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Every investor has an investment strategy based on their specific investment goals. The investment tips below will help Arizona real estate investors fine-tune their plan. There are incredible values for foreclosed homes for sale in Phoenix, Chandler, Gilbert, Mesa, Scottsdale, Tempe and Queen Creek AZ. The 1% rule of rental income to purchase price may be possible! Investment money is easier and cheaper to come by and positive cash flow with 20-25% down payment investor loan is very doable.
Investor Fix and Flips
Investors are not cleaning up as they have been. Current market statistics show there are fewer foreclosures and short sales. But there is a ready market for fix and flip homes that have been repaired, remodeled and modernized. In-fill and close in fix and flip properties are in high demand by those buyers who prefer to live close-in urban areas rather than drive to outlying housing tracts.
The traditional buyer doesn't have the resources, the time, the connections and the experience to remodel a home. Fix and Flip investors need money and contacts to make this work for them. With so many people have lost their homes, the Chandler and Gilbert real estate rental market is strong with less than three months inventory of Single Family homes. Investors have the option to 1) fix and flip or 2) fix, rent and hold, depending upon the investment property acquired. A buy and hold plan should net higher gains by timing your sales in the future when prices are higher.
Easier for Investors to Raise Money
Recent rule changes have made it easier for investors to finance. It is now possible for an investor to have up to four loans (including principle property and second home) with the minimum of 20% down and six additional investment loans with a minimum of 35% down. Even though Fannie Mae and Freddie Mac allow up to ten loans, at this time many banks are restricting investors to four loans. A few allow the fifth loan. (A loan on your principal residence and your second home, if applicable, are included in the first four loans).
If you have money in your IRA that is just sitting there earning very little to nothing, you can set up a self-directed IRA and transfer funds from your traditional IRA to fund your real estate investment plan. Let's talk about your plans and see what is doable in this market. Contact me and let's talk soon!
Compare Property Values and Rents
Financial statistics only go so far; the best measure of a property's market value is often the sale prices of nearby properties. The same holds true for area rents. Do a rent survey of the area before you buy to make sure the rental income you can expect is sufficient to support your carrying costs. Low priced homes in the area are often indicative of the purchasing power of prospective home buyers and tenants in the area.
Be Prudent - Tax laws may change
Don't base your investment decision entirely upon current tax laws. The tax code is constantly changing, but a good investment is a good investment regardless of the tax code. The right property has low cost, long term financing and is generating income before taxes. That is what you want to look for as an investor.
Specialize in something you know
Start in a market segment you know. Whether you focus on starter homes, fixer-uppers, foreclosures, low-down payment properties, condominiums, multi-units or small apartment buildings, you'll benefit from experience by specializing in one aspect of investment real estate properties.
Know the Costs going in!
Know the financial statements inside and out. What are the operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These are key issues that must be addressed before making a solid investment.
Sadly, many investors fail to consistently keep good records or they may deny having any records because the numbers aren't attractive. You need to be prepared to do your homework.
Conversely, a property that has detailed maintenance records are highly valued by investors. Make sure you document EVERYTHING so your property will fetch more when you decide to sell.
Know where your tenants are coming from
Buying a property with tenants in place? If the last rent increase was recent, your tenants may be considering a move. If tenants have a short-term lease, the owner may have them living there simply to attract unsuspecting investors. It is also important to interview the tenants to verify lease terms, rents, and security deposits and collect their security deposits from the seller at closing.
Assess the tax situation
Taxes are an integral part of successful real estate investing, and they often make the difference between after-tax positive cash flow and a negative one. Know the tax situation, and see how it can be adjusted to your advantage. It is a good idea to consult a tax adviser.
Investigate insurance coverage
If the seller's coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price. Contact your insurance company as soon as you contract and open escrow to purchase to make sure your insurance carrier will issue an insurance binder for the property. Also, investigate prior insurance claims that would increase your costs while you own the investment property. Some insurance companies will not ensure a home with a roof 20 or more years old.
Confirm Utility Costs
Check to see which utility services are separately metered and paid by the tenant to the utility company. Ask the seller for copies of the local utility bills to verify recent utility expenses, especially if any of these costs are allocated to each unit and included in your tenant's rent.
Consult With Your Accountant or Tax Attorney
Taxation is a key element of successful real estate investing, so be sure to find an accountant who is well-versed with the constantly evolving tax code. The entire home is depreciated over 27.5 years. Explore accelerated depreciation of parts of the property that have a shorter life expectancy - carpet, water heater, appliances, etc.
And maintain good records of all expenses and income as they occur. Mistakes are made at the end of the tax year trying to recreate what happened all year long. It will definitely cost you more in the long run not to have kept a good record as part of your daily routine!
Inspect! Inspect! Inspect!
Make sure you perform a thorough investment property inspection before buying Chandler, Gilbert or Mesa investment real estate. Never, ever buy any property without examining the property in person. If that is not possible, hire a licensed professional home inspector to examine the structure and mechanical systems is a prudent purchase practice so you don't get surprised later. It is important to know what you are buying. Unknown deferred maintenance costs can undermine your investment plans.
Consider a Home Warranty Insurance Plan to pay for unexpected house repair expenses during the first year, as you build sufficient reserves from your investment income stream to eventually be able to self-insure yourself.
Additional Investor Resources:
Tips for Buying Rental Property, Vacation Home Tax Deferred Exchange Qualification, 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.
Visit Phoenix Arizona real estate blog to keep informed and updated.
My Phoenix Home Buyer Guide provides helpful buyer tips and other resources available to assist you with your home purchase and my Phoenix Home Seller Guide is designed to aid the Seller in maximizing net gain upon sale.
Contact Sam today so we can begin building your portfolio of Phoenix investment property while prices are as low as they are.
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