Investing in Phoenix for rentals

5 Replies

Hi everyone, 

I'm new here and looking to get started in RE investing for rentals. I've done quite a bit of research on Phoenix, AZ so far and was wondering if I could get some honest opinions from those of you that have purchased investment properties here already. 

What neighborhoods/areas did you chose? 

Where you able to rent the property immediately? How did you rent it? Via realtor or did you do it yourself? Do you have a property manager?

Are single family homes further away from the city more desirable than apartments/condos downtown, or vice-versa?

And finally, does anyone worry that Phoenix is in a real estate investment bubble? 

Hey @Isabella Donadio , here's my experience from being a landlord for the past 14 years

1) I primarily focus on Tempe and the areas around Arizona State University (see #2 for reasoning). 

2) The properties rent almost immediately and are never vacant for more than a week. I rent myself using signs, Zillow, and sometimes Craigslist. As an agent, I sometimes help my clients rent specific properties by putting them on the MLS.

3) Location location location - the best rentals are close to jobs or other attractions/amenities. Rentals in the far suburbs would be niche rentals. 

4) Full time residents and investors are flocking to Phoenix from other high cost/tax cities and states, which is driving up demand. I don't see anything stopping this in the near term. I personally think it would take a larger macro economic shock to affect our healthy real estate market. 

Just curious @Ryan Swan , do you feel there are any properties left in the Phoenix area that will cash flow?  Property values are through the roof and I do not want to invest in C-D type neighborhoods.  I live in Gilbert, but I am thinking of investing in turnkey properties out of state.

@Account Closed yeah I've been selling a lot of fourplexes lately and they should all cash flow, even with appropriate numbers for vacancy, utilities, repairs, capital expenditures, and property management. This is assuming 25% down and a 30 year fixed mortgage. Most of the properties are in a range of C+ to B+ type neighborhoods. 

Isabella,

CAP rates are too low in Phoenix and a lot of the smart money is being invested out of state.

I purchased 22 condo units in Phoenix and Peoria in Nov 2015 and April 2017.  I have seen the Phoenix Units more than double in value and my Peoria units are worth 40 percent more than I paid.

I have sold 9 of my Phoenix Units and moved my money to Pittsburgh where I can find CAP rates of 8 percent and where properties have not sky rocketed in price.

I have purchased 14 properties (19 units) in Pittsburgh over the past year and my CAP rates and cash flow are much better.

I strongly feel it is the wrong time to be buying properties for cash flow in the Phoenix valley.  Although the Phoenix market may not be over priced, much better cash flow can be found in the Midwest.

Also, if there is a correction in home prices, Phoenix may potentially get hit harder than other areas which have not had such rapid appreciation.

Hey @Isabella Donadio , Adding on to what Ryan and the others have said, it's all about the location. The main urban areas for renting are Tempe, south Scottsdale and downtown Phoenix. When units I manage in those areas come available it doesn't take long to get multiple applicants, even when raising rents. Rents have been on the upward trend for years and show no signs of slowing, which is drawing a bit of institutional investors to the area. 

While I agree its a challenge to find good cashflowing properties here in Greater Phoenix area, it's not impossible. There's always deals to be had, if you know where to look for them. 

As far as concerns for a bubble, the real estate market is always cyclical, and if you research the trends it usually shifts every 5 1/2 years. Our last shift was a few years ago, and it wasn't very big. Most people didn't even notice much change. The next one might be a bit larger, but they are thinking its still a few more years out.. unless something major changes in the political or economic climate. But no one has a crystal ball. You just have to keep your eye out for the signs that things are shifting and adjust your investing accordingly. 

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