House prices continuing to rise?

[MN-Born-n-Raised]

Originally Posted by blisterpeanuts

Western suburbs. My 2 bedroom shack would probably sell for around $700K because of the location.
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I'm not so sure you are overpaying. If was your landlord, I would be seeing things differently. I don't care on how good you guys are for renters. Because if I was your landlord, I would not be happy as I would be experiencing bad ROI. Here is why: If your rental place would sell for $700K, then I would feel lucky about $2K a month in rent. The owners are getting a terrible ROI. Let's say you got a smoking deal on a $700k mortgage at 3.5%. Your interest only is >$2K/month. Then add in property taxes of 1% or $583 a month and you start to see that the math doesn't work for them. Putting it another way, unless they are experiencing appreciation on the property, renting it out for $2K a month is a terrible return. We haven't started to calculate depreciation, wear-and-tear, accounting costs, insurance, repairs, etc. There are also risks like renters not paying, the fear of lawsuits, rental downtime, or housing falling in value. I missed another 20 items that all add up.

I like numbers. I would be working the math backwards before I thought about coming back to PHX because of the housing cost of living. If you could rent the same caliber of place in PHX area for $1200, you need to make up $800 a month or $9600 a year before taxes to live at the same standard of living. The MA area does have higher wages and a lot healthier economy.

[blisterpeanuts]

Originally Posted by MN-Born-n-Raised

I'm not so sure you are overpaying. If was your landlord, I would be seeing things differently. I don't care on how good you guys are for renters. Because if I was your landlord, I would not be happy as I would be experiencing bad ROI. Here is why: If your rental place would sell for $700K, then I would feel lucky about $2K a month in rent. The owners are getting a terrible ROI. Let's say you got a smoking deal on a $700k mortgage at 3.5%. Your interest only is >$2K/month. Then add in property taxes of 1% or $583 a month and you start to see that the math doesn't work for them. Putting it another way, unless they are experiencing appreciation on the property, renting it out for $2K a month is a terrible return. We haven't started to calculate depreciation, wear-and-tear, accounting costs, insurance, repairs, etc. There are also risks like renters not paying, the fear of lawsuits, rental downtime, or housing falling in value. I missed another 20 items that all add up.

I like numbers. I would be working the math backwards before I thought about coming back to PHX because of the housing cost of living. If you could rent the same caliber of place in PHX area for $1200, you need to make up $800 a month or $9600 a year before taxes to live at the same standard of living. The MA area does have higher wages and a lot healthier economy.

I don't disagree with anything you've said. In fact, if I were the owners of our property, I'd sell it and make a quick $300K profit. Probably, they're holding out for a $400K or $500K return, though.

And believe me, if it were up to me, we'd be back in Arizona in a flash! But with a family, it's not so simply

[lizsellsazhomes]

Originally Posted by blisterpeanuts

It seems there's a bit of a real estate rebound happening in Arizona.

My home in north Glendale has recovered much of its value, according to Zillow. Sadly, we had to relocate back East because of my job, but we held onto the house, a modest 3-bedroom 2-bath ranch in a nice middle class neighborhood near W. Union Hills and 59th Ave. Nothing fancy, but decent size yards, 2-car garage, lot of potential for a renovator.

When we bought it, mid-2007, for $226K, it seemed like such a bargain compared to houses in Massachusetts, New York, and Connecticut.

Then, of course, the implosion began and around 2010-2011, Zillow was telling us the place was worth $110K. I found a job back east, and had to relocate my family, but hung onto the house. Friends were saying, "Oh, just walk away from it. Short-sell it. Send the keys back to the bank."

No way. I held onto the house, found a good management agency to rent it out, renewed the home warranty, and here we are, almost five years later, still the same tenant and Zillow now says it's up to $190K.

The management agency suggested we raise the rent for this next year, but I am keeping it the same ($950). My attitude is, she's been a good tenant, the house looks nicer than when we lived there, and although I lose a bit every month, I'd rather keep a good tenant.

Once the house is in the low $200s, we can start to think about getting some of our money back out of it. But part of me wants to just hang onto it forever. It'll be retirement income, or perhaps a retirement home some day.

Meanwhile, we rent a tiny home back East that would cost us 3-4 times as much, and no garage! Pitiful.

My great regret? That I didn't have the bucks to buy 3-4 more houses in 2011.

Anyone else in this situation?

The AZ housing market has continually proven to increase this year as the year over year closed transaction rate has increased 12% from March 2015 - March 2016. Currently there is a shortage of homes priced $200k and lower, and a high demand for homes priced in the $225-600k range.

As far as your home's value, Zillow is a great starting point but cannot be treated as true market value. For a better idea, contact a licensed real estate agent for a free market analysis.

Hope this helps! Feel free to reach out to me with any questions!

[DougStark]

Blister, I'd do the same thing as you're doing with regard to your good tenant (keeping her rent low). I've even heard Dave Ramsey say that: offering a slightly reduced rent for an excellent tenant is a wise decision.

My question would be, how do I find an excellent tenant without the trial and error process? (I ask hypothetically- I'm not in the landlord business right now.)

[blisterpeanuts]

Originally Posted by DougStark

Blister, I'd do the same thing as you're doing with regard to your good tenant (keeping her rent low). I've even heard Dave Ramsey say that: offering a slightly reduced rent for an excellent tenant is a wise decision.

My question would be, how do I find an excellent tenant without the trial and error process? (I ask hypothetically- I'm not in the landlord business right now.)

We were lucky. Actually, initially unlucky -- we signed a contract with a bad management agency, that did not find us a tenant and turned out to have many bad reviews on BBB and elsewhere. We got out of that contract but had to pay at least a partial fee, and now there's one more bad review on Yelp.

Then we found a good management agency, referred as I recall by someone on city-data. These people methodically searched for a tenant with excellent credit, which they say is one of the best criteria. The tenant we got has been fabulous. She doesn't ever communicate with us but prefers to just live her life. When something goes wrong, she just calls the agency, who calls the contractor to fix it and we pay the $50 deductible on the home warranty in most cases. A nice lifestyle actually.

The agency has been pretty good, not perfect but they do what I ask them to do. When there was a problem with the drip irrigation system in the back yard, which I had installed, they were telling me their landscaper didn't know how to handle it and proposed to replace the whole system. Instead, I sent a friend over there who is a master carpenter and all around awesome handyman, and he just brought his tools and a bucket of sprinkler stuff and fixed everything that was wrong.

But overall, it's been "set it and forget it". In my amateur opinion, if you're going to rent a property, offer it at a competitive rate so that only the financially stable working people will afford it, but then don't raise it if the tenant's decent; eventually your tenant will be paying a bargain price and they'll have more incentive to stay.

My own landlord, as I mentioned above, just raised our rent 11%, which has spurred me to think about moving on. Or else trying to get the money together to make an offer on the place.

[MNSvenska]

The home prices in Sun City have gone up dramatically in the last 3 yrs. We're glad that we invested when we did. Our present 1200 Sq ft house with 2 car garage will do us nicely for the next 20 yrs.