Multi-families in Tempe/Mesa Area

14 Replies

Hi Everyone!

I'm new to Bigger Pockets, so I'm very excited to join the community! I want to get started in real estate investing by buying a duplex as my first place of residence. However, I've noticed that multifamily market in Tempe is quite expensive, and scarce at that. Originally, I wanted to stay in the Tempe area, but now I'm thinking about researching the Mesa and Chandler areas to find properties that are less expensive. I'm still pretty young and have around 5K saved up so far.  

For those with experience, how did you find your deal on your first multi family? Did you find it through researching online, a real estate agent, or by knowing a fellow investor?

Welcome @Andrea Tomlin ! You're in the right place to both learn and also network with the people you'll need to help you. 

Real estate in Tempe is always in high demand, especially small multi-family. You'll find more MF properties available on the market if you expand your search to neighboring cities like Phoenix, Scottsdale, and Mesa, but the good properties in those cities are in just as much demand as Tempe. 

If you want to buy a 2-4 unit property, then you'll likely be using a low down FHA loan to get started. These are government insured loans that allow buyers to put as little as 3.5% down (plus fees and closing costs). You can run the math backwards to see how much you can roughly afford - $5,000 / 3.5% = ~$143,000. There are some condos around Tempe that would fit in that price range. Keep in mind that typical closings costs will run you about 1% of the purchase price, plus FHA has what's called a "funding fee" which is an additional 2.25% of the loan amount due at close of escrow. Those additional fees/closing costs "shrink" your buying power by reducing the money you have to put towards a down payment.

My honest best advice is to keep educating, AND keep saving! You'll have many more purchase options available as you grow your down payment and cash reserves. 

Wow! Thank you so much @Ryan Swan ! I've been looking into FHA loans, so I'm happy I'm on the right track! And thank you for expanding on the additional fees/closing costs. Knowing rough estimates for that helps me immensely when I'm creating my financial plan. I think I'll save up for another year or two and then make my first purchase after having a larger down payment. I will keep trying to network and reviewing the market so I get more familiar with the Phoenix area. I've lived in Tempe, Mesa and Scottsdale, so specific neighborhoods in those areas pretty well, but researching the central Phoenix area will be a new item to my list.

Thank you so much!!

Ryan is right - the multifamily inventory is tough! A lot of Phoenix investors are house hacking with a casita/in law suite. Basically the same investment as a duplex, but a little easier to find. I even know some younger investors who are crushing it by buying a house outright and getting enough roommates to cover the mortgage. There are lots of different options to at least get you started with a primary residence! Happy to talk specifics.

Hi @Pamela Sandberg ! Thank you for your input as well! I didn't consider a casita/in law suite styled home. And renting out rooms is definitely an avenue that seems very plausible! I would love to speak with you further about different options that I can pursue so I can map out my investment strategy!! 

Hello,

I own multi family, I'm looking at single family. Th reason the HOA fee's are going up which cuts into my cash flow(profit) I don't like that.

Single family for the most part has no HOA, more money for you

Large single family 3, 4 bedroom in Tempe is great, you charge the college kids parents what you want  

Best of luck

@Andrea Tomlin

You can also look into the home plus program for Arizona. My wife and I are doing that to start our house hacking earlier.

Essentially, you pay for the down payment through a government program and then pay a higher interest rate but it requires less capital needed upfront.

https://housing.az.gov/general-public/home-plus

I’m in the area and seem to be in a very similar situation. I’d be willing to grab coffee sometime and talk about some of the different opportunities you have in the area in your situation.

@Mark Andrews , thank you so much for your input! Avoiding HOAs is differently on my list. So Buying a larger single family home in Tempe might be the route I take to get started! 

@Matthew Mellinger I didn't even know there was a program like that in Arizona! I would love to grab coffee and get some insight about different opportunities! I'll send you a message so we can talk further! Thank you!

Welcome to BP and REI @Andrea Tomlin !  

You're definitely in the right place for learning and connecting. 

 Investing in real estate while young is the smartest thing you can do to build your wealth in America.  Congratulations!

There are MF under $200k in Phoenix but they're in pretty rough 'hoods!

The advice already given to take a little more time to save more cash to buy in Tempe or Scottsdale is sage guidance.

There are some affordable areas in Mesa that are starting to turn around as well.

Lease-option (rent-to-own) could be a possibility also, I have seen some MF owners willing to go that route.

Feel free to connect and send a DM if you'd like to tour properties in the meantime just for fun, it can be very enlightening and educational! ;)

Cheers to your success!

@Andrea Tomlin I'm stuck in the same boat. I'm looking in the South Mountain area because I have a hunch that property values will continue to climb (more than other areas). Plus, if I were to qualify for an FHA loan, the properties in that area would fit my budget. My concern is looking at Multi-families further from Phoenix. I currently live in downtown and I know how cool it is, and South Mountain is only a 15 minute Uber from the city.

Originally posted by @Bevla Reeves :

Welcome to BP and REI @Andrea Tomlin !  

You're definitely in the right place for learning and connecting. 

 Investing in real estate while young is the smartest thing you can do to build your wealth in America.  Congratulations!

There are MF under $200k in Phoenix but they're in pretty rough 'hoods!

The advice already given to take a little more time to save more cash to buy in Tempe or Scottsdale is sage guidance.

There are some affordable areas in Mesa that are starting to turn around as well.

Lease-option (rent-to-own) could be a possibility also, I have seen some MF owners willing to go that route.

Feel free to connect and send a DM if you'd like to tour properties in the meantime just for fun, it can be very enlightening and educational! ;)

Cheers to your success!

Hi Bevla,

What areas do you think are a bit rough in Phoenix and do you see those areas eventually rise in value? I'm in a similar situation where I don't have the luxury of having a huge budget to prospect killer deals if they fall out of my price range. Do you typically avoid doing business in areas that are more rough because you believe the risk isn't worth the reward?

Thanks!

@Cody LeCates @Bevla Reeves

As a real estate agent, myself and Bevla are unable to tell you which exact areas of the city are "rough" because it could be considering "steering" which is a big no-no for real estate agents. I got in trouble for this in California when I said a specific neighborhood was a "warzone" and someone saw my post and contacted the Bureau of Real Estate. 

Therefore, my suggestion is to look up the local crime maps for any area you are considering investing in. Just got to the local police departments official government website (Phoenix PD, etc.) and it should tell you which website they report their crime statistics to. There are 2-3 major ones that cover most metro areas.

Further, "rough" is completely subjective. I've had investors from the Bronx ghetto look at a neighborhood and say it's not that bad, while someone from Beverly Hills may wonder how people even live in that area. It all depends on the comfort level of the investor.

My ultimate suggestion is to look for deals where the numbers work first, then drive through the neighborhood yourself and determine if it feels right for you, as no agent can tell you that.

@Cody LeCates   Just about every city has its version of rough 'hoods and, of course, "rough" is subjective and just an opinion, but how I determine whether a neighborhood is rough (or a warzone as @Wes Blackwell mentioned), and this is from my perspective as a female is 1: will I drive through it alone. 2: Will I drive through it and get out of my car alone.  If the answer is No, I consider that a rough 'hood, or even a warzone.  And as a real estate agent, I have no problem mentioning that to my clients because I'm not disparaging a protected class, which would be "steering" and not be appropriate.

But if you look up median home prices in any given city, you can pretty much guess the house or MF at the bottom of the range is going to be your rougher 'hoods.  But my advice is to drive them for yourself and check crime stats.

Now, I have a friend and investor that only invests in those 'hoods, it's his niche, and he has close to 100 doors now and he's currently converting an old motel into low-income housing.  He's doing quite well.  It's his thing.

So take the time to figure out your personality style and which method of REI will be the best fit and figure out how to jump in, then do it! ;)

Good luck warrior!

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