Texas versus Arizona
Question: Why would people RENT a place for $1100/month when they can buy it for only $80,000 and have mortgage payments that are MUCH less than Rent? Or I suppose another question would be…why aren’t the RE prices higher?
Answer: I can buy an $80,000 house in Dallas and rent it out at $1,100 per month. Or, I can buy a $100,000 house in Phoenix and rent it out at $800. the numbers are skewed the wrong way in Phoenix. You are very lucky to get the 1% most people want to buy a rental. ($900 rent on a $90,000 house). IN Dallas and Houston, I buy at 85 times rent, which on a $900 rent would be $76,500 or less. I find “less” a lot. Just recently bought two houses. One was $1,300 per month rent, and I bought it (with no repairs needing done) for $104,000. Again, in Phoenix, that $104,000 house would rent for $800, instead of $1,300. I also bought a house in Dallas that rents for $600 per month, and paid $37,000 for it, and then put in $4,000 for repairs. Total in is $41,000. Good ratios.
As for land deals, I buy wherever I find someone that needs to sell. Texas, Arizona, Colorado, Virginia, Florida. It doesn’t matter. IF a property is worth $100,000, and I can buy it for $65,000, I do so. That does not happen often, but at times it does, so I buy. Same ratios are used wherever it may be, so if it meets my ratios I buy. If not, I don’t. I don’t know. All I know is that those are the facts. I buy for those prices, and get those rents. maybe it is because they 1) Don’t have the down payment to buy the house (which is true in some cases) 2) they have bad credit, and can’t get a loan (also true for some) or 3) they are not wanting to have a 30 year commitment, but instead want a one to three year commitment and so want to rent instead, and not have to try to resell in that short of a period. We live in a transient world, and many people aren’t planning on being somewhere long enough to buy there.
Who knows. But, I am taking advantage of the fact that prices are so low below the rent amounts. And, if the prices DO go up to reflect it, then I’ll be in BETTER shape.
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