All Forum Posts by: Derek Janssen

I actually own a duplex close to the ballpark and probably get 1-2 letters per week asking me if I want to sell.  

That area is super hot, but when it feels like you're pushing a boulder uphill, you need to change your strategy or hunker down, save money, and wait it out. I just picked up a SFH in Maricopa last month that pencils.

Congrats on the 4-plex!

Update: Finally broke down and got a new/used fridge from my local appliance supplier.  I'm still going to keep the old fridge around and torment the extended warranty company.  The contractor came out 3 days ago and "fixed" the unit with the unobtanium part that only the home warranty's distributor could conjure up.  Unit wasn't cooling the next day.  Luckily my tenant is pretty cool and calling the contractor.  Yes this is way more energy than it's worth...

1% of purchase price has been used in the past by "connectors".

Also cost of maintenance on older homes vs. newer homes is another qualitative factor.

Nice spreadsheet. I would also add vacancy rate, insurance costs, and property taxes. Property taxes are ~2.8% in Dallas area and 1.25% in Phoenix on avg. 

Some other qualitative factors include weather or climate impacting maintenance costs - pipes freezing in northern climates, hail storms in Dallas, flooding in Houston, Air Conditioners in Phoenix. 

So I did this - back of a napkin type analysis.  Here were the factors I considered:  

Vacancy, Average Rent, Unemployment, Home Price (ZHVI), Tax rate, Insurance, Rent as a fraction of income, Percent Renters vs. Owners, Rent to Purchase Ratio

All these can be looked up on Google.  There are a ton of things to look at.  Also, one zip code in a city could be way different than another zip code.  Take a trip out to a few areas and take a look around.

 Jason Hartman categorizes markets as Linear, Cyclical, and Hybrid.  Linear - Memphis, Cyclical - CA, Hybrid - Phoenix.

Sounds like you think (understandably) that your so cal mark is at the top of it's cycle.  Makes no sense to invest at the top of the cycle and have to wait 8-10 years to come back to the price you bought it at.

I started investing in 2005 - top of the bubble.  My friend directed me toward Dallas area (Linear at the time) and I bought a house there bc Phoenix was blown out.  In 2009 I invested in Phoenix.

 @Matt K - Wanna start a home warranty company? :)

 As a service provider, do they pay you a fair market rate?  Or do they undercut?  For instance, let's say you generally charge $80 for a service call.  Do they put it out for bid and say we will pay you $60?  I am trying to understand their business a little better.  Also, if  service provider is only getting paid $60, maybe they schedule it further out where it makes sense for their scheduling.

Every market has it's pros and cons.  I was in Dallas area back in 2005.  Downside there is 2.8% property taxes and hail storms.  Phoenix - obviously heat (AC units) and the prices are higher than other markets.  But property taxes are 1.1%  I personally think Phoenix has a very diverse economy.  Memphis - every tenant has a 500 credit score and works for FedEx hub.  What happen's if FedEx falters?  The lynch pin to this business is tenants paying rents which translates to your tenants having jobs so they can pay your rents.  What kind of business is in your market?  

Up north, you may have to deal with freezing pipes if your unit is vacant.

Obviously you don't want to buy where there are hurricanes.

Markets I've heard of others investing in are OKC and JAX.

Also, you want a landlord friendly state.  CA is the worst for that.