Welcome Real Estate Investors! Below we present a short guide to getting started in Real Estate Investing in the Phoenix market. This information is by no means all-inclusive, but it gives you an idea of the processes involved in investing in the hot Phoenix real estate market today! And understand that when we say "Phoenix real estate", we include Chandler real estate, Tempe real estate, Gilbert real estate, Ahwatukee real estate, Mesa real estate, Scottsdale real estate and all the cities that form the Valley of the Sun.
These are the basics steps for investing in Phoenix real estate:
1) Determine your strategy early: flip, rehabbing, or long-term rental. There are mainly three strategies to invest in real estate:
a) Flip: This technique involves finding undervalued properties in a neighborhood or an area experiencing rapid appreciation. There are many reasons why a property could be undervalued. Just to mention a few:
- The owner just got a new job and has to relocate.
- The owner received the property as inheritance, but does not want to keep it. They want to get the equity out of the property as soon as possible.
- The owners are having a divorce.
- The owners are experiencing financial hardship and a foreclosure might be looming above them.
In all these cases, the owners (sellers) wanted to get rid of the property in a quick, smooth fashion. We, at Valle del Sol Real Estate.com, are experts at finding undervalued properties for our pool of investors so they can obtain a good return on their investment. Give us a call or send us an email today and let us help you!
b) Rehab/Renovate: In this technique, you find a property that is also undervalued, but because it needs repair work. The work needed can vary enormously in complexity and budget. For example, some properties may only need painting and cleaning the yard, while others may need to be torn down almost completely and rebuilt again. It is very important that you understand how much work is needed before you purchase the property. It is also very important that you recognize how much work you are willing and capable to do as well as how much budget you have available for repairs. It is also important to realize that these properties take longer to generate profit, because of the time you spend in the repairs. Our investment property specialists at Valle del Sol Real Estate.com:
- are very proficient at finding properties in need of work that, when repaired, will turn a healthy profit for our investors,
- are also very adept at estimating what the final "after-repairs" value will be, so we take most of the guess work out of the equation, and
- have a great rapport with several contractors in the Valley that we highly recommend, if you do not have your own.
So, what are you waiting for? Your investment property specialist is waiting for your call or email!
c) Rental: This technique is almost self-explanatory, at least in principle. Basically, you purchase a property, you rent it, and you finally sell it after a period of time. But there is more than meets the eye when dealing with rental property.
First of all, there are two major methods to own rental property: buy tenant-occupied property, or buy a vacant property, do any repairs needed (usually minor) and look for tenants.
Each method has its advantages and disadvantages. For example, if you buy tenant-occupied property, you will start enjoying the benefits of cash flow as soon as you own the property. You also do not have to trouble yourself with finding and screening the tenants. However, one disadvantage may be that you may not like the tenants and you have to honor their agreement.
On the other hand, buying vacant property allows you the freedom to fix the property to your liking (so that maybe you can ask above-average rent) and to select the tenants yourself. One of the disadvantages that comes with this method is that while you are repairing the property and screening the tenants, you will not be receiving cash flow from it, so you must have some cash reserves.
A VERY IMPORTANT THING TO CONSIDER WHEN BUYING INCOME-PRODUCING PROPERTY!
Another important consideration about rental property is the principle of cash flow. There are generally three options for you to choose from:
i) Negative or no cash flow, big appreciation. With this strategy, the rent money you receive from the property is not enough to cover the mortgage and other expenses of the property, but because the property is located in an area experiencing big appreciation, you can carry this burden, because the appreciation offsets the negative cash flow.
ii) Some cash flow, some appreciation. With this method, the rent money you receive is higher than the expenses, giving you the benefit of some cash flow every month. However, your property may not be appreciating at the accelerated rate we talked about in the above. It will continue to appreciate at a more "normal" pace.
iii) Large cash flow, almost no appreciation. In this strategy, almost all your profits will come in the form of cash flow. This is more likely to be realized by multi-unit buildings, which will not appreciate very much, but because of the many units you will have in them, the cash flow can be a large one.
Your investment property specialist from Valle del Sol Real Estate.com knows where to find each of these properties. You just need to tell us what strategy you want to follow and we will present you with a menu of choices.
We are here to help you achieve your goals. Give us a call today!