Best neighborhoods to invest in an income property (Tucson, Sahuarita: short sale, foreclosed)

[Ghadji1]

Hey guys,

I'm a Canadian foreign national who has been married to an American for 2 years. After my wife got a good job offer in Tucson, we decided to move there from Toronto. We went ahead and bought a house in Sahuarita with a cash deal a few weeks ago. And I couldnt help but be blown away by the prices in Tucson!! So naturally I'm interested in purchasing an income property to rent out. I've tried my best to research areas but see a large inconsistency in rent prices in each neighborhood. I would truly appreciate sany guidance in looking into the right neighborhoods/properties that would yield the best return on investment.

look forward to hearing from you all,

George

[shortfu]

I'm almost in the same situation. I'll be working in Tucson for the next two years. I'm looking to buy a property first as primary residence then rent it after my tour is over. Would love to hear from everyone's inputs.

[swbell6]

How much can you spend and what kind of return do you want? What's your target CAP rate? Are you handy and do you want a fixer-upper? Are you going to manage it yourself or hire a property manager? If not, are you willing to travel to your rental when something goes wrong or you have to show it to prospective tenants? (That can eat up a lot of your time.) Who is your ideal tenant and how much can they afford? Will you be renting to students?

Personally, I've had good luck buying duplexes in the 85712 area, and my partner and I are starting to look for our next property - probably a single-family fixer-upper this time because good deals on duplexes are hard to find these days. Besides 85712, we like the 85716 and 85710 areas, too. We generally look for properties with some deferred maintenance issues that are located in "transitional" areas.

Also, there's a lot of competition out there now. If you find something you like and it's a good price, don't wait. Good luck!

[shortfu]

Originally Posted by swbell6

How much can you spend and what kind of return do you want? What's your target CAP rate? Are you handy and do you want a fixer-upper? Are you going to manage it yourself or hire a property manager? If not, are you willing to travel to your rental when something goes wrong or you have to show it to prospective tenants? (That can eat up a lot of your time.) Who is your ideal tenant and how much can they afford? Will you be renting to students?

Personally, I've had good luck buying duplexes in the 85712 area, and my partner and I are starting to look for our next property - probably a single-family fixer-upper this time because good deals on duplexes are hard to find these days. Besides 85712, we like the 85716 and 85710 areas, too. We generally look for properties with some deferred maintenance issues that are located in "transitional" areas.

Also, there's a lot of competition out there now. If you find something you like and it's a good price, don't wait. Good luck!

Swbell, I'm also looking for a fixer upper also. price range from $130K-180K for a 3BR/@BH with a garage. I don't care who a I can rent it to as long as it is easy to rent area and in a safe neighborhood.

[Jukesgrrl]

I know someone who has two rentals purchased at the lower end of that price range which have never been empty for a single month in the many years that he's owned them. They are in the 85719 zipcode. One is within walking distance of the U of A, the other in biking distance.

But here's the rub. You're extremely unlikely to find, in shortfu's price range, a three-bedroom, multiple bath house with a garage — even if it's practically falling down — that close to the university. There are some beautiful homes in that zip, but when they are beautiful they are very expensive. The not-expensive houses are old and have very weird layouts. One of my friend's houses has two front doors and no back door. The other one was basically a studio that got rooms added on to it willy-nilly. They both have one small bath and tiny kitchens. The one with two front doors has a one-car garage that was probably built around 1920 (it was being used for storage when the roof started to collapse). The other has no garage. Because of the age of these properties (and the fact that they have been rentals for decades) they require constant maintenance. Still very rentable to university folks, and he comes out ahead financially, but not a project for the faint of heart.

I live in a development near the Foothills Mall where the houses were built at the turn of this century. Because most were sold at the height of the market, owners have suffered greatly in lost value. So when people are forced to move for jobs, etc., many rent their house rather than take the huge loss. They seem to get tenants pretty quickly and these houses have everything shortfu asks for (at the higher end of the specified price range), but I don't know how much profit that would be turned. The market for rentals in a suburb like mine is good now, but if and when mortgages become available again for young people, who knows if the rental market would remain?

[swbell6]

Originally Posted by Jukesgrrl

I know someone who has two rentals purchased at the lower end of that price range which have never been empty for a single month in the many years that he's owned them. They are in the 85719 zipcode. One is within walking distance of the U of A, the other in biking distance.

But here's the rub. You're extremely unlikely to find, in shortfu's price range, a three-bedroom, multiple bath house with a garage — even if it's practically falling down — that close to the university. There are some beautiful homes in that zip, but when they are beautiful they are very expensive. The not-expensive houses are old and have very weird layouts.

I live in a development near the Foothills Mall where the houses were built at the turn of this century. The market for rentals in a suburb like mine is good now, but if and when mortgages become available again for young people, who knows if the rental market would remain?

Good points, Jukesgrrl. I'm not sure if Shortfu is looking in the University area? The Northwest area is great for rentals, and you're more likely to find garages and modern houses. Floor plan is important - there are some investors who will walk away from older, cramped houses with poorly planned additions, especially if they're unpermitted. I do like some parts of 85719 for investors. And there are pockets of newer neighborhoods all over central Tucson - hidden gems.

As more renters are able to jump into the housing market, that will put upward pressure on prices, of course. And rents tend to follow the general market. Tucson hasn't seen substantial rent increases for awhile. We've kept our rents steady, except in one case with a long-term tenant.

[shortfu]

I think I've narrow my search to the NW area. I'm looking for properties within 5 mile radius of Ina Rd and Thornydale Rd. I would like to know what is the rental rate for a 3bd/2bt w/ a garage. I could not determine the rental rate for that area on thru Craigslist because not a lot of rental properties are listed for that area. If anyone has a rental property there, please share. Thanks.

[RickTucsonHomes]

Originally Posted by shortfu

I think I've narrow my search to the NW area. I'm looking for properties within 5 mile radius of Ina Rd and Thornydale Rd. I would like to know what is the rental rate for a 3bd/2bt w/ a garage. I could not determine the rental rate for that area on thru Craigslist because not a lot of rental properties are listed for that area. If anyone has a rental property there, please share. Thanks.

My sister has a rental a few miles from there at Sliverbell and Cortaro, 1600 sf, 3br 2 bath, 2 car garage, post 2000 construction, she gets 1200 a month and has never had any problems gettting it rented, via Craiglist and networking. I just did a search in the Tucson MLS, based on your parameters in the 85741 and 85742 zip codes there is about 36 properties for rent, low end of 900 tops out at around 1400, exluding some properties in some higher end areas. This area will have homes built in the 1970's to post 2000 so that will have an impact on rents.

[shortfu]

Originally Posted by RickTucsonHomes

My sister has a rental a few miles from there at Sliverbell and Cortaro, 1600 sf, 3br 2 bath, 2 car garage, post 2000 construction, she gets 1200 a month and has never had any problems gettting it rented, via Craiglist and networking. I just did a search in the Tucson MLS, based on your parameters in the 85741 and 85742 zip codes there is about 36 properties for rent, low end of 900 tops out at around 1400, exluding some properties in some higher end areas. This area will have homes built in the 1970's to post 2000 so that will have an impact on rents.

Thanks for the info. Assuming I have a similar property (3br/2bt, 2-car garage, post 2000 construction) around my ideal area, It would it would be safe assume I can get at least $1200/month or better since it is close to restaurants and the foothill mall?

[AzHuny]

There can be good income properties in any portion of town, depending on the purchase price. Tucson has many investors right now, and the aggressive rents of the past few years will be harder to fill as people who had been through a short sale or foreclosed on in 2008 and 2009 may be able to purchase again this year. Look at your CAP rate as swbell6 said, decide what sort of investment you want to make. I have seen successful income property from downtown to the Foothills, but it always will come down to the price per month and the amount of people with that criteria.