Investing in Phoenix

9 Replies

Hello everyone!

I live in LA. Cap rates here and tenant-friendly environment aren't what I'm looking for, so I want to invest out of state. 

Phoenix looks good on demographics, jobs and it's also only 5 hours by car. Since I'm not familiar with this area, I'd appreciate every piece of advice you guys can share :)

Updated almost 2 years ago

I forgot to mention, I want to invest in multifamily 30 units apartment.

Lots of great opportunities here in Phoenix! STR, LTR, flips ... it really depends what you want to get into. There are also different opportunities in different areas of town. (For example: Tempe is home to the largest public campus in the country, so there is always demand for LTR. Downtown has several historic neighborhoods where people are taking on huge reno projects, but making huge gains for the risk. Scottsdale has been known to crush the STR rental market.)

Happy to answer any specific questions I can! 

@Max Petrov Phoenix from a high level is good. I'd recommend getting some boots on the ground there or creating relationships since it is outside your backyard. Having someone in the market goes a long way. 

Originally posted by @Bob Okenwa :

@Max Petrov

What exactly are you looking for out here? Multifamily? Single family? Price point? Type of neighborhood?

 Hi Bob,

I'm looking for multifamily, class B-C, about 30 units. Price is tricky, because if I find a great deal, I think I will be able to raise money.

@Pamela: We really like Midtown and the area just south of Biltmore in East Phoenix, just around Arcadia Lite.

What are your thoughts on the market cycle right now? We have an LOI in on a 15 Unit and because of the exchange, we are able to cash flow nicely on a turnkey property.

Do you think the market will go through a severe or slight downturn in the next 1-4 years? I think our numbers work, but was wondering where Phoenix is at in the market cycle. Any feedback would be greatly appreciated!

The market has been growing pretty consistently and steadily here! Last year's appreciation was in the 7-8% range (in the strong, appreciating parts of town) and next year is projected at 5-6% (again, if you're in the right part of town). These numbers are encouraging for several reasons: first, they show consistent appreciation. Secondly, they indicate that the appreciation is sustainable, because the numbers aren't growing too quickly. Moreover, Phoenix has been consistently appreciating since the great debacle that was 2008. Not so fast as to indicate a bubble - just enough to indicate good, reliable, sustainable growth.  

One other note: builders have been going CRAZY here, because housing shortages are being predicted. If the builders are willing to invest their billions, that's a reassuring sign. This also suggests that far more new builds will be on the market in a couple years. I predict that older houses with good character (such as downtown historic district, Arcadia and Arcadia Lite) will be harder to find, and more valuable as a result.

@Vlad Denisov

Phoenix is a great market right now! I am assisting a group to purchase 100-200 unit properties out here and are finding there are a lot of opportunities in the value add space. The buyer pool is pretty deep out here though.

As @Scott Morongell said, it would be a good idea for you to get out here and find some local experts for your team so you have a strong base before pulling the trigger.

Happy to help connect you with people out here!

@Vlad Denisov small multifamily 5-50 units is a very tough market in PHX right now. Much more downside risk than upside. Management from CA will be an immense challenge. Labor is very expensive and challenging to source right now and vendors love the CA $$$, looks greener to them:) The neighborhood your looking in is where a lot of out of state guys start so there will be no off market or diamond in the rough deals to be had. You need to hit the street and talk to guys that invest in that space. I would recommend you buy a condo or SFR to start and try the STR game. At the very least you have a safe house when you come and visit and the numbers have a chance to work. If you don't like the experience then you have a fully staged home to throw on the MLS and move on. Easy in easy out. Jump to a 30 unit your looking at minimum $3M for class C/D. Sounds cheap coming from SoCal but that $3M will buy you $15-20k EGI realistically. Pick the wrong street over and your copper will go missing between turns. I'll take 5 units in LA at a 4 cap over 30 units in PHX at a 4.5 cap. Rolling dice on appreciation both ways and in that case I'll bet on CA every time.