Newbie Investor from San Diego looking in Phoenix Metro Area!

10 Replies

Hello all!

I was born and raised in San Diego and now work here as a mechanical engineer in the defense industry. Growing up, the concept of "work hard in school, get a degree, and find a well paying job to work at for the rest of your life" was ingrained in me. But after being introduced to investing and real estate, I've learned that there's a much more enjoyable way to live your life if you just work smarter. This past year I've been doing a lot of research into real estate investing (BP books/podcasts/webinars & definitely a whole lot of YouTube) and after watching many BP webinars, I finally decided now is the time to put my money where my mouth is and go Pro! While I'd love to invest locally, this market is a bit out of my price range. After reading David Greene’s book on long distance real estate investing and watching the BP/Mynd YouTube series on helping someone invest OOS,I’ve been more confident that I can find a market that’ll work for me.

I'm currently looking into the Phoenix metro area to buy a SFH (2B/1Ba) as a long term buy and hold rental at the $180-230k range. Hoping to BRRRR it and do about $10k in rehab to force some equity into the property. I know I don't need a home run on my first property, but after analyzing a few deals found on Zillow/Redfin, I'm seeing barely 3-5% ROI's..

I’ve been searching mainly in the Phoenix area (South Mountain, west Phoenix, and Arcadia) but would also like to hear about what you all think on other areas nearby, like Glendale, Tempe, Chandler, Gilbert, etc. for finding better deals. My main reason for looking in Phoenix proper was the commute time to downtown, but is that really a big factor in the area? Or do many white collar workers still work out in the outskirts of the city?

Thanks in advanced and as an OOS investor, I'm excited to connect with you all and soon build my "core four"!

Jhonathan Bituin

@Jhonathan Bituin I would try looking into Communities on the west side. Verrado and Buckeye for examples. The west side has appreciated tremendously over the years and continues to do so. A nice metric is If you look at jobs locally in the areas you find major distribution warehouses, and plenty of retail spaces. So you can see tenants can afford the homes. Besides the appreciate that comes from the boom, the area is expanding with jobs, schools and more. Do some research and good luck.

Originally posted by @J'son Elizondo :

@Jhonathan Bituin I would try looking into Communities on the west side. Verrado and Buckeye for examples. The west side has appreciated tremendously over the years and continues to do so. A nice metric is If you look at jobs locally in the areas you find major distribution warehouses, and plenty of retail spaces. So you can see tenants can afford the homes. Besides the appreciate that comes from the boom, the area is expanding with jobs, schools and more. Do some research and good luck.

Thanks for those recommendations! I have not really considered any areas west past Glendale so far. I really agree with looking into what local jobs people are working. I've been using websites like BestPlaces to find what industries are prevalent in the area, but do you have a resource that shows you exactly what sort of jobs potential tenants have?

 

Originally posted by @Erin E. :

Hi! I’m a Realtor in Goodyear.  

The traffic to downtown has gotten worse as the area has boomed over the last decade or so, but it's still a quite doable commute to drive from the outer skirts of town to downtown. Play around with Google maps to get a better idea of commute times. A lot of people have had employers allow them to work from home during COVID and once they've seen it's doable, they've kept the new structure which has allowed a lot of people the freedom to move about the valley to their desired neighborhoods without the constrictions of geography. This, along with a mass exodus from colder climates (notably Chicago and New York) and California, has greatly bolstered the market here. Most investors choose not to purchase when everyone else is purchasing because they don't find many favorable returns. However, I'm wondering how the market will respond to the end of the foreclosure moratorium and tenant evictions (Biden just extended to June). That could provide a little burst of investor prime properties. The west valley is a little more affordable than the east valley, but has seen strong growth since the bubble era of 2008. The economy has diversified and the west valley is home to prominent warehouses (Chewy, Sub-Zero/Wolfe/Cove, REI, Dick's Sporting Goods, Amazon, UPS, Anderson Windows, etc.) along with growth in the aviation sector and a few data centers. The country's largest nuclear power plant is also in the far west valley, making the west valley the only viable option for people looking to live in a suburban area within a drivable proximity. These companies provide solid, reliable job opportunities for people moving to the area looking to rent before they commit to buying a property. Buckeye is really booming and if you want to get ahead of the appreciation curve, Tonopah and Rainbow Valley are in the path of growth as the city grows. The amenities aren't what you'll find in the east valley, but the affordability makes it worth the living considering you can live here and get to anything you want in the valley typically in less than an hour drive. Be all of this as it may, you're definitely not going to be finding anything under $250,000 in the MLS at this time in Goodyear, but there are a handful in that price range in downtown Buckeye and a couple in downtown Avondale.

I wish you luck on your journey and please don’t hesitate to let me know if I can answer any questions of be of further assistance!

Thanks for such a wealth of information! I've heard many other investors recommend the Goodyear community as a great option. I do believe that there will be a period of foreclosures once the forbearance period ends and provide more buying opportunities, but I'm worried that "waiting it out" could lead to never purchasing a property. Kind of like when people wait for the stock market to drop and miss out on huge potential gains by sitting on the sideline.

You mentioned that the amenities aren't what you find in the east valley, would you mind elaborating on that? Is it not that developed as more urban communities? Not as "city-like"?

Again thanks for being so kind and helpful!

Yeah, it's just that the East Valley has had a longer development period, so it's more mature.  The West side has really just started gaining in popularity in the 2000s as Phoenix growth has demanded, so still adding specialty businesses and non-chain restaurants and the like.  We do have some older areas, but they're confined to the traditional city-centers of outskirt towns.  Most of the development on this side of the valley has really picked up and has happened since 2000.  The demographics are a little different between the East and West Valley, too.  People who gravitate toward the East Valley are more likely to have a free-flowing mindset when it comes to money and will spend liberally as they see money as something that is plentiful and can fairly easily be replaced after being spent (income comes from investments) whereas people living in the West Valley chose to live there because of it's affordability.  Their money mindset is that of scarcity - money is hard to come by and difficult to replace when spent, therefore they choose to spend very carefully and less liberally than their east valley cohort (income comes from work).  These are wide generalizations, but this insight was explained to me by a local restaurateur when asked why the West Valley seems to have trouble attracting and retaining unique non-chain restaurants, and I can totally see and understand that logic when visiting the different areas in the Valley of the Sun.  Of course, not everyone who lives where they do in the Phoenix metro will follow those mindsets, but at the core, it's a great observation.

Hi Jhonathan. Given the housing boom and the shortage of affordable homes there won’t be a foreclosures market like there was in 08–11.  Banks will get top dollar as investors like myself or individuals will scoop up anything on the market. These are desperate times and it’s a simple supply and demand equation. Don’t wait too long

@Jhonathan Bituin As of 2/23/2021, there are 120 SFH in Maricopa/Pinal Counties <$250k min 2bd/1ba (excluding retirement communities) in the MLS.

The good ones sell very fast (hours or days) and usually with multiple offers. There are some older and/or less desirable properties that last longer on the market.

There are many off-market properties but those are cash or hard money only (I received about 75 today). 

Your desired price range is extremely competitive!

Most of your property selections will be in South Mountain, West of I-17 or further out like San Tan Valley, Casa Grande, Eloy, etc. 

ROI is going to be tough b/c even though rental prices have increased, they have not gone up as much as purchase prices. I think you can buy based on potential increase in value but not mainly based on rental prices.

Commute time to downtown Phoenix is not as bad as LA or SF or NYC or Chicago, but it's getting longer. There are a lot of white collar workers that live/work on the outskirts because of their ability to work from home. 

Hope this helps!