Purchase out of state

6 Replies

So here's our thought....we live in Colorado, but are interested in investing in Arizona. We spend a fair amount of vacation time in AZ and plan to retire there within the next 10 years. 

We're considering some 3/2 properties south of metro PHX, but the rental calculator, with all variables results in $0 (to slightly negative) cash flow . Our intentions are to rent to the snowbird community -  Dec-March and for our own vacation use the rest of the year. So I guess my question is that if our goal is more long term capital appreciation vs. rental income, does it make sense to buy and accumulate a portfolio of properties even though there's not any cash flow to speak of? 



Can you put more down then the normal 20%-25% for financing to help make it cash flow?

I think you will get tired of $0 or negative cash flow every month and when repairs hit you will dislike it even more. I dont think this would be bad on one home if your gonna live in it half the year and rent it out the other but to build a portfolio all on negative cash flow, to me is not the way to go.  You might aw well just buy all cash if you can on 1 or 2 then negative on several.  Unless you will be alive in the next 30+yrs to realize the cash flow once paid off. 

Good luck

Thanks Curt...that's actually what I've been thinking.

We could put more down, but was thinking more along the lines of long term appreciation.
We'd actually only be in the house ourselves a handful of times per year.

If you finance, with naught to negative cash flow it could seriously affect your DTI when it comes to future financing needs. Also, if you haven't already, consider all the costs associated with rental property ownership - rental costs, HOAs, assessments, repairs, property managers, maintenance, vacancies, tenant troubles. However any negative cash flow could be considered as the cost of your time in the unit.

Thanks for the input Bill....the good news is that the numbers do include all of the the BP Rental Calculator variables....ie vacancy rate, management, HOA, etc.

So what I'm hearing is that if we can utilize this home for our own vacation purposes when it's not rented, then the negative cash flow might make some sense. But understandably the lack of income out of a potential portfolio of properties would certainly be a problem regardless of long term appreciation. Gosh, after talking through it, now its sounds pretty elementary.

Maybe by spending more time in that market by living there part time would give us a chance to really learn the market intimately prior traditional investment....

Thank you all for the advice.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you