Investing in Phoenix (Mesa, Scottsdale, Chandler: foreclosures, rentals, condo)

[vancouverisland]

Hi, I am looking for some help on where to buy in the Phoenix area. I currently live in Vancouver and just sold my condo and was looking for an investment property in the southern states.

Every few days there are posting on Vancouver Craigslist, that you can buy a new home in Maricopa for a little over 100k. I was thinking about buying a new house to rent out for the next 5 - 10 years thinking the market will appreciate.

I was researching Maricopa and it seems like there will be alot of investment over the next few years in term of commercial space, and with the housing so cheap it looks like it is an investment worth considering.

Anyone have any advice on this, or opinions on Maricopa development over the next few years.

Thanks

[Synergy38]

Since there are THOUSANDS of rentals available in the valley i'm not sure if that'd be smart to do. You might be months without a tennant.

Damn you Vancouverites obsession with buying homes and using them as investments.. main reason I am moving to AZ from Calgary. Can't afford this city any more due to outside investors... Whatever happened to buying a home just to live in?

[Captain Bill]

If you're going to buy to rent for a few years then you can do ok. There are several ways to go.

One is to buy a condo that is furnished, (or furnish it) in a nice area for snowbirds to use for the season which runs from Nov through March. The rents during that time is, to give an example, around $1900/mo for a 2 bedroom condo, as opposed to the regular rent of $900/mo. It will remain vacant most of the rest of the year, and you can come use it any time then. April and May (if it's not rented) would be great months to use it because the weather is still excellent. If you're lucky you will be able to rent it out for a couple months during the off season, but don't count on it.

By buying a condo in a nice area, you don't have to worry about it being vacant during the off season. I work with a lot of relocation clients and sometimes some of them need a short term month to month rental.

You won't achieve a positive cash flow at the current prices. But you're looking at a long term goal of price appreciation, and you have to look at around 6 years out.

Another approach, and this is one that the investment partnership I'm in uses, is to buy certain properties in a specific area in Phoenix in the price range that works for us. These will be unfurnished with a minimum 12 month lease. We have access to wholesale properties in good condition that never get to the mls, so we're looking to either buy and hold, or buy and turn to our investors at a good discount from market value. We'll rent any that we buy and hold for price appreciation also.

We keep looking to see if we can get properties at a price where we can break even monthly, and possibly have a little cash flow. We have software that computes all the numbers we need in order to evaluate our investments fairly quickly. It's very important to anticipate the expenses realistically.

In November I sold a large home to a client from Vancouver. He uses this as a second home, not an investment, but he's considering also buying some investment property here.

What will help you to get a good deal, is to work with a local mortgage source and have your financing all set up and be ready to move quickly when a good property comes along. The really good deals do not last more than a few days, and in some cases, a few hours, and there are only a few each week that come by the office.

You should plan on 25% down plus closing costs of around 1.5% and possibly painting and carpeting, with an inexpensive carpet that is good for rental units. I feel that one can do ok by being prepared to move quickly to buy at a good price and plan to hold for 6 years or so.

[vancouverisland]

Hey,

Thanks for all the info, so what areas of Phoenix do you think would be good to invest in. Do you think Maricopa will appreciate or is there another area to focus on.

Thanks so much!!

[hootie]

Originally Posted by vancouverisland

Hey,

Thanks for all the info, so what areas of Phoenix do you think would be good to invest in. Do you think Maricopa will appreciate or is there another area to focus on.

Thanks so much!!

There is ZERO jobs in the city of Maricopa. My guess is that it will be a LONG time before it recovers like the rest of the Phoenix sprawl. I only know the east valley, but Scottsdale and Tempe both have already a good job core, and Mesa is a dump. Chandler has Intel and I would imagine the next ten years more jobs will go into Chandler and Gilbert just because the demographics are there. So that is where I believe the best deals are. Maricopa will be a bedroom closet blip on the map in the middle of nowhere.

[londonbarcelona]

Originally Posted by Captain Bill

If you're going to buy to rent for a few years then you can do ok. There are several ways to go.

One is to buy a condo that is furnished, (or furnish it) in a nice area for snowbirds to use for the season which runs from Nov through March. The rents during that time is, to give an example, around $1900/mo for a 2 bedroom condo, as opposed to the regular rent of $900/mo. It will remain vacant most of the rest of the year, and you can come use it any time then. April and May (if it's not rented) would be great months to use it because the weather is still excellent. If you're lucky you will be able to rent it out for a couple months during the off season, but don't count on it.

By buying a condo in a nice area, you don't have to worry about it being vacant during the off season. I work with a lot of relocation clients and sometimes some of them need a short term month to month rental.

You won't achieve a positive cash flow at the current prices. But you're looking at a long term goal of price appreciation, and you have to look at around 6 years out.

Another approach, and this is one that the investment partnership I'm in uses, is to buy certain properties in a specific area in Phoenix in the price range that works for us. These will be unfurnished with a minimum 12 month lease. We have access to wholesale properties in good condition that never get to the mls, so we're looking to either buy and hold, or buy and turn to our investors at a good discount from market value. We'll rent any that we buy and hold for price appreciation also.

We keep looking to see if we can get properties at a price where we can break even monthly, and possibly have a little cash flow. We have software that computes all the numbers we need in order to evaluate our investments fairly quickly. It's very important to anticipate the expenses realistically.

In November I sold a large home to a client from Vancouver. He uses this as a second home, not an investment, but he's considering also buying some investment property here.

What will help you to get a good deal, is to work with a local mortgage source and have your financing all set up and be ready to move quickly when a good property comes along. The really good deals do not last more than a few days, and in some cases, a few hours, and there are only a few each week that come by the office.

You should plan on 25% down plus closing costs of around 1.5% and possibly painting and carpeting, with an inexpensive carpet that is good for rental units. I feel that one can do ok by being prepared to move quickly to buy at a good price and plan to hold for 6 years or so.

Everything Bill said is solid advice; however, I would like to add that you must be careful where you buy. The closer in you are to the city, the better off your investment will be -- at this time. People keep freaking out saying Phoenix is going to crash and burn, and I don't see it that way.

The prices went through the roof in 2005, and eventually the market will 'right' itself once people realize that the days of buying a house for 300K and selling it for 700K a few months later are over.

Prices are coming down, not because this area is doomed, but because the market is righting itself. The biggest problem I see is people still trying to get over-inflated 2005 prices for their homes and they refuse to drop the price.

It was a blip on the radar, those days are over, now if we could just convince everyone to calm down, and take their houses off the market (unless it's essential they sell immediately) and the market will pick back up. But all these greedy sellers who don't have to sell are what's causing the raucous right now in our market. What they don't seem to realize is that they are part of the problem. There is just too much inventory at this time.

Things will get better, Phoenix is way too nice of a city to go under so quickly. Common sense will tell you that...

[Captain Bill]

Originally Posted by vancouverisland

Hey,

Thanks for all the info, so what areas of Phoenix do you think would be good to invest in. Do you think Maricopa will appreciate or is there another area to focus on.

Thanks so much!!

From an investment standpoint I personally would not invest in the areas that had high new home growth rates and presently have a very high percentage of homes on the market; rentals because their house won't sell; and high foreclosure rates.

That includes the Surprise area, Queen Creek and Maricopa. There are people who may do well if they're buying for their own use in those areas and are not planning on selling for many years.

We have a set criteria for the location and price points where we will invest, and those criteria may not work for everyone.

[Master Shake]

The city of Maricopa has an excess of empty houses -- both rentals and other types of investment properties, with a lot of foreclosures. Yes, you can probably get a great deal on a house in Maricopa, but trying to rent it out could be difficult.

If you want it as an investment/vacation home, then Maricopa could be a good choice -- if you plan on keeping it for 5 years or more. The city will grow and prosper eventually.

[Ponderosa]

Prices are low there and probably are not going to tank much more on the new builds anyway. So you are going to get some appreciation, if not much. But for the fast buck buck (loonie) it is not a great deal. Development in Maricopa is inevitable but I think it is more like 10 - 15 years at least before median home prices will catch up with what they are in the more desirable areas like Chandler.

If you were looking to live there for retirement, it would be another story. There is enough there to meet your basic needs and the relative distance from the city is a positive in that case so the slow appreciation would be more acceptable.