About as crazy as ever

[SD Realtor]

It is ridiculous right now. Properties on the I15 corridor priced anywhere close to reasonable are seeing double digit offers. As crazy as it was in 03, I think it is harder now for buyers because of the tight inventory. I would not want to be a buyer at this time.

[spdrun]

Difference being that cash talks now, whereas BS talked back then.

[SK in CV]

Question for you, if you know….

What’s the availability of SFH rentals in the area? At times in the past it’s been very low in that area. I don’t know how much investor action there’s been there over the last couple years.

Over the last couple weeks I’ve touched base with about a dozen property managers here in Phoenix, and it’s not looking pretty. I’m sure there’s been a lot more PE money here than in SD (if there’s been any in SD?). But from what I’m hearing is all those great plans for sweet cash flow isn’t quite materializing. Rents have fallen in much of the west valley, and even softened in the higher rent east valley.

One guy I talked with said he thinks the PE guys are struggling to get 50% occupancy. Not horrible if they’ve been here for 90 days, but some have been here for more than a couple years already. Unlikely it’s a lot better for individual investors. And with spring upon us, we’re maybe a month away from turning the A/C on.

Inventory issues could reverse pretty quickly, though in a very different way than 5 years ago. Cash buyers don’t suddenly become distressed sellers. Just anecdotal, but I saw a lot more open house signs this past weekend than I’ve seen in more than a year.

[spdrun]

^^^

This makes me orgasmically glad that I didn’t buy in Phoenix, if 12% paper cap rates are turning into 6% in reality. Yeah, schadenfreunde, but so be it. It’s really a pestilential, mosquito-ridden (yep, they’re drawn to the moisture from swimming pools and irrigation), dusty, shitehole in the desert. There now, I said it.

Hoping at least one offer in SD that’s been “stewing” comes through this week, BTW.

[SK in CV]

[quote=spdrun]^^^

This makes me orgasmically glad that I didn’t buy in Phoenix, if 12% paper cap rates are turning into 6% in reality. Yeah, schadenfreunde, but so be it. It’s really a pestilential, mosquito-ridden (yep, they’re drawn to the moisture from swimming pools and irrigation), dusty, shitehole in the desert. There now, I said it.

Hoping at least one offer in SD that’s been “stewing” comes through this week, BTW.[/quote]

Nobody in their right mind thought 12%. 8% maybe. It may end up closer to zero.

[SD Realtor]

SK you need to be more specific when you said the area. Also this post is for owner occupancy. SFH will get killed as a rental at the prices I am talking about.

[SK in CV]

[quote=SD Realtor]SK you need to be more specific when you said the area. Also this post is for owner occupancy.[/quote]

I-15 corridor. Scripps, PQ, RB, CMR, Poway. I know there’s always been more rentals avail in MM, particularly in the east, but more now I suspect?

[spdrun]

Re: Poenis, AZ:
There were houses in Deer Valley selling for $80k that would be usable with $20k of renovations. They’d rent for $1300/mo, minus $200 for taxes, minus $100 for insurance, tenant pays utilities. That’s 12% pro forma cap.

[SK in CV]

[quote=spdrun]There were houses in Deer Valley selling for $80k that would be usable with $20k of renovations. They’d rent for $1300/mo, minus $200 for taxes, minus $100 for insurance, tenant pays utilities. That’s 12% pro forma cap.[/quote]

Go for it. Only an extraordinarily naïve investor would think they might get 12%. Water bill is hard to get into a tenants name, most public utilities will only bill the legal owner. You want to trust the tenant to pay, go ahead. Gardner? You want to trust the tenant to mow the lawn and take care of the landscaping, go ahead. Dreamers think they’re going to get 100% occupancy. Almost never happens, specially in the year of purchase. I rented a house in SD from 2006 to 2011. I was the exception. Shit happens. Sometimes there will be a year with no repairs or unexpected costs in a rental house. Not often. If you’re lucky, they’re small.

[spdrun]

I was thinking more like 10% in the real world. I guess water really is the 1000-lb gorilla in the room, at least as far as Phoenix goes.

If there’s no HOA, would I actually give a aerial wank how the tenant kept the lawn?

[SK in CV]

[quote=spdrun]I was thinking more like 10% in the real world. I guess water really is the 1000-lb gorilla in the room, at least as far as Phoenix goes.

If there’s no HOA, would I actually give a aerial wank how the tenant kept the lawn?[/quote]

You never know. I’m the last person to ever tell you that it matters what the house looks like, except to the extent that it affects value. You could get lucky and get a tenant that likes and cares about the yard. Or you could get one that doesn’t give an aerial yank either (I love that, btw). That tenant is likely to stay a shorter time too. And when you have to release it, what it looks like DOES matter. So you either have a harder time re-renting it, rent for less money, or pay through the nose for instant landscaping.

I just did a little math. I’ve collected over 30,000 months of rent in the last 20 years. If there’s one thing I’ve learned, the unexpected WILL happen.

[SD Realtor]

SK in the areas you mentioned no way you turn a positive cash flow on a SFH at 20% down. Also I am starting to see gaps in comps. For instance older homes in say Westwood of RB that we selling in the high 400’s and low 500’s are now gapping into the high 500’s rather then ramping. Another thing that has pushed some of the gaps is investors coming in and flipping. A home that sold for 430k in September just closed for 575k in February. Again, not fun being a young couple looking for a home to buy.

[hmc]

Include yard maintenance fee in the rent and hire a gardener. You may include (flat) water fee in the rent also.

Explain this to the tenants. This is what I am doing.

[bearishgurl]

[quote=SD Realtor]SK in the areas you mentioned no way you turn a positive cash flow on a SFH at 20% down. Also I am starting to see gaps in comps. For instance older homes in say Westwood of RB that we selling in the high 400’s and low 500’s are now gapping into the high 500’s rather then ramping. Another thing that has pushed some of the gaps is investors coming in and flipping. A home that sold for 430k in September just closed for 575k in February. Again, not fun being a young couple looking for a home to buy.[/quote]

That “young couple” needs to start shopping Lemon Grove or Chula Vista. I’ve seen some very high-quality flips sell recently in these areas for the $350K to $425K range. A couple of them recently sold VA/FHA so these “flipper-sellers” are accepting offers from buyers who don’t have a huge downpayment.

Yes, I KNOW what the properties were before so these flippers appear to have spent as least $25K in materials on them PLUS labor.

Of course, you’re aware, SDR, that it doesn’t matter what the flippers paid for the former sh!thole that no one but a cash investor would buy.

I think flippers doing good-quality work are actually performing a public service by revitalizing neighborhoods and upgrading and enhancing homes that otherwise would never sell and continue to be rental eyesores.

[all]

A friend of mine made a cash offer 5% over asking price on a house in the area. The house went pending a week after hitting MLS and my friend is not the one who got it.

[Author]

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