1st Analysis in Phoenix; What do you think?

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1st Analysis in Phoenix; What do you think?

Cosette TrantowPro Member
Phoenix, AZ · Member since 2018 · 80 posts · 28 votes

Hi everyone, I hope y'all are doing well. I tried to analyze my first property today. I'm really not sure if I did it right because it seems like a really good deal (I'm not anywhere near ready to buy yet, just learning how to analyze). I'd like some feedback from those of you who invest here in the Phoenix area so that I know how off my numbers are. I live in Mesa and I tried to find rent comparisons for the area of the property (Alhambra) but there was nothing for rent there I could find. I kind of went with the general area and near what I pay for rent here.

This property is in the Alhambra Neighborhood of Phoenix AZ.

List price: $350,000

4 units: 3 x 2 bd/1.5ba 1 X 2bd/2ba

I figured $1100/mo for rent for the 3 1.5 baths and $1150 for the 2 bath

Total Income: $4450

I used Zillow and my assessor's website for tax info (although I have no idea what FCV and LPV are)

Tax: $95

Vacancy: $230 (5%)

Repairs: $230 (5%)

CAPEX: $230 (5%)

Property management: $450 (10%)

Mortgage: $1922 (using an FHA loan at 3.5%)

PMI: $280

Insurance: $70 (based on zillows numbers)

Total Expenses $3507

Cashflow: $4450- $3507 = $943

Down payment: $14000

Closing costs: $4000 (I definitely need help with this number)

Rehab: $10,000 (pulled this out of my butt, only 1 picture of the outside)

Total cash in: $28,000

Cashflow for the year= $11316

COC ROI= 40.4%

I'd just like a little help to figure out if I'm even in the ballpark or if I really need to make some big adjustments to my numbers. Any resources that I can use to understand some of these numbers better would also be appreciated.

Thank you so much for your time and input, I have a while before I can take action on anything, but I want to be able to analyze a deal in my sleep by the time I get there and be confident that I did it correctly. 

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Michael Pearse
Rental Property Investor · Kansas City, MO · Member since 2016 · 112 posts · 75 votes
8y

@Cosette Trantow Glad to help. Yes I definitely do those 5 steps while in the inspection phase. 

Sometimes I will have a contractor walk through the property before I even make an offer if I know I am seriously considering the deal. If you have worked with contractors in the past (eventually you will once you find a good team and have a couple of deals under your belt), they will be glad to give you estimates before you make an offer on a property. 

As you gain experience you will be able to complete most of the steps before even reaching out to make an offer. That knowledge will come with time. Don't be too cautious to get started. I spent hours analyzing deals and still made mistakes. Best thing to do is fail forward. Meaning that you accept that mistakes will be made, as they always happen when you are new. (It's like taking a math class, you probably won't get it right the first time. But after iteration and iteration you eventually see the patterns and prevent those mistakes from happening again.)  Get through the learning phase quickly and learn from your experience so that you can start to focus on making forward progress. 

Cheers!

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  • Michael Pearse
    Rental Property Investor · Kansas City, MO · Member since 2016 · 112 posts · 75 votes
    8y

    @Cosette Trantow I think you are on the right path, nice job. When you are able to make a move on a deal, definitely walk through properties to get a better feel of the condition of home. The rehab number seems low, especially for a unit that size. Though I agree, this estimation would be hard if you only have 1 picture and its on the outside. The inside can really be in any condition. If the unit was considered turnkey, assuming $10K for rehab is a good conservative number for this size. As goes for closing cost, you could reach out to a bank and ask for an estimate based off of the asking price and specifying that this is a fourplex.

    Below are 5 tips below I would recommend when closing on an investment:

    1. Pay for an inspection.

    2. If you plan on doing any rehab, have a contractor/contractors do a walk through to get their opinion on the condition.

    3. If you are using property management, ask them what is a competitive rental market rate for that area.

    4. Obtain information about the previous taxes to gauge how much it will cost the next year.

    5. Run the numbers again after doing all of these steps.

    Best of luck! 

    1Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Michael Pearse Great information, thank you. I appreciate the feedback on my numbers and the great tips when closing. Would you usually do those 5 things during the time you have for the inspection (assuming that I would have that as a contingency)? 

    0Reply
  • Michael Pearse
    Rental Property Investor · Kansas City, MO · Member since 2016 · 112 posts · 75 votes
    8y

    @Cosette Trantow Glad to help. Yes I definitely do those 5 steps while in the inspection phase. 

    Sometimes I will have a contractor walk through the property before I even make an offer if I know I am seriously considering the deal. If you have worked with contractors in the past (eventually you will once you find a good team and have a couple of deals under your belt), they will be glad to give you estimates before you make an offer on a property. 

    As you gain experience you will be able to complete most of the steps before even reaching out to make an offer. That knowledge will come with time. Don't be too cautious to get started. I spent hours analyzing deals and still made mistakes. Best thing to do is fail forward. Meaning that you accept that mistakes will be made, as they always happen when you are new. (It's like taking a math class, you probably won't get it right the first time. But after iteration and iteration you eventually see the patterns and prevent those mistakes from happening again.)  Get through the learning phase quickly and learn from your experience so that you can start to focus on making forward progress. 

    Cheers!

    2Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Michael Pearse Great advice, thank you for your time!

    0Reply
  • Matthew Jacobsen
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 2 posts · 1 vote
    8y
    @Cosette Trantow Hi there. I'm also in the Phoenix area and kicking around the multi unit idea. My wife and I have a few single families in the Phoenix/Arcadia area and are looking to expand. Have you been looking in a specific are for multi's?
    1Reply
  • Brett Chemaly
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 19 posts · 16 votes
    8y

    @ Matthew Jacobsen

    Interesting you mention Arcadia...one of the more affluent parts of the city. Are you getting decent cashflows out of your properties ?

    0Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Matthew Jacobsen I’ve just been using Mesa properties for analysis practice for now. Only because that’s where I live so I think I know the rent in the area. When I actually purchase a property I’m not sure I’ll want to buy here. I’m going to start analyzing properties in different areas of the East Valley.  

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    @Cosette Trantow Tax on a quad in Phoenix Arizona 95$ a month.. um no that can’t be right .
    1Reply
  • Todd Willhoite
    Attorney · Claremore, OK · Member since 2013 · 125 posts · 61 votes
    8y

    Your property tax rate will change based on the sales price. If the previous owner bought the property for much less than the sales price then the taxes will go up. You can call the county assessor to find out how to calculate the approximate amount. You have your numbers based upon an FHA 3.5% down loan. That indicates you will be living in one of the units, so that income will not be coming in, but you are correct to run the numbers on the total amount so you can see what your returns will be if you move out after a year. If you don't plan on living in a unit, then you will have to get a different loan which might require a 20% down payment.

    0Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Dennis M. I’ve been having trouble finding the tax info for a lot of places on the Assessor’s website. I think I got that number from trulia. I realize it seems a bit low, so you have any suggestions of where I should be looking or how to navigate the Assessor’s website so I can actually find this info?

    Thank you. 

    0Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Todd Willhoite You’re right, I will be  occupying the property for the first year. I have been forgetting to factor that into my analysis. Thanks for the reminder. 

    I appreciate the tax advice, I’m having issues finding the previous taxes on a lot of properties on the Assessor’s website so I’ll definitely give them a call for the math. 

    I appreciate your help, thank you. 

    0Reply
  • Matthew Jacobsen
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 2 posts · 1 vote
    8y
    @Brett Chemaly Hi Brett, The rental in the Arcadia does well for us. Generates ~$400/month, but we were lucky enough to buy when prices were down. I would like to continue to invest in the area specifically but prices seem a bit high to make it work. Are you pretty familiar with area and/or do you have any rentals near here? Thanks,
    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    Originally posted by @Cosette Trantow:

    @Dennis M. I’ve been having trouble finding the tax info for a lot of places on the Assessor’s website. I think I got that number from trulia. I realize it seems a bit low, so you have any suggestions of where I should be looking or how to navigate the Assessor’s website so I can actually find this info?

    Thank you. 

    Call your local courthouse ask to be connected to the recorder of deeds and the tax assessors office . One of those departments will have the correct information you need 

    0Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Dennis M. Thank you, I’ll do that. 

    0Reply
  • MOHAMED M.
    Los Angeles, CA · Member since 2018 · 17 posts · 9 votes
    8y
    @Matthew Jacobsen wow nice. Yeah Arcadia is flipville now I think
    1Reply
  • Michael Patras
    Rental Property Investor · Hoffman Estates, IL · Member since 2018 · 10 posts · 6 votes
    8y
    @Cosette Trantow I didn’t read the comments so stop me if this was mentioned, but if your getting an FHA, will you be living there? Your rent estimates are for all 4 units, you may have to subtract 1 if you’re living there. Good luck to you, hope it works out:)
    1Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Michael Patras Yes, I’ll be occupying a unit. I completely forgot to factor that in. I’ve already analyzede a handful of properties and it didn’t occur to me once. This is why I need extra eyes. Thank you!

    1Reply
  • Brett Chemaly
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 19 posts · 16 votes
    8y

    @Matthew Jacobsen, pretty familiar with Arcadia but i'm mostly concentrating on North Phoenix and then the suburbs much further out of town. Guess i'm priced out of Arcadia now from a RE perspective but would love to buy a home there.

    1Reply
  • Michael Hacker
    Investor · Phoenix, AZ · Member since 2013 · 167 posts · 127 votes
    8y

    You can get the property taxes from the treasurer's site:

    https://treasurer.maricopa.gov/Parcel/Summary.aspx

    You'll need the parcel number which can be obtained from the assessor's site by searching by address.

    The rents seem high to me for Alhambra.  I thought Zillow would have a rent estimate but if not, you can check rentometer.com.  Good luck -

    1Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    Thank you for your help @Michael Hacker, I appreciate it!

    0Reply
  • Account Closed
    Real Estate Broker · Phoenix, AZ · Member since 2018 · 83 posts · 28 votes
    8y
    @Cosette Trantow What are the crosstreets? If that's in Maryvale I'd watch it. I'm all for C class neighborhoods, but not Maryvale. I have a great 8.4% cash flowing Multi-family in Avondale, all the growth is West. East is overpriced now. Central can be great, depending.
    0Reply
  • Account Closed
    Real Estate Broker · Phoenix, AZ · Member since 2018 · 83 posts · 28 votes
    8y
    @Matthew Jacobsen C type neighborhoods will cash flow much better than nicer ones. Central and South, plus West are the hot spots and Sunnyslope.
    0Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Account Closed I’m not sure what the cross streets are. The address is 2109 Colter 85015. 

    How do you find out what class neighborhood a property is in, and is there a website I can go to that would explain each classification?

    1Reply
  • Account Closed
    Real Estate Broker · Phoenix, AZ · Member since 2018 · 83 posts · 28 votes
    8y
    @Cosette Trantow Huge mistake imho to count on Zillow for anything. My house is undervalued by $60k in Zillow, many many many inaccuracies. You don't have a REALTOR?
    0Reply
  • Cosette TrantowPro Member
    OP
    Phoenix, AZ · Member since 2018 · 80 posts · 28 votes
    8y

    @Account Closed I’m brand new to this and am just educating myself now. This is my first analysis of a property and I just used one that I found online so that I could learn how to do it right. That’s why I’m asking for help with the numbers. Im not going to get a realtor until I’m close to having the money to buy, which is quite some time away yet. 

    1Reply
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