Purchase out of state

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Purchase out of state

Peter PadalinoPro Member
Rental Property Investor · Gulf Shores, AL · Member since 2015 · 53 posts · 10 votes

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? 

Thoughts?

Thanks!

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Curt DavisBusiness Member
Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
10y

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

Curt Davis - KAIZEN Realty538 Reviews
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  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    10y

    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

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
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  • Peter PadalinoPro Member
    OP
    Rental Property Investor · Gulf Shores, AL · Member since 2015 · 53 posts · 10 votes
    10y
    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.
    0Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
    10y

    @Peter Padalino

    Welcome to the site.

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  • Peter PadalinoPro Member
    OP
    Rental Property Investor · Gulf Shores, AL · Member since 2015 · 53 posts · 10 votes
    10y
    Thanks James...happy to be here.
    0Reply
  • Bill Florence
    Investor · Boulder, CO · Member since 2015 · 137 posts · 36 votes
    10y

    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.

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  • Peter PadalinoPro Member
    OP
    Rental Property Investor · Gulf Shores, AL · Member since 2015 · 53 posts · 10 votes
    10y

    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.

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