Is Phoenix RE a good investment? (Gilbert, Surprise: sales, real estate, apartment complexes)
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I'm thinking that strong housing markets can indicate a strong economy. And vice versa. Would that be reflected in the stock markets and other investment vehicles?they seem to be tied together so why have other investments apparently done so well?
I have had three different financial advisors over the last thirty years and am lucky to be breaking even on those investments.
The problem with waiting for the shadow inventory to drive down prices (assuming the numbers are much higher than Orr suggests) is you`ll likely find growing competition from buyers. I`ve been in the market since the summer of last year and the competition is fierce even for cash buyers.
It appears the market psychology has changed and my guess is we`re going to see a lot of buyers that have been sitting on the sidelines jump in. I bought a 4 bed 2 bath 2000 sq ft home (Gilbert 85234) for roughly $140,000 last summer which I now could probably sell for $165,000 in less than a week. I also lost a short-sale last year for $143,000 (gilbert 85295) which the bank took back and placed on the market for $165,00 last Nov. which quickly sold.
I clicked on The "about" of the Cromford Report and found to my surprise that Mike Orr, an Oxford Mathemetician who runs it, has been into RE investing professionally since 2002. So much for that.
Perhaps you should do a little more research before making that statement.
Mike Orr starting developing his statistical models in order to help him and other investors be able to track the market. Then he joined up with the Information Market and formed the Cromford Report to provide accurate, up to date, data for people in the real estate industry.
In 2005-6, because of the statistics he had developed and the trends that were forming, he was warning people that the price increase could not last. He was seeing increasing inventory, declining sales while the prices were still going up, due to the inherent lag in real estate prices following supply and demand.
I believe he sold all of his properties when he was advising others that they should be selling.
Now not too long ago he began telling people that the reverse was happening; that the supply was declining, and sales were increasing, and along with other data and warning signals he has developed, he was saying that sooner than later prices have to increase.
A lot of people didn't listen to him when he warned that the prices had to decline and they lost money. Today, there are still many people who didn't listen to him and they missed the bottom.
He has been right all the time.
If you were really interested in learning something about the real estate industry you would be studying the people who are the foremost experts in the area who provide factual data instead of innuendo. But it appears that you're insistent on letting your biases prevent you from learning.
Recently, ASU recognized his expertise and appointed him as Director of the Real Estate Center of the W. P. Carey School of Business.
W. P. Carey School Upgrades Real Estate Programs & Adds Well-known Expert Mike Orr
Worldwide attention is now focused on the Phoenix-area real estate market and its slow recovery from the foreclosure crisis. At the same time, the W. P. Carey School of Business at Arizona State University is making some timely upgrades to its real estate programs aimed at disseminating more public information about the market and educating future real estate industry leaders. Among them is the addition of real estate expert Mike Orr, highly regarded for his market analysis as creator of The Cromford Report.
Here is a link to a pdf download of Mike Orr's 17-page April 25 real estate report for W P Carey.
I think Phoenix re *was* an excellent investment in 2010 and 2011. Now, not so much. The deals that gave the best "cash on cash" returns were sub $100k. Now that market is way overcrowded with buyers, so the odds of being able to close more than one deal in that range on a home that will throw off cash are slim. If you're a small investor with a lot of extra time on your hands, you might still find a screaming deal here or there, but the low-hanging fruit is gone.
If you aren't already an investor here, and familiar with rehab costs, laws, and the neighborhoods you're buying in, you're in a dangerous position. MLS photos rarely show any warts, and those marketing to put-of-town investors take "puffing" to a new level.
The easiest way to make a million dollars in Phoenix real-estate is to start with ten million dollars (and lose nine million).
Arguments revolving around how many sunny days we have, or the lack of earthquakes are short-sighted, and have no merit. We have lower property taxes than most states, but that can change. We sold our Capitol building and rented it back. We've gutted higher education funding during a recession, and the only area of government that hasn't taken significant cuts is our for-profit prisons. The hospitals that have located here could leave just as fast as they opened, and it's getting more likely every time we cut healthcare funding so we have more money for prisons. So it isn't all "peaches & cream", far from it.
From that article they do not break down the number of REO's in inventory like I did. The total is 6,838 in various states with only 1,682 not accounted for (or held back)
Then they make no distinction of homes already in foreclosure.
Homes in foreclosure means they have been issued a NOTS. Some of those are already listed as a short sale.
Currently there are 13,024 foreclosure homes in Active, AWC or Pending Status
13,024 plus 6,838 equals 19,872.
40,000 minus 19,872 equals 20,138 homes that have been issued a NOTS but are not on the market.
There will be a number of them where the owners are working on loan modifications, because the banks are doing that now. BofA has sent out large numbers of invitations to owners to participate. They have been so backed up with loan mods that they can't process a home loan in the normal amount of time. The loan officer I prefer to work with had to quit and go to work with another company because deals were falling through because BofA couldn't keep up.
And what if all 20,138 end up being foreclosed? I think they would be gobbled up very quickly.
Here are a couple of snippets that you may have missed in that article:
New data from California-based John Burns Real Estate Consulting, one of the nation's leading housing researchers, puts the number of homes in the Phoenix area's shadow inventory at about 92,000, the size of a small Valley suburb.
But that number, which includes Pinal County, isn't alarming housing analysts.
That's because the rate of sales is as important as the raw number of homes. If sales are brisk, the homes are snapped up quickly, meaning they won't lead to lower prices.
Stay tuned Cap'n, this crashain't over yet. Macro economics will crash the party.
Once again, I dismiss real estate in Phoenix as an investment. It is not. I do not dismiss owning real estate in Phoenix as a place to live if you easily can pay the mortgage, if your job cannot be outsourced, and if your salary cannot be cut, or if your non-RE investments annual gain can handily pay your mortgage.
'm sold on its a great place to live, but if I invest $150k in a rental, is it a secure investment, can I make money, how long before I see a return, what kind of return can I receive and would I be better off in the stock market or even gic's.
I have never had much luck getting decent long term income from rentals. Only money I ever saw was from appreciation. I'm putting $25k into a place now. Thats several years profits. Fortunately, its appreciated enough that the $25k is a serious wound but it won't kill me. Maybe I'm just a crappy landlord and don't max out my rental revenue. When I have these big hits, I take out an interest only LOC on the equity. Pay it off if I can but otherwise consider it a sunk investment.
I'm just starting to crunch a few numbers. I have a place in the west valley but I think a better investment is out east, with the intel plant coming up.
When it becomes a 100% sure bet the risk is eliminated and everyone wants in (like a winning lottery ticket) as long as you can get a property in AZ at 50% of what someone was previously willing to pay for it I think you are as risk free as you can expect..
I'm sold on its a great place to live, but if I invest $150k in a rental, is it a secure investment, can I make money...
Here`s what I`ve learned the hard way: To be on the safe side you should set aside 40-50% of rental income to pay for operating costs.
The properties I bought recently each bring in $1300 a month and I pay $700 to the bank. The rest basically covers my operating costs with a bit of pocket change left over. I`m fairly confident housing prices at least in the areas where I bought (Gilbert/Chandler) will not slide anytime soon. How much they will go up is anyone`s guess.
Owning investment property is hard work esp. if you`re an out of state investor. My biggest mistakes (besides initially buying at the wrong time back in early 2005) were underestimating operating costs and not having reliable property management.
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