. You can go to any city's police department website and see what crime site they post their reports to. Then scout the neighborhood you're considering and look back the past 6 months to get a good idea of the area over time. Ignore minor crimes like petty theft, loitering, stolen license plates, etc. That happens in every neighborhood. But drive-bys, shooting on an occupied dwelling, and assault with a deadly weapon only happens in the worst of neighborhoods.

Once you've identified an area that works, then expand the search a little bit and see if there are any other properties nearby that may work for you. And now you'll know that any new listings that come in that area will fit your neighborhood criteria. But once again, if it's totally overpriced and the numbers don't work... who cares?! That's why you start with the numbers. 

Hopefully that helps you analyze properties here in AZ and back in CA as well. If I can be of any other help or answer any more questions for you just let me know :-)

@Wes Blackwell    Thank you for posting some of these, it's great to get to see some examples laid out like this.

@Wes Blackwell , you are awesome. I really like that strategy about finding a place where the numbers work first, THEN  look at the neighborhood.  All great points! You have added much value into my RE scouting criteria. Also, I will reach out to you this week! 

Look into Graham County. New copper operation and people are moving in to the area and housing is at a premium. However, there are a lot of vacant homes, and my husband and I are always on the hunt for off market deals. We have bought 3 this past year, one with 2 units, and we just put 2 more under contract in a bulk property purchase. Still on the fence about keeping them or wholesaling them. Feel free to call or text me for more info.

@Wes Blackwell Thank you for sharing the knowledge with the steps when looking for a property.  Also for the examples.  I'm a Arizona native and the neighborhoods have definitely changed over the years, you made a important statement by saying a neighborhood you would live in if you had to.  This gives a different perspective to open up to different areas to look at for investing. 

Do you also help with fix and flips?  I'm interested in doing some house flipping and then just selling them. As a RA with AZ if the numbers work do you still think its a good idea?  Reason I ask is because a friend who does flipping is not doing any right now & says the market will crash & just wants to wait a while until doing it again, and any deals out right now are not as lucrative as before?  He was doing in the PHX areas where they were getting 50-80k a flip. What are your thoughts? I would love to hear from others also. 

@Kevin Moules Vacation rentals (Airbnb) are doing very well in AZ! ;)

Originally posted by @Wes Blackwell :

@Kevin Moules

My best suggestion when you're having a hard time finding cashflow with 25% down is to take your 25% and look into investing in a market where that same amount equates to 50%.

More money down = more potential for cashflow. Plain and simple.

That being said, you can still find cashflow here... I would look into 2-4 units (same 25% down, residential loan) as it's a little easier to get cashflow positive than on single family homes with those same terms.

For example, here's a decent looking fourplex in Mesa:

https://www.realtor.com/realestateandhomes-detail/...

I just pulled the first thing off the MLS that looked like it makes sense and ran the numbers for you.

It's priced at $443k, so so with 25% down and interest rate of 5% your monthly PITI would be ~$2,375. Gross rents for this property are $3,375. That's a thousand dollar spread before other expenses (utilities, maintenance, etc.) and might not get you quite $200 per door but like I said I pulled this offline in just 5 mins.

Deals are out there, you just have to take the time to do the analysis :-)

$1000 spread between PITI and gross rent? I don't see a deal here. What about Property Management costs since this would be a remote investment. Say that's 8% of gross rents = $270. What about HOA fees of $360/month? Now you're down to $370/month spread. What about maintenance costs & turnover/vacancy allowance (albeit small for the hot Phoenix market but still not $0)? What about special assessments from the HOA? And capex?

Unless I'm missing something, this is a loser. And remember you put $110k down on this deal.

Not trying to be argumentative, just chiming in with my view since there are new investors reading posts like this getting what I consider to be only half the story.

Dave,

Thank you for laying out the numbers! We all need to do our best to give the full story on properties. I was thinking along the small lines. 

@Kevin Moules yeah, some of us need to work harder at it than others. Especially those of us that have $13k of motivation (3% co-broke of $443k). 

Not that you needed one more vote on this, but I'd go shop deals in OH. My last acquisition in AZ was 2017.

@Dave G, I was wondering the same- the numbers on the analysis provided did not make sense. I thought I was missing something.