Phoenix area home values- November, 2010 --- (Carefree: cost, estimates, retirement)
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I counted 40+ rental houses, currently on the market, in Surprise with rent under 1000 pm. As of a few days ago, there were ZERO in this "Sketchy" part of town, by the Phoenix Country Club, in the 85014 Zipcode.
I am trying to attract investors to this area, and I hope they will make educated decisions. For an investor, a large house with a low rent, would not make sense.
BTW, is there "a good side of the tracks" in Surprise?
If your decision to buy a home is related to how much you get in yearly rent, then buying a bigger home is foolish. Putting it another way, if you double the size of the home, you won't double the amount of yearly rent; Not even close. But of course some people don't buy a home to rent them out (they buy them to live in).
While we are on the topic of RIO, you are thinking of real estate investing one dimensionally. I have a 4000 sq foot in Northern MN that rents for $2000-$4500 a week (depending on the amount of people and if they rent my pontoon and jetskis etc). It rents in the winter as well to snowmobilers for $1000 a weekend because there is a premium for weekend rental rates. As you might guess, this rental model is furnished with nicer stuff (not over the top). I simply select fabrics, floor styles, etc based off of easy of cleaning. So to make this rental approach work, I need to target people with money that vacation. So while I MIGHT be able to get $2000 a month based off of yearly rentals in this Northern MN lake home, I get >$60K in rent furnished to higher end vacationing people. There might be 3 couples going on vacation for a week and they split the $3500 bill. Cheap!
So you are in a paradigm. You are simply calculating how to maximize rents based off of being a pseudo slum lord. There are a lot of successful investors using that model.
Now let's just say that you WERE looking for an investment property in Surprise or Pieora (for instance). Hummm..... Would there be people looking to rent by the week? Well, the local Holiday Inn in Surprise gets $175 a night during peak times ($90 in off-peak) and they cater to baseball fans. So let's say three couples stay at the new Holiday Inn. They pay $3675 a week ($175 x 3 couples x 7 days plus tax). So assuming you had a place all decked out within reason in the right neighborhood close to the fields, could you now imagine people renting it for $2000+ a week?? Some people I met are renting to ballplayer families that want a home to live in versus a hotel. In the right home they will pay $7K a month. In Surprise, there are tennis tournaments that come into town, long weekends, and other rental opportunities?? Using this rental model makes sense to buy a 4000 sq foot home versus a 1700 sq footer that are a dime a dozen TRYING to do the same thing unsuccessfully???
Strictly speaking about ROI, If you buy in the right area (entertainment synergy that is safe) and the right property (size, street appeal, right amenities, right neighborhood) and you know how to market on the Internet, then you too would realize that renting by the year has terrible ROI. The bonus is that you can use your place whenever it isn't rented.
IWhen it comes to renting, you need to think outside of the box.
Last edited by MN-Born-n-Raised; 03-04-2011 at 10:08 AM..
If your decision to buy a home is related to how much you get in yearly rent, then buying a bigger home is foolish. Putting it another way, if you double the size of the home, you won't double the amount of yearly rent; Not even close. But of course some people don't buy a home to rent them out (they buy them to live in).
While we are on the topic of RIO, you are thinking of real estate investing one dimensionally. I have a 4000 sq foot in Northern MN that rents for $2000-$4500 a week (depending on the amount of people and if they rent my pontoon and jetskis etc). It rents in the winter as well to snowmobilers for $1000 a weekend because there is a premium for weekend rental rates. As you might guess, this rental model is furnished with nicer stuff (not over the top). I simply select fabrics, floor styles, etc based off of easy of cleaning. So to make this rental approach work, I need to target people with money that vacation. So while I MIGHT be able to get $2000 a month based off of yearly rentals in this Northern MN lake home, I get >$60K in rent furnished to higher end vacationing people. There might be 3 couples going on vacation for a week and they split the $3500 bill. Cheap!
So you are in a paradigm. You are simply calculating how to maximize rents based off of being a pseudo slum lord. There are a lot of successful investors using that model.
Now let's just say that you WERE looking for an investment property in Surprise or Pieora (for instance). Hummm..... Would there be people looking to rent by the week? Well, the local Holiday Inn in Surprise gets $175 a night during peak times ($90 in off-peak) and they cater to baseball fans. So let's say three couples stay at the new Holiday Inn. They pay $3675 a week ($175 x 3 couples x 7 days plus tax). So assuming you had a place all decked out within reason in the right neighborhood close to the fields, could you now imagine people renting it for $2000+ a week?? Some people I met are renting to ballplayer families that want a home to live in versus a hotel. In the right home they will pay $7K a month. In Surprise, there are tennis tournaments that come into town, long weekends, and other rental opportunities?? Using this rental model makes sense to buy a 4000 sq foot home versus a 1700 sq footer that are a dime a dozen TRYING to do the same thing unsuccessfully???
Strictly speaking about ROI, If you buy in the right area (entertainment synergy that is safe) and the right property (size, street appeal, right amenities, right neighborhood) and you know how to market on the Internet, then you too would realize that renting by the year has terrible ROI. The bonus is that you can use your place whenever it isn't rented.
IWhen it comes to renting, you need to think outside of the box.
Most HOAs have minimums on leases, 6 months in some cases, 30 days in some others, no renters in a few--this is to avoid nice neighborhood being turned into Motels. It's been a big issue in LV. The management fees on these things is really high, too. 10% + 150 every time it changes hands or more.
Saw a nice little house in Prior Lake for 32,500 the other day.
Most HOAs have minimums on leases, 6 months in some cases, 30 days in some others, no renters in a few--this is to avoid nice neighborhood being turned into Motels. It's been a big issue in LV. The management fees on these things is really high, too. 10% + 150 every time it changes hands or more.
Saw a nice little house in Prior Lake for 32,500 the other day.
Re: HOA's. "Motels" don't charge $2K+ per week. You need to go back and do some homework. That's not the case in HOA's I'm looking in Surprise. I've checked. Re: Management fees. I pay near zero. You get a cleaner to help out and pay them by the hour. I also have a handyman that I hire and trust for $25 an hour as well. IP based cameras outside the entry points help keep the charged hours you get accurate. Now if you want it turn key and low stress, management fees can approach 40% in some parts of the country (FL for instance). I like $15 a check in and $15 a check out a little better. Most importantly, I don't rent to just anyone. So I don't want a Rental Manager who is fiscally motivated to put in just anyone.
Here are a few hundred HOA's that don't seem to mind (see Phoenix Vacation Rentals - VRBO® Vacation Rentals Phoenix - Phoenix Lodging (http://www.vrbo.com/vacation-rentals/usa/arizona/phoenix-area - broken link)
Saying that, you will notice most homes sit empty. That's because most people don't cater to vacationers with a few extra bucks in their pocket. The goal is to attract people who want something special. I don't want to rent to someone who only cares about price. But 90% of the people on that link don't get it. Look for full calendars during peak times and it will always make sense. It has to be in the right neighborhood with the right decore etc. The more bedrooms you have the more "guys weeks" or "girls" weeks you can have. So 5 bedrooms will rent to 5 guys and that 4 bedroom will get passed up. I've done this on the side since 2005. I very much understand the model and love when other think it cannot be done.
Last edited by MN-Born-n-Raised; 03-04-2011 at 01:02 PM..
Val Vista Lakes has one condo sub-division. Many of the units in there are rented by the month, furnished to snowbirds.
In checking the VVL CC&R's, the Rules (which clarify the CC&R's) state that a resident member may transfer their membership (clubhouse facilities) to a renter. The owner just has to provide a copy of the lease that states the names on the lease and the length of the lease. It does not limit the time.
I believe there is also a reasonable fee for transferring the members clubhouse privileges to the tenant to cover the cost of transfer.
I don't know how many are empty, but as Captain Bill said, if you have rentals in good locations, in good condition, with competitive rates, they will rent quickly. I have no problem keeping mine rented on at least yearly leases. Like any investment, you need to evaluate each potential rental and determine if the return after expenses will be sufficient. And you should factor in a vacancy rate. But if you have to "plan" on 6 months vacancy, then you picked the wrong one.
You may be competing with landlords that paid 3-4 times more, and you will always have a competitive edge on them. We have a guy that paid 540,000 for four units that he rents. If he charged what I do, he would be negative about 400 per month, while I am positive 300+. So, who is going to have the vacancy issues? And when the market comes back (Warren Buffet says it will), I will always be able to undercut them on resale, too.
I know you guys are talking about renting, but I just checked Zillow on my home and its showing a value of $10,000 more than I paid a year ago and climbing. I know this is all speculative, but its nice to see it not going down.
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I have a 4000 sq foot in Northern MN that rents for $2000-$4500 a week (depending on the amount of people and if they rent my pontoon and jetskis etc). It rents in the winter as well to snowmobilers for $1000 a weekend because there is a premium for weekend rental rates. As you might guess, this rental model is furnished with nicer stuff (not over the top). I simply select fabrics, floor styles, etc based off of easy of cleaning. So to make this rental approach work, I need to target people with money that vacation. So while I MIGHT be able to get $2000 a month based off of yearly rentals in this Northern MN lake home, I get >$60K in rent furnished to higher end vacationing people. There might be 3 couples going on vacation for a week and they split the $3500 bill. Cheap!
Well, the local Holiday Inn in Surprise gets $175 a night during peak times ($90 in off-peak) and they cater to baseball fans. So let's say three couples stay at the new Holiday Inn. They pay $3675 a week ($175 x 3 couples x 7 days plus tax). So assuming you had a place all decked out within reason in the right neighborhood close to the fields, could you now imagine people renting it for $2000+ a week?? Some people I met are renting to ballplayer families that want a home to live in versus a hotel. In the right home they will pay $7K a month. In Surprise, there are tennis tournaments that come into town, long weekends, and other rental opportunities?? 
Using this rental model makes sense to buy a 4000 sq foot home versus a 1700 sq footer that are a dime a dozen TRYING to do the same thing unsuccessfully???
