MLS Search Capability/Phoenix Update
I’ve now got MLS search capability here on the blog, as well as enhanced capability through the VOW. For those who like doing this sort of thing please click on the relevant tabs, give them a bit of a test drive and then maybe provide some feedback.
I wrote about a house purchased in Phoenix a couple weeks ago. The house was bought for $65,000, and $9,000 was spent cleaning it up. It was recently rented for $750.00. Here’s a little cash flow chart:
Rent: $750
Mortgage: $335.90
Strata Fees: $40
Property Management: $60
Taxes: $121.75
Insurance: $56.10
Maintenance (2%):$15
Vacancy (2%):$15
Profit: $106.25
Not bad. 30% downpayment, 100 rent multiplier, 18.5% IRR, cash on cash return of a little over 5% according to the numbers supplied by the buyer.
Good deal? Depends, I guess, on where you stand on the metrics vs. market question. If the US market still has farther to fall, is it foolish to buy cash flow?
39 comments
good topic Rob, but I guess you get more bang for your buck if you buy in Detroit. Whereas properties in LA dont look really cheap in my opinion. Do you have any experience with buying properties in US? Where can I find a typical std offer form ?
Steve:
Be careful buying property in the States and do your homework. Tax laws and labor laws can bite you. This property was bought by a US subsidiary of a Canadian company and all work was done by American citizens in order to stay on the right side of the line in all respects.
My advice? Pick the palce you want to buy and find a good realtor. For Phoenix I like Greg Swann.
Rob said: Tax laws and labor laws can bite you.
I know for sure that taxes are less than here, but I dont understand what labour laws are you talking about? How does that affect you buying a property there?
Taxes vary from state to state and aren’t that straightforward for “aliens<
Also, you can`t do any work on your rental properties yourself.
Sure, of course it makes sense to buy things that cash flow. It does matter a fig if the price goes down, so long as it doesn’t go to less that the DP, right. I’m going to look at it. Would you provide the know-how for a fee (I already have a US subsidiary).
Rob
Usually laws are reciprocal regarding international laws. Is there a law that foriegn nationals can’t do their own work on their properties here in Canada?
I was wondering if you live in the US. Can you wash your own car. This action takes a job away from an American. Just wondering.
which cities would you recomend for buying in the States? Phoenix is not really liveable is it, especially summer time? and in the good places in california things are not that cheap yet, if you looking for rental property expect cap rates similar to vancouver.
Disbelief,
I understand that you can’t even mow your own rental’s lawn in some states.
Perhaps someone else on this blog can provide some can’s and cannot’s on this.
Steve/1… ‘more bang for your buck if you buy in Detroit’…
You’re not kidding, in the following instance one ‘lucky’ Canuck RE Vulture picked up an entire stadium for USD 585K (far less than many YVR condo’s and about USD 250M less than replacement cost)…
[BloomBerg] Lions Ex-Stadium, Once Super Bowl Host, Sells for $7.25 a Seat
http://tinyurl.com/yz5mwty
And now, courtesy BobHerbert [NYT], here’s why…
An American Catastrophe
http://tinyurl.com/yaxttx7
On the other hand, when California sellers ‘just won’t budge’ you can see why Detroit stadiums might seem like a bargain after all….
[LAT] Candy Spelling stands firm on $150-million asking price…
http://tinyurl.com/y89fnkx
Off topic, but of particular interest to VD & other ad/media types – this morning’s final piece – also courtesy NYT….
An Unsteady Future for Broadcast
http://tinyurl.com/yekoagn
Thhhhh thhhh thhthhh that’s all, folks!
Rob, Rob, Rob…
“It’s the economy, stupid “was Bill Clinton’s retort to Bush Sr. Not the other way around.
Anywhosers, here’s my favourite link of the week. From craigslist, of course, a 3-bed rental reduced from $16550/month to $14900 for a “quick” rental. Attention Olympic visitors, you’ll have to call for February rates.
http://vancouver.en.craigslist.ca/van/apa/1476205784.html
Thanks HP,
So network TV is going down the tubes too, aye? TV, Magazines, Newspapers. Oh well, it’s hard to get excited when there’s so much sh*t on TV. And what the heck is going on in the cable/CRTC world? I’m trying to follow but every time I do, I fall asleep in mid-arguement.
Plus the networks’ and Shaw’s ads all look the same (not to mention Shaw’s brand is inconsistent) that I can’t tell who is doing the talking. Boring message. Boring messengers. Sent to a bored audience. What would Aristotle say?
Jimmy,
It’s true. You can’t mow your lawn on rental properties you own but think like a Vancouverite–one that’s been arrested for Breaking & Entering and then let go by the courts within 3 hours of your arrest. You can’t mow but you can inspect each blade of grass individually and without its roots.
OK. I am bored now. Bye bye.
VD, one more Reduced sign in the hood – properties are starting to sit.
Wonder how the rest of the year plays out. CREA indicates that November sales numbers (nationally) are running hotter than October – this surprises me, so the market still is running hot hot hot, but I can’t explain why this is so. Boggles me timbers.
Jimmy 8:
If you are going to make money, or even potentially make money, by working in the States, or if anyone else is going to make money through your working in the States, you need a work visa. So you cut the lawn on a property you are renting FROM someone, but not the lawn on a property you are renting TO someone.
The business activities you can perform are pretty well limited to meetings, observation (but not supervision), negotiation, purchasing and hiring (but not firing).
Think about it this way: you would expect to be allowed to go to the States, start your own hot-dog vending business and then start selling hot dogs from the cart without a work permit. Noting changes if its a real estate company.
Really anonywow, you can’t figure it? I can. Cheap money complemented by foreign investors on the cusp of supplanting the US as the worlds’ no. 1 economy plus a long-standing fear of being priced out forever. It’s like a perfect storm.
VD/11… Aristotle once said, ‘The Gods too are fond of a joke’… Will that do?
Newcomer/Jimmy/Disbelief… It’s easier than you think, in some regards… the following links may prove helpful…
http://tinyurl.com/ybo3l97
http://tinyurl.com/yclk9kp
http://tinyurl.com/yeqssnk
Of course, the list of professions granted US entry under the old FTA was far more eclectic/egalitarian… including, amongst other eligible occupations – ‘bovine inseminator’ – a former business partner and I once considered declaring ourselves ‘bovine inseminators’ to get work permits… after all, how would they check? We figured if we showed at PeaceArch with a cooler full of yoghurt in dry ice and long rubber gloves they’d have to let us through… Right?
HP 17:
You can take my word for it. I run a cross boarder business and have had all kinds of visas. I spend a lot of time with my immigration attorneys making sure things are in order. The TN is a visa which you do need to apply for. You can’t just start working under the assumption that if it’s a NAFTA job, you’ll be OK. And cutting laws is definitely not on the TN list.
“is it foolish to buy cash flow?”
No. How are those who bought a similar property 2 years ago feeling? If they “bought cash flow” they shouldn’t be worrying at all.
Check out affordability in the States. Of course, places like Honolulu can’t compare with us for weather, but it is interesting nonetheless.
http://tinyurl.com/lstcfa
VD: foreign investors on the cusp of supplanting the US as the worlds’ no. 1 economy plus a long-standing fear of being priced out forever. It’s like a perfect storm.
Not quite- the US won’t be supplanted as the largest economy in the world for a couple of decades yet- China is not even close. GDP/Cap is still 20% of the US
In regards to the VOW site (which is very cool by the way), it would be nice to have an option to search for houses with a workshop. Another thing I would like to see is an option to enter a custom lot size (e.g: 3500 sq.ft – 6000 sq.ft). I noticed that condos and townhouses are lumped together and it might be better to be able to search them separately…
Anonymous/14: “CREA indicates that November sales numbers (nationally) are running hotter than October – this surprises me, so the market still is running hot hot hot, but I can’t explain why this is so.”
Yes, this market is bizarre. I don’t think much will change until either the CMHC reduces amortization periods, increases down payments or the BOC increases rates… Personally, I think the CMHC should be pressured into changing their policy and sooner rather than later. Bridge loans should be against the rules; people should have to save to attain their assets…
The savers continue to suffer into the recession… When will the insanity end? [melodramatics on] I’m loosing my will to live [melodramatics off]…
Good morning, All… Beans/21.. Actually, if we abandon sovereign territorial states as our unit of analysis - the ‘aggregated’ EU actually comes out on top (and has been since around 2007 – see link immediately below)… but in any event, in the current era it’s ‘all about the money’ as money per se has taken on a distinct life of its own – i.e. no borders, no allegiance (Frankenstein, anyone?)…
http://tinyurl.com/5apkt3
Meanwhile, back in Tarzana – 7.5M to build, 9.8M ask ‘fail’ – on the block in time for Christmas with a min bid at just 2.1M [LAT]…
http://tinyurl.com/ycodlhk
And, ’surprise’ (not) – according to the LAT… ‘Owners’ willingness to ’strategically default’ on loans depends largely on how far underwater they are’….
http://tinyurl.com/y8h45tc
Last up – a NYT political think piece so good it may well prove prescient… ‘The Pit Bull in the China Shop’
http://tinyurl.com/ydr7nen
Afterthought, Newcomer/18… ‘cutting laws [sic] is definitely not on the TN list’…
Well, maybe not as such – but this one is… ‘Landscape architect
(requires Baccalaureate or Licenciatura degree)’ – so, for the better educated grass cutters out there…
Sorry, couldn’t resist that one! But of course, you’re right.
Yikes! Where is everybody – at open houses?… Here’s today’s final remark/link from HP… I blame it on VD – whose Aristotelian yearnings reminded me of a classical allegory with implications for YVR RE prognosticators… the following is suitable for all ages and best viewed ‘HQ’/full screen….
http://tinyurl.com/ylrd35a
Noting that a sales stats are around 2 weeks behind activity…is the horrible weather having any impact on sales?
http://www.usedvictoria.com/classified-ad/10662137
http://www.vancouversun.com/business/Homes+place+live+first+source+wealth+second/2244294/story.html
More and more sobering/balanced reports in MSM – is this the sign of anything?
this blog seems to be getting quite tired.
HP,
Isn’t that version of the Cave amazing? If only someone could have shown that to me when I was learning it the first time. Would have taken the struggle out of being a hormonal teenager and a struggling student. So, who on our political scene do you think is the Philosopher King?
Who has seen the light? Who is still in chains? The developers? The foreigners? The real estate agents? Us? Bob Rennie?
Mainstream media is actually starting to get the message. Can the end be near?
http://www.theglobeandmail.com/blogs/streetwise/why-home-prices-are-frothy/article1372885/
McLovin
You can duplicate the Phoenix story in hundreds of locations in the US. Since I’m an investor living in the OC you just go 5 miles east to sunny Santa Ana, CA. Just go to an area where all the fraud took place and your able to buy a home for 30 cents on the 2006 purchase price. You have no problem renting them out and they pay the rent (just don’t believe they are renting the place just for their family), heck you don’t even get maintenance phone calls because the renters are handy themselves.
I’m thankful I bought early enough in the game as everything I’m writing on now goes for 60K over list with 30-40 offers. I quietly did my four purchases from Sept 08- Feb 09. I focused on sfr’s from 190K-240K, 3bed/2bath 1000-1100sq ft on 6-7K lots that will rent all day long for $1800.
33 Socal Investor
I dont think the return is the same from properties in OC and Phoenix. Prices in Santa Ana are not cheap at all by any measure, I dont know were you get your information. I also lookes at appartment buildings, you get very low cap rates in St Anna or LA aera for that matter (barely better than in vancouver) whereas in Phoenix you have appartment buildings with 15 to 30% cap rates.
What will be the most desirable locations in OC in your opinion ?
You’re right I don’t get the Phoenix returns but I chose to invest close to my home and still didn’t do to bad. If I want the Phoenix returns close to home I would have gone to Temecula, CA. A friend of mine who just bought 2 there paid 65 and 55 and everything else is about the same as Phoenix. She actually turned down an unsolicited offer on her Santa Ana investment property she bought in Jan 09 for 240 for 350K (FHA loan so it probably would have had appraisal issues). She was contemplating selling Santa Ana and buying a bunch more in Temecula but I convinced her to keep it as Santa Ana is central and not out in the boonies like Temecula. I know Santa Ana will go up quicker than Temecula. I will buy anwhere I can get a steal. Santa Ana was the best OC location, followed by Anaheim. But the opportunities are being forced out to the outlying counties where I refuse to buy.
Also I have lots of investor friends that sold their choice coastal socal properties to buy huge (better returns on-paper) multi family properties in places like Memphis, Kansas City, OK City, blah blah blah. They now tell me as soon as they unload these they are coming back to Socal. Real estate will always be location, location, location. I bought buildings in Long Beach, CA in 01 for 30K a door when LA and the OC were 3 times that. It doesn’t take a rocket scientist to figure out which location is under valued. I also bought buildings when everyone else was buying sfr’s. I bought sfr’s now because the stupid banks are letting you steal them.
36 37 Socal thanks for the info. But traditionally if cap rate is below 10% is not worth looking at the property. Cap rates in California generally are below 6% for appartment buildings and less in the aeras you suggest. I dont know how you could find such great investments there, pls share your experience, what cap rates did you buy?
I have always bought off MLS. My 4 recent purchases in SA I had to be real quick on one and the listing agent just pushed my offer and was accepted before they put the lkbx on the front door so I could see the inside. Another fell out of escrow with a buyer who was getting financing so they called me up as I was paying cash. Another was a short sale that I had to sway the listing agent to sell to me instead of other buyers and take both commissions (I am licensed and write my own offers most of the time). The other one is just being in the right place at the right time and again a greedy agent wasn’t looking out for the seller.
It has been the wild west down here with listing agents controlling the strings and not looking out for the banks that hired them. My muli-family buildings were acquired just being fast, fast, fast. Buying cheap, and adding value. My best deal was a 12 unit 2 blocks from the beach in Long Beach for 370,500K in 12/01, (ages ago). When buying I really analyzed the price per door (not cap rate or gross multiplier as those can be make believe) as in a non-rent controlled area you can change the rents/expenses/etc.
Also I’m correcting what my friend bought in the earlier posting-it was Lake Elsinore where there are smokin deals, not Temecula ( I just hate that area out there as a whole so I bunched the areas together).