All Forum Posts by: Melanie Johnston

Hi @Douglas Underwood

I've helped several BiggerPockets investors buy properties for STR, MTR and LTR in Metro Phoenix.

While Scottsdale is best known as a tourist destination, there are numerous STRs in place, so you'll want to consider that. Also Scottsdale is one of the cities that has implemented new rules and regs for STRs, along with Mesa, Fountain Hills and Paradise Valley. If you want a copy of the Scottsdale City Manager's recent PPT presentation that ties all of their requirements up in a bow, email me and I'll send it to you. Otherwise much of this info is on the city's website. These rules don't mean you can't successfully operate there, you just want to be aware of what's required.

There is a special zip code I think has the most potential in this area. Feel free to message me for details.

Areas of Phoenix, Mesa and other cities can work well, depending on the size of your property and the audience you want to attract.

The first step would be knowing your budget. Everything else will flow from there.

Hope this helps,

Melanie

Hi @Andrew Schug. Congratulations on getting started.

Most of my clients are BiggerPockets investors, so I would be delighted to help you and your wife, too.

I'm here to answer any questions now...and throughout the process.

Melanie

Quote from @Alex Teodorescu:

Appreciate the info! This is exciting!

 I agree!

Quote from @Matt Greer:

@Melanie Johnston I absolutely love how every time you post you include hard statistics and analysis. I agree with what you have to say. I'm also very upset with the Goldman Sachs projections. I feel like they were very misleading and not completely founded in facts or logic.

 Thank you, Matt. I think GS is getting a LOT of feedback these days.

Quote from @Darius A.:

@Melanie Johnston

Agreed, tough at this point to gauge where the dust will settle after housing peaked in the spring/summer of 2022. Patience and dry powder 😊

Dry powder for sure!

Quote from @Darius A.:

GS thinks Phoenix and a few other cities are in for some pain.

https://thehill.com/homenews/3832410-goldman-sachs-says-4-cities-likely-to-see-a-2008-style-housing-crash-report/amp/

There is a lot of discussion around here on that Goldman Sachs narrative. Since The Cromford Report directly addressed it, I'll share their response here:

"Jan 25 - There is a story run by Fox Business News today that quotes Goldman Sachs making all kinds of weird and unlikely forecasts. Not quite sure how to deal with it because its description of the current Phoenix market bears little comparison with the real world.

Some quotes are:

• Goldman Sachs expects home values to worsen through 2023 amid continued skyrocketing interest rates and declining housing prices
• four US cities will suffer the most catastrophic dips, drawing comparisons to the 2008 housing crash
• Phoenix Arizona will likely see noticeable increase before drastic decreases of more than 25%

My comments are:

• We saw skyrocketing interest rates in 2Q and 4Q of last year. The idea that interest rates will skyrocket in 2023 seems more than a little far-fetched when the inflation rate is falling. It could happen, but to have this as your base case seems very irresponsible.
• Is Goldman Sachs really saying Phoenix home prices will go up and then drastically down? Come on now, there is no data that supports that outlook. Just a wild-*** guess?
• In the Great Recession, the median price in Phoenix declined from a peak of $265,000 in June 2006 to a low of $109,000 in May 2011. That is a fall of almost 60%.
• Please let us not compare 60% with 25%. They are not similar.
• Since the peak in May 2022 of $475,000, the median was down to $412,000 by December. This is a fall of 13% so far.

The lack of coherent thinking in the text of the article contrasts with the interview with Ara Hovnanian that appears on the same web page. I went away with the impression that Ara Hovnanian has his head screwed on tight and that the Goldman Sachs housing analyst has lost the plot. Maybe Sky Business garbled the message that Goldman Sachs put out?

Also confusing are Goldman Sachs recent forecasts of interest rates:

• November - mortgage rates will drop to 5% by March and property values will rise 1.8%
• December - 6.2% average rate for 2023
• January - 6.5% by 2023 year end (not sure how skyrocketing takes place in this context)

No-one has ever been very good at forecasting mortgage interest rates more than a couple of weeks in advance. This includes the Mortgage Bankers Association and it especially includes Goldman Sachs whose track-record on interest rate forecasts is extremely poor. This is not saying much because there is no-one who gets them right more than by random chance.

Any time spent listening to people making interest rate forecasts is time you could have spent more productively."

Quote from @Account Closed:

Typically Spring is our busiest season, from March through June. You have to go back on this chart to 2019 to see a typical year, since 2020 was influenced by COVID, 2021 was an unusual banner year and 2022 was influenced by rapidly rising interest rates.

When looking at how Phoenix inventory has doubled since December 2021, it's important to note that those 2021 numbers were a historic low. While we have doubled inventory to 16,000, we are still below the 20,000 - 25,000 active listing count that is considered a balanced market. 

This chart from The Cromford Report (which creates its proprietary Cromford Market Index from Metro Phoenix MLS data) breaks down which cities are in buyer/balanced/seller markets. See their commentary below to learn more.

"Among the 17 largest cities we see 4 currently in a buyer's market below 90, 3 balanced between 90 and 110, and 10 in a seller's market over 110...

Overall, the market is more favorable to sellers than we expected in December and downward pressure on pricing has been largely eliminated, except in a few market segments.

The more favorable situation has started to bring more sellers into the market and new listings have been more plentiful over the last week. Overall supply remains well below normal and so does demand. Volume is low but it is increasing and market health is improving, not deteriorating as it was for much of 2022."

From Melanie:

We are seeing a tale of two markets, depending on the individual property. Buyers are negotiating price discounts and beneficial terms from sellers who have been on the market 90+ days. And some sellers are starting to receive multiple offers, which was rare even 30 days ago.

It's definitely a property-by-property situation in the Metro Phoenix market right now.

@Slim Geransar This is a very interesting thread.

I primarily help investors (most of them from BiggerPockets) buy both long-tern and short-term rentals in Scottsdale, Phoenix, Mesa, Chandler, Peoria, Surprise and Buckeye, Arizona.

One investor who purchased 8 LTRs in 2021 came out on a reconnaissance mission so he felt comfortable with the various areas of town that we toured. Another investor who purchased 3 LTRs that year has yet to come to Arizona. I video toured and FaceTimed toured all properties, even bringing in a PM I trust to evaluate the house for rental potential and red flags before we wrote an offer.

It depends on who you have as boots on the ground. 

I've also helped STR buyers who first walked their property after closing. Through all our walkthrough videos and live calls with inspectors, etc., they had a good handle on what they bought. I've never had a buyer who arrived after closing be disappointed with their investment.

It definitely comes down to trust. There are people who have proven themselves to be trustworthy and others who let you down.

Asking for references of someone's past investors is a great way to know who you are working with.

Best of luck!

Melanie

@Evan Bunce there is an AZREIA podcast that might be helpful in the meantime.

Maybe we'll cross paths one day!

Melanie