Guide for Buying Phoenix Residential Rental Properties

1.  Location. If traffic is heavier, rentals are easier to rent. A sign will often pull more response than an ad in the paper. If it is in a nice locale, it will usually rent faster. This is also true of places close to shopping, schools, parks, work, good transportation access and other amenities.

2.  Run the numbers. Get every last expense figured into your calculations, and be sure that you will have positive cash flow from the start. Pay attention to property tax rates, fire insurance and homeowners association fees. Your plan should include money for reserves for repairs, replacement and tenant improvements.

3.  High home prices. Look for Phoenix, Scottsdale, Tempe, Chandler, Gilbert and Mesa homes AZ with high home prices, as this creates rental demand. What do people do when they can't afford to buy? They rent.

4.  Good schools. You can get higher rent in good school districts. Renters would choose to rent in highly rated school districts than rent in poorly rated school districts. And some would be willing to rent in a good school district rather than purchase a home in a lower rated school district.
 
5.  Low maintenance buildings. Avoid cedar-shake roofs, and wood-sided buildings. Look beyond current expenses to see how much maintenance the building will need. Low maintenance means less headaches and more profits.

Ask to see maintenance records, but don't be surprised to see how poorly many investors track their maintenance costs. Because the information in property listings are inaccurate due to poor record keeping or incomplete, we will have to approximate costs by using industry averages. 

Your best option is Inspect - Inspect - Inspect! That is the best way to learn what deferred maintenance items need to be repaired and then get an estimate for repair costs to factor into your offer.

6.  Good rental history. Ask to see the rental history. Note how long residents are staying on average, and how well they pay on time. If there is not rental history, I can do a current rent survey to let you know what similar properties have rented for in the same area.

7.  Below market rents. Buying rental properties with below-market rents means you can raise rents. Raising rents means you immediately raise the value, because rental property values are based on income generated.

8.  Complying with zoning, building and fire codes. Have it inspected, and ask local officials if there are any problems. Verify the property use is in compliance with current zoning and whether rezoning is anticipated. 

9.  Less than 20 years old. This is somewhat arbitrary, but if you limit your search to newer buildings, you will be less likely to have building code and deferred maintenance problems. However, there is strong rental and buyer demand for "retro" or historic homes for unique homes. Just do your homework and make sure you really know the condition of the property.

10. Owner/manager out of state. These properties are often the best deals, because it is tough to manage a property from far away. An out of state seller is often more concerned with a quick sale than a higher price.

11. Neighborhood is stable or improving. Stable is okay, but if you buy in a neighborhood that is improving,  you'll rent the units more easily and, therefore, get automatic appreciation in value with time.

12. Determine ways to improve the property's ability to produce additional income and increase its market value.

Once you acquire your rental property, you will want to get the property in condition to be rented. This entails making repairs, making sure all systems are operational, paint, carpet, window coverings, etc. to make it comfortable for your tenant. Remodeling the property to enhance its sales value should not be done until you are ready to sell. 

When you decide you want to sell, call me to determine the expected return on investment for the planned remodel before you begin. These questions will help you find a qualified and reliable Home Remodeling Contractor. 

Other helpful topics are: Is your LLC working for you and providing the protection you expect, How to make money investing in real estate, How you can buy and manage real estate within your IRA to build a bigger retirement nest egg, Is a 1031 exchange right for you and When to sell and upgrade your investment properties.