Best place for investment/rental property in Phoenix area? (Mesa: renters, HOA fees)

[bbb222]

I'm planning to buy an investment property in metro Phoenix that I plan to rent out in the next few years with the view of retiring in Phoenix in the next decade, or selling the place instead if gains are significant. My budget is 150K (which I will pay in cash) and I'm thinking of a detached house in Gilbert or Chandler with the least possible property tax and HOA fees to pay.

What do you think of my plan? With the housing crash is it feasible to offer 150K in cash for a 200-250K listed property? How are the Gilbert and Chandler areas like for retirees (crime, golfing, activities, shopping, etc.)? And what about rental prospects? I know those are not exactly tourist destinations like Scottsdale. Or should I concentrate on Scottsdale/other touristy areas and get a condo or something within my budget there?

Also is it better value to buy a new home from the builder or buying resale?

Thanks for any comments/suggestions

[SOON2BNSURPRISE]

Have you considered Surprise? Just found out that they are having no minumum auctions on many homes in the city. Turns out that the rental market has increased as people have lost their homes. Someone was telling me that 1 in 10 homes may be facing forclosure in Surprise. At the same time it is hard to find a rental in the area. Could work for you. I know my wife and I are now looking into that as well. We plan to buy a rental sometime after we move into our home in September. (They just started building our home as of today.)

[bbb222]

Do you know any good websites for auction listings?

Originally Posted by SOON2BNSURPRISE

Have you considered Surprise? Just found out that they are having no minumum auctions on many homes in the city. Turns out that the rental market has increased as people have lost their homes. Someone was telling me that 1 in 10 homes may be facing forclosure in Surprise. At the same time it is hard to find a rental in the area. Could work for you. I know my wife and I are now looking into that as well. We plan to buy a rental sometime after we move into our home in September. (They just started building our home as of today.)

[Captain Bill]

bbb, The auctions have not proven to be the best sources for investors. If the properties are good they will be bid up close to retail. I wouldn't rule them out, but auctions are held for a purpose, and that is to get people in an emotional bidding battle.

A cash buyer can usually get a discount on a property, but the amount depends on the seller and the property.

You're asking if you can make a cash offer and buy a property from 25% to 40% below retail. That's a tall order. Any time you find a property at 40% below market, it will be a fixer.

$150k is a little on the low side to buy a good condition home in the better neighborhoods, unless you just happen to run into a steal.

As an investor I would not buy an investment property in Maricopa, Casa Grande, Surprise, or Queen Creek. That is my personal preference because I don't want to be in competition with new builders in an area that was overbuilt and hit hard with the mortgage problems.

It would not want to buy a new build and expect to rent it out because you are going to have to do a lot of work after the home is built. Also, I wouldn't want to put a tenant into a brand new home. If you have to sell the home while there are more new homes being built in an area you will have to compete with the builder.

I'm investing in homes with a partner, and we deal with investment homes for clients also. We look for a home in a good area that needs only cosmetic redecorating that we can get at a discount to market. We have several sources for those, and we have to act quickly when one comes available.

We're prepared to act fast. When we research a property, we go to physically inspect it, then comp it out and run a financial analysis. We have property analysis software and rental analysis software so within a few minutes we can run the numbers in several what if scenarios. Within a few hours we know if the property is a match for us.

We're making an offer on one today that is in a good neighborhood in east Mesa. It has an HOA that is only $35/mo. We will buy in Mesa, Gilbert, Chandler, Scottsdale, and parts of northeast Phoenix. We only buy homes that are in sound condition that need a little tlc. So we redecorate and resell the homes.

You may want to consider finding a realtor that works with investment properties, and sit down and outline your investment criteria with him/her and have them let you know when a property that fits your criteria comes along. When it comes along, be prepared to check it out and make a quick educated decision. Many of the good deals that come along are gone within a few hours after they are available because there are people waiting for them.

Since $150k is tight to get a good property, and around $200 to 225 gives much more flexibility to buy in better areas, you may wish to consider having up to 75k financing available just in case. You'll still have a positive cash flow, and a better property.

[maxch]

bbb, there was an article in AZCentral a few days ago about condo auction in Mesa - here is a link to it 14 condos sold at auction that draws hundreds (http://tinyurl.com/2pqqr5 - broken link) Looks like some people actually purchased at very reasonable prices.

[SOON2BNSURPRISE]

Captain Bill is in the know on these kind of things. Always prefer to take my advice from the people that are doing rather than those that are talking about it. I would also clarify that our intention of purchasing a rental home is for the intent of having a home for a family member. We want to keep them close by and with the low prices in Surprise it works out for us. That being said it is hard to compete with the builders in the area. I don't know where or when they have the auctions but chances are the bank's and mortgage companies could be a good source for this information. Not sure how that works.

[Captain Bill]

Originally Posted by SOON2BNSURPRISE

Captain Bill is in the know on these kind of things. Always prefer to take my advice from the people that are doing rather than those that are talking about it. I would also clarify that our intention of purchasing a rental home is for the intent of having a home for a family member. We want to keep them close by and with the low prices in Surprise it works out for us. That being said it is hard to compete with the builders in the area. I don't know where or when they have the auctions but chances are the bank's and mortgage companies could be a good source for this information. Not sure how that works.

Some title companies handle much of the process for these auctions, so one can also call all the title companies and may find some.

Some advice for anyone buying at auction. Make sure you inspect the property thoroughly; study the comps; you must know what the active, sold and expired comps are in the area. Then determine the absolute maximum that you can pay for that property.

Develop your bid strategy and if you get out bid; drop out. Do not go beyond your predetermined number. Auctions are successful for the companies because people get caught up in the emotional aspect of bidding and winning. Avoid that.

If they have several homes, then you may research several of them and have them in a priority list. If you don't get one, then try for the other ones.

If you don't succeed at this auction, there'll be another one soon.

Remember, if you go beyond your set maximum bid price, and you win, then you have paid too much. Control your emotions.

[SnowDesert]

Captain Bill,

I don't live in the Arizona (Live in PA) and planning to purchase a single-family rental property (forclosed house) under 130K. I'm looking at Chandler or Gilbert (and perhaps some other areas). A few questions for you:

1) I noticed there are more 3BR houses for rent than 4BRs, should I buy a 4BR instead? Are 4BRs easier to rent out than a 3BR due to the available rental inventory?

2) Now, the other side of question 1: Since a 4BR is more expensive, would I have a harder time renting it out at the price I want? or should I just stick with a less expensive 3BR house?

3) Chandler and Gilbert seems to be centrally located and close to the freeways. Any recommendation as to where I should invest in? Chandler or Gilbert? Which one will give me a higher rental income?

4) I've looked at Maricopa, Mesa, and Surprise. I can get a bigger and newer house at a lower price, but they seem a bit far. Would I have problem renting a house out?

5) Who will be my rental demographics in Chandler or Gilbert? For example, if there are lots of snowbirds there, retirees would most likely own a home; or if there's lots of young single people, they'll most likely not rent a large house; or if the house is too far and inconviently located, there'll be less renters; or if the houses on the outskirt of town are so inexpensive, renters might decide to buy a home instead, etc...

6) Finally, my plan is for now purchase one good sized and nice looking home for around 130K, and lease it out, then in the future possibly use it for retirement; and also purchase another cheaper around 60-70K for investment purpose only. Do you think this is a good plan? or should I stretch out my money by buying 3 60K smaller properties in areas outside Chandler and Gilbert?

Thanks in advance for your responses..

[PhoenixAirConcerns]

Most people I have been talking to are holding off due to falling home values. Arizona Realtors acknowledge this in their Pending Price Index report:

http://www.armls.com/Libraries/STAT/...2010.sflb.ashx

Hopefully this is helpful to people.

[Kimballette]

Originally Posted by PhoenixAirConcerns

Most people I have been talking to are holding off due to falling home values. Arizona Realtors acknowledge this in their Pending Price Index report:

http://www.armls.com/Libraries/STAT/...2010.sflb.ashx

Hopefully this is helpful to people.

That is not what the o/p asked about, however. Please stay on topic.