New to buying investment property

[leecachu]

I've been looking at becoming a landlord of a few places and friend of mine said you guys where to place to go for advice.

Here's the breakdown of my situation:

I got lucky a few years ago and purchased a home at the absolute bottom of the market for my area (Phoenix.) Now I find that I have about $100k in equity in the home and I'm looking to find a good way to capitalize on that. Near me there are several condos that are for sale and they are all in the $40k price range and have HOA fees of around $160/month. I figure I could rent them out for around $750-$800 month. Some are 2/1 and some are 3/1. Some require some work and some are ready to go and one already has tenants currently living there. Any advice anyone has about what I should look for before diving in or things to keep in mind I would greatly appreciate. Thank you for your time.

[Another Reader]

Any condos for sale in the Phoenix market for $40k now are going to be in marginal locations that attract low quality tenants.  $750-$850 rental?  I doubt that's achievable on $40k condos right now, but I'd be interested to see the source of that data.

Great deal on your house, though.  I would consider borrowing out some of that equity to buy a rental, just not the $40k condo.

[SDREMNGR]

Paying a little more to not have to deal with the worst tenants is worth it.  I don't know how judges and prison guards deal with being around the worst of humanity all the time. 

[johnintaiwan]

My parents live in phoenix and i was interested in condos in that area as well. The 40k ones caught my eye, but my parents told me that they are not in great areas and likely wouldnt command that rent. The 85-100k rentals not too far away though looked like they could. I think i am going to be holding off for now.

[leecachu]

Thanks for all the info. I've been feeling pretty excited about getting a lot of cheap places with a little return instead of a couple of more expensive ones with about the same initial ROI. Doing some more research It doesn't look like I would be able to get the rent I was hoping for but I might still have to deal with the quality of tenant issue.

[arebelspy]

Best way to capitalize on that equity is probably a HELOC, or refi.

As AR points out, those numbers don't sound accurate.  Make sure you have rock solid numbers for your analysis. 

Phoenix may not be the place to buy for cash flow in 2014, however.

[Another Reader]

Best way to capitalize on that equity is probably a HELOC, or refi.

As AR points out, those numbers don't sound accurate.  Make sure you have rock solid numbers for your analysis. 

Phoenix may not be the place to buy for cash flow in 2014, however.

You will be cash flow negative on most deals in Phoenix right now.   Phoenix has had a huge run-up in prices.  Now is NOT the time to buy.