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Buying Phoenix investment rental properties for sale can be a great way to build your wealth. However, as in most real estate investment, it is sometimes difficult to know if you've found a good deal - especially the first time.
Residential investment real estate in Phoenix, Scottsdale, Tempe, Chandler, Gilbert, and Mesa Homes AZ selection criteria should include several factors:
Here are some other factors to look for to be sure that rental is a great investment:
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 homeowner association fees. Your plan should include money allocated for reserves to make repairs, paint, and improvements.
3. High home prices. Look for Phoenix, Scottsdale, Tempe, Chandler, Gilbert and Mesa homes for sale AZ in nice neighborhoods with high home prices, as this creates rental demand. What do people do when they can't afford to buy in desirable areas? They rent.
4. Good schools. You can get higher rent in good school districts. Renters choose to rent in highly rated Chandler, Gilbert, Tempe and Scottsdale school districts rather than rent in poorly rated school districts. And some would prefer 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 and compositions roofs and wood-sided buildings. Look beyond current expenses to see how much maintenance the building will need. Low maintenance means fewer 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 to 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 no 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. The cash flow of rental properties with below-market rents can be improved quickly by raising rents to market rate. Higher rent will immediately increase the value of the property because rental property valuation is based upon income it generates.
8. Complying with zoning, building and fire codes. Have it inspected and ask local officials if there are any compliance issues. Verify the property use is in compliance with current zoning and whether rezoning is anticipated.
If rezoning is anticipated, ask if the current use of the property is grandfathered. Rezoning can reduce the value of the improvement to zero with the remaining value in the land only. Ask if the assessed tax value can be adjusted at the time of rezoning.
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. The 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, add or upgrade 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 your planned remodel before you begin and let me help you find a qualified and reliable Home Remodeling Contractor.
If you are going to sell, we need to discuss your reinvestment plans to avoid having to recognize and paying capital gains tax and recapture of depreciation.
Thanks for visiting! Contact Sam or call 480-213-1799 when you are ready to buy, sell or exchange Phoenix AZ real estate investment property! I have helped many investors locate exceptional investment opportunities!
Additional Investor Resources:
Is your LLC working for you and providing the protection you expect, how to make money investing in real estate, how to 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.