Not too long ago, Investor Extraordinaire Warren Buffett penned an op-ed piece for the New York Times titled “Buy American. I am.” In this piece he shares one of his long-held rules of investing:
“Be fearful when others are greedy, and be greedy when others are fearful.”
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. This home in Glendale 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 a liveable 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.
Think you can’t rent a newly remodeled home for more than $400/month?
I know you can.
So if you are a potential investor who is somewhat on the fence, now you know what is happening. The secret is let out of the bag.
Shhh. Don’t tell.
The investor who owns the house above said that he is buying 4 or 5 houses like this a week.
Phoenix Mortgage Rates for May 1, 2009
{ 2 comments }
My first reaction to this is this makes me fearful since to me this person is being greedy. As for Buffett, I don’t personally care for the man.
I think this is awesome for the guy involved. I wish I had the kind of capital/credit to snap up even a few houses in this buyer’s market.
Definitely if I were a potential investor I’d already be buying up real estate. There are still bargains in the stock market as well.
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