Hi All, My wife and I are new investors and looking to purchase a rental property close to downtown Gilbert, Arizona. We understand the market is ridiculously hot right now especially in this area but love the growth potential due to growing population in the area and great schools for a long term rental. This is a buy and hold long term opportunity and we would be paying 6% over asking price and only cash flowing $125.00 a month. Purchase prices in Gilbert are up 30% YoY. Does this seem like an investment we should move forward with?
Hi Gavin! For a LTR, I would suggest far west valley where the prices are still "low" but rent is still decent. I've seen rental pricing in Goodyear or Florence (west vs east) that compare to Gilbert, but the purchase price is much lower. You can still get a new build in the mid $300s. I like new builds for LTR- I feel the equity grows quicker if you buy in phase 1 of a new community. Reach out with any Gilbert or Phx area questions!
I also live in Gilbert, what a couple years of appreciation! Does your cashflow number include allowances for Vacancies/Repairs etc? Unless you're putting a large down payment, I don't see any houses on the market in Gilbert that would offer any cashflow.
If you're expecting appreciation, that's definitely something you could bet on. However that may include negative monthly cashflow after setting those allowances for added expenses.
@Gavin Welch The demand for rental property in Gilbert, AZ is very high! I ran comps yesterday for a smaller 3 bedroom and the market is at $2100.00 per month for a long-term unfurnished rental. Gilbert is a hub of activity and will continue to be so as the Williams Field Airport employment corridor grows out over the next few years.
@Gavin Welch I'm also in Gilbert. I'd second @Daniella Lamis and @Justin Phillips comments. While I think Gilbert is a great long-term market, it sounds like you're basing your decision on appreciation over time. I would say that these last two years of appreciation are very abnormal. I would also question if the $125/m cashflow is really cashflow after you factor in PITI, maintenance, vacancy, CapEx, etc or if it's $125/m over PITI only. If you're OK with paying these additional expenses out of pocket to get in the rental game, then I'd say go for. You'll still be getting loan paydown and tax benefits over time. I personally couldn't justify paying 6% over list price on a rental that doesn't cashflow, but that's because that type of deal doesn't align with my goals
Also, I'd be happy to look at your underwriting numbers if you send them over.
@Gavin Welch Gilbert is one of my favorite spots to invest in the valley. The growth is in the top of the nation if you’re looking for appreciation I can’t think of a better place to invest!
Thank you everyone for your replies, you guys are awesome. I need to do some further analysis. I am still very bullish on Gilbert but agree there are better deals to be had.