Even though the housing market is in a bit of a slump, many people are actually making money by buying investment properties, rehabbing them and either selling them for a profit or renting them out.
This week, I have had multiple conversations with multiple people about the state of the Arizona housing market and one thing is clear from what I see:
There are more than just a few investors out there who are snapping up houses at ridiculously low prices with a business plan to cash flow the properties or simply fix them up and put them back on the market. Here is only one case in point. A home in Glendale, Arizona was sold recently for $24,000 cash to an investor who bought it directly from the bank who owned it.
The investor hired a Phoenix trashout company to clean out all the trash and do some minor remodeling to get the home in good, clean condition where a family could come in and actually be excited about their new home.
Total cost of the trashout? $600. Total cost of the remodeling? About $6,000.
By the time this house is remodeled and “attractive” for potential buyers (or renters), the investor will be into it $30,000.
A 30 year mortgage on $30,000 at a 7% rate (let’s aim high on the rate) is about $200/month for principal and interest. Throw another $150 (again, aim high) in for taxes and insurance and your full PITI payment is $350 a month. There are also multiple mortgage programs (if you don’t want to pay cash) that you can pick from such as the Fannie Mae HomePath Renovation mortgage or the HomeStyle Renovation mortgage.
Is it possible to rent a home in the Phoenix market for more than $400 a month.
My best guess is that this home will fetch between $750 and $950 per month in income or about double what the monthly carrying cost is for the investor.
Investing (wisely) in real estate may make more sense now than it has for years.