Average Cash Flow Per Door In Phoenix Metro Area

26 Replies

Hey Everyone! 

I'm writing this post for a few investor clients of mine, and wanted to see what the average cash-flow per door other investors in the Phoenix metro area (Scottsdale, Tempe, Gilbert, Glendale, Chandler, Mesa, Peoria, Surprise, etc.) were getting on their rental properties. 

Of course, the more details you share about the property the better, so here's a generic outline to make sure we get all the necessary info to evaluate what to expect:

  • Property Type: (Condo, Single Family House, Multifamily Property)
  • Total Doors:
  • Purchase Price:
  • Year Bought: (Buying at bottom of market obviously makes for more cashflow today)
  • Financing: (Cash purchase, financed with percentage down, lease option, etc.)
  • How You Found Property: (MLS, Off-market, Wholesaler, Foreclosure, REO, etc.)
  • Property & Neighborhood Rating: (A-F, 1 to 10, neighborhood quality and condition of property)
  • Net Cashflow Per Door:
  • Cap Rate, CoC, Appreciation, Etc.: (Any other metrics or ROI figures you think are important to the deal)

You can either answer in this format or write a paragraph or two including all the details. Figured this would help some beginners know what to expect and see what returns other investors are currently getting in the Phoenix market.

Let's see who has the highest net cashflow!

Originally posted by @Wes Blackwell :

Hey Everyone! 

I'm writing this post for a few investor clients of mine, and wanted to see what the average cash-flow per door other investors in the Phoenix metro area (Scottsdale, Tempe, Gilbert, Glendale, Chandler, Mesa, Peoria, Surprise, etc.) were getting on their rental properties. 

Of course, the more details you share about the property the better, so here's a generic outline to make sure we get all the necessary info to evaluate what to expect:

  • Property Type: (Condo, Single Family House, Multifamily Property)
  • Total Doors:
  • Purchase Price:
  • Year Bought: (Buying at bottom of market obviously makes for more cashflow today)
  • Financing: (Cash purchase, financed with percentage down, lease option, etc.)
  • How You Found Property: (MLS, Off-market, Wholesaler, Foreclosure, REO, etc.)
  • Property & Neighborhood Rating: (A-F, 1 to 10, neighborhood quality and condition of property)
  • Net Cashflow Per Door:
  • Cap Rate, CoC, Appreciation, Etc.: (Any other metrics or ROI figures you think are important to the deal)

You can either answer in this format or write a paragraph or two including all the details. Figured this would help some beginners know what to expect and see what returns other investors are currently getting in the Phoenix market.

Let's see who has the highest net cashflow!

  Hi Wes, I was approached by an Investor who wanted to get into the game by learning Subject To. That is best done by doing a Joint Venture on the first couple. Here is how I recently did one with that new Investor. He put in the capital and I put in the expertise and the work. We split the profits 50/50 (all by written agreement of course) Here are the Spreadsheet numbers

The property is a 4 bed 2 bath with pool in Mesa AZ that I found "off market" and negotiated the Purchase & Sale Agreement for $180,000. ARV on it is about $225,000. I put down $15k and the seller took back a 2nd with an underlying loan of $145,000 that we took over. The roof needed to be replaced. Within a week I found a Tenant Buyer who put down $20,000 (which the investor and I split, that made the investor happy ;-) and the Tenant Buyer replaced the roof at his cost, not ours. Our payment on the underlying loan is $995 a month PITI and we have it out to the tenant Buyer for $1650 a month. So, monthly cash flow is about $655 - not a home run but decent.

Originally posted by @Mike M. :
Originally posted by @Wes Blackwell:

Hey Everyone! 

I'm writing this post for a few investor clients of mine, and wanted to see what the average cash-flow per door other investors in the Phoenix metro area (Scottsdale, Tempe, Gilbert, Glendale, Chandler, Mesa, Peoria, Surprise, etc.) were getting on their rental properties. 

Of course, the more details you share about the property the better, so here's a generic outline to make sure we get all the necessary info to evaluate what to expect:

  • Property Type: (Condo, Single Family House, Multifamily Property)
  • Total Doors:
  • Purchase Price:
  • Year Bought: (Buying at bottom of market obviously makes for more cashflow today)
  • Financing: (Cash purchase, financed with percentage down, lease option, etc.)
  • How You Found Property: (MLS, Off-market, Wholesaler, Foreclosure, REO, etc.)
  • Property & Neighborhood Rating: (A-F, 1 to 10, neighborhood quality and condition of property)
  • Net Cashflow Per Door:
  • Cap Rate, CoC, Appreciation, Etc.: (Any other metrics or ROI figures you think are important to the deal)

You can either answer in this format or write a paragraph or two including all the details. Figured this would help some beginners know what to expect and see what returns other investors are currently getting in the Phoenix market.

Let's see who has the highest net cashflow!

  Hi Wes, I was approached by an Investor who wanted to get into the game by learning Subject To. That is best done by doing a Joint Venture on the first couple. Here is how I recently did one with that new Investor. He put in the capital and I put in the expertise and the work. We split the profits 50/50 (all by written agreement of course) Here are the Spreadsheet numbers

The property is a 4 bed 2 bath with pool in Mesa AZ that I found "off market" and negotiated the Purchase & Sale Agreement for $180,000. ARV on it is about $225,000. I put down $15k and the seller took back a 2nd with an underlying loan of $145,000 that we took over. The roof needed to be replaced. Within a week I found a Tenant Buyer who put down $20,000 (which the investor and I split, that made the investor happy ;-) and the Tenant Buyer replaced the roof at his cost, not ours. Our payment on the underlying loan is $995 a month PITI and we have it out to the tenant Buyer for $1650 a month. So, monthly cash flow is about $655 - not a home run but decent.

 Nice numbers. I'm still finding lots of opportunities in Phoenix and Glendale. We should have lunch sometime and compare notes. I do the occasional one in California but the returns and better in in Phoenix.

@Mike M. that looks like an interesting deal. I'm curious about some of the mechanics? 

Is the Seller carry back a zero coupon note or interest free?

Do you specify redemption periods or set times for the buyer to refi or leave it open ended?

What type of conversion rates do you see in your area sub-to deals and how much do you reserve for each deal?

How do you qualify your buyers?

Originally posted by @Bill F. :

@Mike M. that looks like an interesting deal. I'm curious about some of the mechanics? 

Is the Seller carry back a zero coupon note or interest free?

Do you specify redemption periods or set times for the buyer to refi or leave it open ended?

What type of conversion rates do you see in your area sub-to deals and how much do you reserve for each deal?

How do you qualify your buyers?

 The carry back is interest free to be paid when my Tenant Buyer refinances. (Sometime in the future.) 

The Tenant Buyer is on a 3 year Lease Option unless he wants some other period of time. I don't particularly care about the length of time because:

a. I get the cash flow for as long as he is in the Lease Option

b. I get the principal paydown

c. I get the tax write offs

d. Potentially I get the appreciation (look at h. below)

e. A yearly rent increase is written into the Lease Option so the amount I get increases each year

f. The Tenant Buyer takes care of all Rehab, Maintenance & Repairs.

g. If the Tenant Buyer refinances I get the "Back End Equity"

h. If the Tenant Buyer walks away from the deal I get to keep his Option payment since it is non-refundable and I sell to another Tenant Buyer and get another Option Payment usually about $20k to $25k.

I encourage people to get qualified for financing and to plan their lifestyle to be able to get a loan to exercise the Option. Some do, some don't. I offer to help them through the process but few take me up on it. As I tell then, "I will help you but I'm not your daddy". I have the information and I will work with them, but if they choose to "do it on their own", that's fine. (It just never gets done that way.)  

About 1/3 of the deals fall through at their end because people "have stuff happen" in their lives like Job Loss, Lose Momentum getting credit cleaned up, Medical Issues, Divorce, "Changed their mind", Don't REALLY want to be home owners, etc. As long as they can keep paying the rent, I keep them in the premises if they want but when the Option expires the Option goes away. Not hard and fast, just rule of thumb. 

I qualify my Tenant Buyers by Down Payment and Income and Job Security. If they have the Down Payment I am looking for, if they have provable income at least 3x rent, 12 months of paying rent on time, if they have been employed two or more years in the same line of work, that is what I am looking for. They can have a foreclosure, bankruptcy, repossession, defaulted credit cards etc but I don't really care. 

They can't currently be in bankruptcy, they have to bring any child support current if they have child support and they have to have student loans current or in abeyance. I prefer self employed Tenant Buyers because they show drive and most self employed simply take all of the tax write-offs available to them which reduces their bottom line income. That makes it hard to get a mortgage (since they aren't showing enough income). I am their pressure relief valve, I provide a home where before they didn't qualify. I once upon a time was a Loan Officer so I understand a little bit about underwriting a loan and I just keep to "good common sense".

Originally posted by @Mike M. :
Originally posted by @Bill F.:

@Mike M. that looks like an interesting deal. I'm curious about some of the mechanics? 

Is the Seller carry back a zero coupon note or interest free?

Do you specify redemption periods or set times for the buyer to refi or leave it open ended?

What type of conversion rates do you see in your area sub-to deals and how much do you reserve for each deal?

How do you qualify your buyers?

 The carry back is interest free to be paid when my Tenant Buyer refinances. (Sometime in the future.) 

The Tenant Buyer is on a 3 year Lease Option unless he wants some other period of time. I don't particularly care about the length of time because:

a. I get the cash flow for as long as he is in the Lease Option

b. I get the principal paydown

c. I get the tax write offs

d. Potentially I get the appreciation (look at h. below)

e. A yearly rent increase is written into the Lease Option so the amount I get increases each year

f. The Tenant Buyer takes care of all Rehab, Maintenance & Repairs.

g. If the Tenant Buyer refinances I get the "Back End Equity"

h. If the Tenant Buyer walks away from the deal I get to keep his Option payment since it is non-refundable and I sell to another Tenant Buyer and get another Option Payment usually about $20k to $25k.

I encourage people to get qualified for financing and to plan their lifestyle to be able to get a loan to exercise the Option. Some do, some don't. I offer to help them through the process but few take me up on it. As I tell then, "I will help you but I'm not your daddy". I have the information and I will work with them, but if they choose to "do it on their own", that's fine. (It just never gets done that way.)  

About 1/3 of the deals fall through at their end because people "have stuff happen" in their lives like Job Loss, Lose Momentum getting credit cleaned up, Medical Issues, Divorce, "Changed their mind", Don't REALLY want to be home owners, etc. As long as they can keep paying the rent, I keep them in the premises if they want but when the Option expires the Option goes away. Not hard and fast, just rule of thumb. 

I qualify my Tenant Buyers by Down Payment and Income and Job Security. If they have the Down Payment I am looking for, if they have provable income at least 3x rent, 12 months of paying rent on time, if they have been employed two or more years in the same line of work, that is what I am looking for. They can have a foreclosure, bankruptcy, repossession, defaulted credit cards etc but I don't really care. 

They can't currently be in bankruptcy, they have to bring any child support current if they have child support and they have to have student loans current or in abeyance. I prefer self employed Tenant Buyers because they show drive and most self employed simply take all of the tax write-offs available to them which reduces their bottom line income. That makes it hard to get a mortgage (since they aren't showing enough income). I am their pressure relief valve, I provide a home where before they didn't qualify. I once upon a time was a Loan Officer so I understand a little bit about underwriting a loan and I just keep to "good common sense".

Very Interesting. 

I had never thought about directly targeting self employed individuals, but it makes sense. Is that who you find is your most common buyer? 

I'm assuming in the situation described in h. that you will have some turnover/rehab costs or do you just sell it as-is again?

You must have some sales skills to convince the seller to give you an interest free loan for 3-5 yrs. 

Do you reserve a fixed number or percentage of purchase price to cover the deals that go south, since you still have to pay the original note.

Originally posted by @Bill F. :
Originally posted by @Mike M.:
Originally posted by @Bill F.:

@Mike M. that looks like an interesting deal. I'm curious about some of the mechanics? 

Is the Seller carry back a zero coupon note or interest free?

Do you specify redemption periods or set times for the buyer to refi or leave it open ended?

What type of conversion rates do you see in your area sub-to deals and how much do you reserve for each deal?

How do you qualify your buyers?

 The carry back is interest free to be paid when my Tenant Buyer refinances. (Sometime in the future.) 

The Tenant Buyer is on a 3 year Lease Option unless he wants some other period of time. I don't particularly care about the length of time because:

a. I get the cash flow for as long as he is in the Lease Option

b. I get the principal paydown

c. I get the tax write offs

d. Potentially I get the appreciation (look at h. below)

e. A yearly rent increase is written into the Lease Option so the amount I get increases each year

f. The Tenant Buyer takes care of all Rehab, Maintenance & Repairs.

g. If the Tenant Buyer refinances I get the "Back End Equity"

h. If the Tenant Buyer walks away from the deal I get to keep his Option payment since it is non-refundable and I sell to another Tenant Buyer and get another Option Payment usually about $20k to $25k.

I encourage people to get qualified for financing and to plan their lifestyle to be able to get a loan to exercise the Option. Some do, some don't. I offer to help them through the process but few take me up on it. As I tell then, "I will help you but I'm not your daddy". I have the information and I will work with them, but if they choose to "do it on their own", that's fine. (It just never gets done that way.)  

About 1/3 of the deals fall through at their end because people "have stuff happen" in their lives like Job Loss, Lose Momentum getting credit cleaned up, Medical Issues, Divorce, "Changed their mind", Don't REALLY want to be home owners, etc. As long as they can keep paying the rent, I keep them in the premises if they want but when the Option expires the Option goes away. Not hard and fast, just rule of thumb. 

I qualify my Tenant Buyers by Down Payment and Income and Job Security. If they have the Down Payment I am looking for, if they have provable income at least 3x rent, 12 months of paying rent on time, if they have been employed two or more years in the same line of work, that is what I am looking for. They can have a foreclosure, bankruptcy, repossession, defaulted credit cards etc but I don't really care. 

They can't currently be in bankruptcy, they have to bring any child support current if they have child support and they have to have student loans current or in abeyance. I prefer self employed Tenant Buyers because they show drive and most self employed simply take all of the tax write-offs available to them which reduces their bottom line income. That makes it hard to get a mortgage (since they aren't showing enough income). I am their pressure relief valve, I provide a home where before they didn't qualify. I once upon a time was a Loan Officer so I understand a little bit about underwriting a loan and I just keep to "good common sense".

Very Interesting. 

I had never thought about directly targeting self employed individuals, but it makes sense. Is that who you find is your most common buyer? 

I'm assuming in the situation described in h. that you will have some turnover/rehab costs or do you just sell it as-is again?

You must have some sales skills to convince the seller to give you an interest free loan for 3-5 yrs. 

Do you reserve a fixed number or percentage of purchase price to cover the deals that go south, since you still have to pay the original note.

 I've done this for so long it's second nature. 

Most people get hung up on Fix & Flip which is the riskiest highest taxed, or Buy & Hold and hope for $100 a month cash per door. I think that's a mistake, but to each his own.

I average $20K that I get as a Down, and $500 per door cash flow on a $50k investment. There is no bank qualifying I need to do or worry about 25% down or debt ratios or any of that stuff.

I keep $5k per house in reserves so that I can always make the underlying payment and cover emergencies. In the event of a turnover, I simply see to it that it is habitable and safe. Other than that, any rehab, maintenance, upgrades are entirely up to the Tenant Buyer or the the new Tenant Buyer.

I never offer interest on the carryback. Interest rarely comes up and I simply write up the agreement.

I find that I have a mix of self employed and W2 but my preference is self employed. Self employed tend to think like I think and they are more resilient to changes in the economy.

@Mike M. , thanks for giving the details on how you approach your business. After information overload regarding fix and flip, and/or, buy and hold, etc., etc., I think I'm going to follow your lead. It just makes sense. Not that the other strategies don't, but yours seems like a logical solution to a number of challenges, for all parties involved in the transaction. 

Originally posted by @Chris Nelson :

@Mike M., thanks for giving the details on how you approach your business. After information overload regarding fix and flip, and/or, buy and hold, etc., etc., I think I'm going to follow your lead. It just makes sense. Not that the other strategies don't, but yours seems like a logical solution to a number of challenges, for all parties involved in the transaction. 

 If you have any questions I can answer for you, let me know.

Thanks for the info! I’m just getting started educating myself to invest in the near future and your model is very very interesting. May end up doing this myself when I’m ready to take the leap into investing!

@Mike M. Thanks for providing such detail into the transaction.  I knew the basics of a subject-to deal but this takes you through all of the steps, start to finish.  And incorporating a small carryback is great.  What are your main sources for off-market leads these days?

I love doing flips out here but I often bang my head against the wall going through the motions of finding good properties.  This may be interesting for some diversification. 

@Mike M. very, very informative. Do you have an open door policy for JV deal on a sub 2?

Originally posted by @Mike Dmuchoski :

@Mike M. Thanks for providing such detail into the transaction.  I knew the basics of a subject-to deal but this takes you through all of the steps, start to finish.  And incorporating a small carryback is great.  What are your main sources for off-market leads these days?

I love doing flips out here but I often bang my head against the wall going through the motions of finding good properties.  This may be interesting for some diversification. 

 I keep finding them. There are always people that need to sell or want to sell for their own reasons. Phoenix and the surrounding cities have a higher turnover rate than most of the country. Some of it would be all of the vacation properties here, some would be the aging population that moves here to get out of the cold during the winter. 

Originally posted by @Darron Washington :

@Mike M. very, very informative. Do you have an open door policy for JV deal on a sub 2?

I always have two or three in inventory that I'm prepping for Turn Key and JV's. Of course I can't post any here, it's against BP rules. You'd have to PM me or go to my profile for my site. But I love talking about Subject To, also called Sub2 & Wraps, Land Contracts & Lease Options which I think have bigger bang for the buck than Fix & Flips or traditional bank financed Buy & Hold Rentals. I do these primarily in Arizona & Texas but they could be done in most states, except California is hard to cash flow, not impossible, just too much work compared to AZ & TX. You could do these all day long in the mid west in some cities. I prefer the higher value transactions tho', nicer properties & it's a lot more profitable for the same amount of work.

This post has been removed.

@Mike M. have you ever done a Sub2& Wraps, Land Contracts & Lease Options on a multifamily residential. I am looking at buying and there are a couple listings that have multiple units and I want to protect my investment by buying both but we are using an owner occupied VA loan and I would want to actually close on the sister property after we get the first BRRR finished.

This post has been removed.

Originally posted by @Greg Dorn :

@Mike M. have you ever done a Sub2& Wraps, Land Contracts & Lease Options on a multifamily residential. I am looking at buying and there are a couple listings that have multiple units and I want to protect my investment by buying both but we are using an owner occupied VA loan and I would want to actually close on the sister property after we get the first BRRR finished.

 I haven't bought a multi-family. It isn't that it can't be done with Subject To, it's just that it is a different market and I don't understand them.  It should be able to be done though, if you can find a willing seller.

@Mike M. on the example you gave in Paradise Valley with the $500 per door and getting $20,000 down with a $50,000 investment, are you acquiring the properties all cash for that or using the $50,000 as part of a down payment or option money and then taking title subject to so that you only have $50k invested?  

Originally posted by @Joe Yobaccio :

@Mike M. on the example you gave in Paradise Valley with the $500 per door and getting $20,000 down with a $50,000 investment, are you acquiring the properties all cash for that or using the $50,000 as part of a down payment or option money and then taking title subject to so that you only have $50k invested?  

 That particular property is in Mesa. But, to your question: I allocate $50k to buy each property but I don't always need to use the full amount. (Properties here are averaging $250k to $325K) It is Not "all cash". I give the seller some $$ of their equity and I take over their payments. Title transfers to my name. The loan stays in their name. It is not an Option. I take actual ownership.

When I sell to a Tenant Buyer, I get an Option payment from them that I get to keep and goes into my pocket. Title stays in my name until they exercise their Option. If you go to my profile and click on the link you will see how this is done.

@Mike M. Very informative, thanks for sharing your knowledge. There is so much to learn from BP community.

Originally posted by @RJ Sidhu :

@Mike M. Very informative, thanks for sharing your knowledge. There is so much to learn from BP community.

I've noticed that several properties on the MLS that I've been watching in Phoenix and Mesa has dropped their prices recently. That tells me they were a little too optimistic with their listings. That makes my job easier because I buy "off market" and when people who might otherwise list, see price reductions on the MLS they become more flexible in selling to me. Keep in mind the average seller pays 6% to the real estate agent ($12,000 on a $200,000 sale) and they pay 0% zero, zilch, nada $0 when I get involved. They get to keep that money.

Mike- as i understand it, you resell the home "subject to" the original loan in the name of the seller whom you bought the property from. I'm curious as to whether that raises some potential legal issues or problems if, for example the lender calls the note due upon learning about the sale?  If that is the case, I might be a little concerned.

Hey Mike, have you had any issues with "due on sale" clauses being activated or bank's kicking back at all?  I'm curious how to navigate these if they come up, or if they just don't come up in reality.

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