New Investors in AZ?

Question

I was wondering if any of you new investors were working with any sucess in AZ?

After reading this forum regarding the pros and cons of investing out of state, especially when noting from the veterans that; "This business is hard enough," without trying to work out of your area. I'm trying to determine if I can do a buy and hold strategy here.

Cindy Nevarez · Answer

Ha! Tell me about it!

I've got Realtors here saying that very thing. They are so deluding themselves.

There are very few places where one wouldn't have to worry too much; Flag, Prescott, Tempe and the Arcadia area of Phoenix. Homes in that part of Phx are selling for close to a half mill if they have been completely remodeled.

We read a report a couple of weeks ago saying to expect another drop of 18% in values here through next year. In my own neighborhood several houses are for sale in the upper 300s. One moved at 349k 6 months ago. But the others are just sitting there...some empty. A realtor did a comp for me. So I said, "If I really wanted to get out of here fast, I would price it at 275, right?"

We were thinking of renting it out but I don't think people are really wanting to be in this area anymore. In this zipcode there is a 26% vacancy now. That's even high for this time of year when the snowbirds have gone back home.

Will Barnard · Answer

AZ has been oversupplied of housing for the last 4 years running. Although the demographic studies are not bad, there was so much building that the supply greatly exceeds current demand. Similar to CA, where prices shot up to the moon on greed, speculation, and stupidity. If anyone from CA or AZ thinks they have hit bottom already, they are sadly mistaken and should do some more research.

AZ is estimated to have another year or two of loss in value followed by 3-4 years of stagnation. Keep in mind I am talking about AZ as a whole which is not entirely fair. The state is very large and is made up of many citites in which their are many communities, but as a whole, the picture from an investor's standpoint is not good right now. It is poised for recovery in about 5 years.

Cindy Nevarez · Answer

I really want to invest in Tempe. But everything is still too high there. also, I DO expect to make a positive cash flow. Otherwise what's the point?

So are you approaching people in the West Valley who are not in foreclosure yet, and offering them 75 - 80%?

Cindy Nevarez · Answer

Hi azmania,

Thanks for the response.

We're actually wondering what sort of properties are you going after, and do you actually get any cash flow out of them?

Everything we've read says that values here are going to continue to drop about 18% more through 09'.

Mike Wilcbon · Answer

It depends where in the valley you are investing and what type of deal you make on the home.  If you can get it at say 75-80%, it will cashflow.  Plus, I tend to bank on the appreciation.  If you look at the west valley where I am (glendale/peoria), you will see that the prices have leveled.  The only problems are the foreclosures that drive the comps down.  This is slowing up and with a buy and hold mentality (especially if you make it a point to not expect anythig but everything covered expense wise), you should do great.

mbkfinancial@gmail.com

Mike Wilcbon · Answer

Hi...I wanted to respond to your investing in az question.  I found it so good out here that I recently moved to do deals here!  I was doing deals in az from Michigan with no issues, but I like the climate so I made the move.

I put together an entire team too.  I have a great management team in place and former realtors and home inspectors to do the things that I am not good at.

See, the beauty of the phoenix market is that the values have bottomed out and are leveling off.  These properties lost 50-75% in the last 18 months.  The market will return over the next 3-5 years and a buy and hold investor can literally retire if they buy right!

I would be glad hepl or answer any of your questions.