Hello, my friends and welcome to another episode of Ask Marco where I answer your investing related questions.

So today's question comes from Jason and he sends this question in with some urgency. Jason, I'm going to provide you some direction. As you know, we don't give financial advice and sometimes it's hard to know what advice to actually give somebody without specifics on the situation. But I understand what is going on here from your email and I can feel your pain because I've been there many times myself. Anyway, Jason writes in and he says, Hey Marco, first of all, thank you for being not just a voice but the voice for us real estate investors. I have spent the last two years consuming as many books, podcasts and all things real estate investing. In my opinion, you are the authority that you're way too kind. I've been networking with other investors and your name keeps coming up.

So from all of us. Thank you. Well, you're very welcome. So he goes on to say, I closed on a property just as the coronavirus pandemic started. This property is in the Phoenix market and I think we both know this market is susceptible to a decline in values. I will be all in for $250,000 and I paid cash. This includes the rehab or renovation and all other costs including selling costs, as my intention was to flip it. If I don't sell all in, it will be around $235,000 it will rent for 1400 to $1,500 a month. Obviously doesn't come close to the 1% rule. I'm worried with what's going on with coronavirus. I will not be able to sell it at a profit. The estimated after repair value at the time of closing was $270,000 so only a $20,000 profit margin. I feel like my biggest loss will be the opportunity cost.

If I leave $250,000 cash during what possibly could be a great time to buy? The return on investment is not attractive as a conventional mortgage and renter. My question is, what other strategies should I be considering such as a lease option providing owner financing, a home equity line of credit or a cash-out refinance. I greatly appreciate you taking the time to read this and I am open to a conversation since I am asking a big question. Thank you and stay healthy, Jason.





Alright, Jason. Great question. I can feel your pain and I empathize so I don't have enough detail obviously to give you specifics because so much of this is going to be neighborhood-specific or neighborhood dependent. Phoenix is a big, big market had it has been a great market for many years just because of the tremendous growth that has been going on there.

However, having said that, as a flip property, that's a pretty thin margin of 20,000 assuming you sell it for the 270,000 being a retail flip, you always have to account for fluctuations in negotiation with your potential buyers. If the market softens during the period of time that you are renovating your property, that 20,000 could be enough pretty quick. Ideally, you want to see a minimum of a 10% profit margin on a flip, and I'm talking about a net profit. Ideally, you want to be well above that, so I'm not sure where you got it or how you purchase this or how come you're so deep into this property. But that doesn't matter because that's not your question. In regards to Phoenix, just a quick comment. You know, Phoenix has been one of the highest appreciating communities or markets, well not only in Arizona but nationwide and Phoenix.

Home prices were up roughly 7% over the last 12 months, which is a very strong price growth and that's probably why you pick the Phoenix market as far as finding a distressed property to fix and flip. But despite the increase in property prices, the Phoenix market still is a good market even though it has been softening. And that's actually what has been happening. So according to some websites, and these are automated models like Zillow's model, they're only expecting that market to appreciate about 1.7% as a whole over the next 12 months,