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Old 06-04-2015, 09:04 AM
 
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I'm wondering if the Phoenix / Scottsdale area would be good to purchase a home as an investment to rent out. I'm comfortable spending up to $250,000. Thinking a condo might be better. My concern is the rental market and, realistically, what percentage of the time I will be able to have a renter. I don't know what the demand is like for rental units in this area. Looking for a decent area/decent caliber of renters. I have a friend out there who could act as a property manager. Thanks for any replies.
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Old 06-04-2015, 09:47 AM
 
Location: Phoenix AZ
6,274 posts, read 12,596,736 times
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Quote:
Originally Posted by propertynubie View Post
I'm wondering if the Phoenix / Scottsdale area would be good to purchase a home as an investment to rent out. I'm comfortable spending up to $250,000. Thinking a condo might be better. My concern is the rental market and, realistically, what percentage of the time I will be able to have a renter. I don't know what the demand is like for rental units in this area. Looking for a decent area/decent caliber of renters. I have a friend out there who could act as a property manager. Thanks for any replies.

Finding tenants shouldn't be a problem if your property is priced right. The issue for you will be finding a property that you can purchase for the right price, & turn a profit on rent (at market rates), after all your expenses are figured in. The sub $150k market is on fire right now with lots of buying competition & under $250k isn't a whole lot better (for *nice* houses, that is).

If you're looking to buy mostly for depreciation/ tax advantages & future appreciation you would have more to pick from, but it's still going to be a challenge to do if you're paying retail for the house & all repairs & maintenance. Your local friend needs to have a real-estate license to represent you if you pay him/her any money for that service. (They could certainly be the tenant's "first call" for repairs & maintenance without a license, but they can't collect rent, sign your leases, or represent you in court without a license).

Just know going in that you're competing head-to-head with lots of full-time professional flippers/rehabbers & landlords both when you're buying & when you're renting it out, and they're going to be buying at a lower prices, getting maintenance & repairs at lower prices & offering units at the same market rates as you. The "easy money" in landlording here was 4-5 years ago when houses & labor was cheaper.

You might want to check out the forums at biggerpockets.com to chat with other landlords / flippers & rehabbers in Phoenix as well.
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Old 06-04-2015, 10:38 AM
 
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Wow, thank you very much Zippyman. That's a lot of good information.
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Old 06-04-2015, 02:28 PM
 
Location: In the gawdforsaken desert
6,619 posts, read 7,894,208 times
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I'll sell you a nice meth lab, er I mean rental for $250k! Pleeeze buy it! OK, $225k and it's yours. Bring your gun.

Seriously, do a LOT of research on your first purchase. I would avoid a higher end rental at first until you learn to screen, etc. I look for at least a 15% ROI and try to keep per unit costs between $20-50k per unit or $100k for SFH.

Buy close to where you live, not too close though.
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Old 06-04-2015, 03:15 PM
 
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ok, thank you jamies. I thought by going a bit higher, with a bit higher rent, that would yield a better class of people. especially if there's a large company where employees look to rent. I actually live in the NY area & anything decent here is very expensive. Maybe this is not a great idea....
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Old 06-04-2015, 03:36 PM
 
Location: Phoenix AZ
6,274 posts, read 12,596,736 times
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Originally Posted by propertynubie View Post
ok, thank you jamies. I thought by going a bit higher, with a bit higher rent, that would yield a better class of people. especially if there's a large company where employees look to rent. I actually live in the NY area & anything decent here is very expensive. Maybe this is not a great idea....
well, I don't think you're going to find anything you *want* to own for under $100k right now. A few years ago, I had a number of people tell me I was a complete idiot for buying 3/2's in a decent neighborhood here for ~$70k - now you would have some difficulty finding equivalent houses for $150k in the same hood.

There are always opportunities if you have the time & energy to dig a bit & moving into the higher-end rentals might not be a bad place to start. There was a post here a while back with someone looking for a rental home close to the scottsdale airpark & I couldn't find hardly anything actually available to rent for under $1800 - and that $1800 rental was, frankly - kinda dumpy. The homes in that area do cost more ( finding one for $250k would be a stretch), but if you did, and it was nice - I'd expect you could watch an army of tenants fight to the death for the opportunity to rent from you - and I don't doubt there are lots of pockets in the valley with that kind of demand, I just don't know myself where they are..
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Old 06-05-2015, 06:31 PM
 
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The sub $300,000 market is on fire right now. Been looking for a home. Everything we are interested in is getting multiple offers within a day or 2.
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Old 06-05-2015, 08:49 PM
 
Location: In the gawdforsaken desert
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Paying more for a rental just means your tenants will wreck a nicer home. Unless you are in the $5-15k a month range of uber wealthy.
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Old 06-07-2015, 12:26 AM
 
Location: Phoenix AZ
6,274 posts, read 12,596,736 times
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Quote:
Originally Posted by jamies View Post
Paying more for a rental just means your tenants will wreck a nicer home. Unless you are in the $5-15k a month range of uber wealthy.
I've had great luck with tenants & know many other landlords here who've had very few problems. When I was a tenant, the place was always nicer/cleaner when I left than it was when I moved in. There's always an exception, but most problem tenants can be screened out if you do your homework as a landlord.
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Old 08-25-2015, 11:58 PM
 
Location: Pac. NW
2,440 posts, read 1,875,637 times
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A 250k house may not be a very good rental property.

You have to look at what the rental market in that area demands. And bear in mind that you are partially competing with apartments and duplex/4 plexes. VERY hard to compete with those with a 250k house that was intended for a family to purchase and grow into. That's because a 32 unit apt. (for example) may have been bought at 75k per door.

For example, a 250k house renting for $2000 per month may be priced out of the market compared to 2 125k houses renting for $1175 each.

In most rental markets, renters of single family houses want out of apartments for more privacy, have the income to make that "upgrade", and have a big picture plan to eventually buy. And it's very narrow "sweet spot" to meet the demand of that market.

The rental house has to be affordable but clean to appeal to the market, yet cheap enough for an owner to profitably operate. And it's very hard to get the numbers to work with a 250k house that was originally intended for a family to buy and grow into.

So you gotta go for older homes that were built for bare bones use. Maybe 65 years ago a "bedroom community" was erected to house the local workforce, and that intent drove the economics of that development. Cheap housing that the average 35k to 50k income household can afford in a livable area. Tenants who have stable enough income to pay the rent every month but are a ways away from buying.

A lot of newbie investor/landlords have a hard time with the whole endeavor because they upgrade to a bigger house but want to keep the first house they bought to live in as a rental, and as an afterthought they try to convert it into a rental to keep it in a rising market for future profit. Or they're underwater and want to save it from a foreclosure.

They get a bad taste from the whole experience, which was probably an economic impossibility to start with.

The problem is that the house was never intended to be a rental, and the numbers can't be bent around to work. Those houses are worth more on the retail sales market.

If you can find a clean house on a nice street, and can find solid working class folks to rent to, and can get the house ready for the market for less than 150k, you'll have a hands down winner.
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