I'm a newbie to the real estate arena and trying to figure out what works best. I live in Phoenix(east valley area) and am looking for my first place to invest. My primary focus is to look for my first investment where I can get some cash flow to start with. While reading multiple forums on areas that are best suited for cash flow,most of the areas seem to be in other states- Ohio,Florida,Texas etc.
Keeping in mind my beginner level, I would want to start off investing local,but the general feedback seems to be that phoenix and adjoining areas may not be the best suited for cash flow. With properties on the rise,the capex does not really make sense in the areas like Gilbert,Scottsdale etc,even though the appreciation factor may be beneficial. On the other hand with my limited experience ,any kind of flipping properties may also not work for me.
What approach do you suggest. Try to go out of state,or still look for properties here or just wait it out for now?
@Deepak Mahajan We invest in the areas around Gilbert and Chandler but not in Gilbert or Chandler. We have properties in Mesa, Apache Junction, San Tan Valley, Coolidge, Florence, Casa Grande and one in Phoenix. They all cash flow when we use our lease option model. I just posted a meetup that we are going to have in 2 weeks in Mesa, AZ. It's a great place to network and meet other investors. Here is the link:
You're certainly doing your homework and asking the right questions! Yes, Phoenix costs have been rising, and it is harder to cash flow. That said, it is still possible to put together a deal where the numbers work. I would definitely recommend that for your first deal or two (or ten) until you really get your feet wet. Investing out of state is a WHOLE other animal, and you want to be confident in your skills before you tackle that project.
Have you tried looking in the outlying towns of the Phoenix Metro area such as Apache Junction, Buckeye, Casa Grande, San Tan, Coolidge, and Queen Creek? You have to be creative and willing to go places others aren't and do things others won't in order to find deals in and around Phoenix these days.
I'm kinda jealous that you could potentially invest somewhere close to where you live. I live in Los Angeles so investing near where I live isn't really an option, so I invest out of state (Memphis). I wish I could invest somewhere closer to home. Do you plan on managing the property yourself?
Thanks for the inputs Pamela. Yes i think it does make sense to start off local before venturing out.
Bob,i have not yet looked in these areas.But I guess you are right,I will need to look into areas that are not on everyone's focus. Specifically since,these areas have also seen similar appreciation over the years.
Tim,yes.I thinking living in LA makes the choice easier when deciding to invest out of state :). If I do go local, i plan to start the management myself,and then go out to a property manager if things seem to get out of control. So while calculating,i intend to put in the management cost as well.
The easiest thing to do would be to explore both. Look at properties local to you and out-of-state. The more you shop around, the more the answers will become clear to you and you'll begin to really know what you're looking at.
I'm in a similar market, Las Vegas. I'm pushing out to smaller surrounding towns. For help with the mindset on out of state investing I would suggest listing to BP Podcast 301 with Alex Felice. It was randomly suggested to me and it did not disappoint when enlightening on how it can be a benefit to invest out of state.
@Deepak Mahajan We invest in the areas around Gilbert and Chandler but not in Gilbert or Chandler. We have properties in Mesa, Apache Junction, San Tan Valley, Coolidge, Florence, Casa Grande and one in Phoenix. They all cash flow when we use our lease option model. I just posted a meetup that we are going to have in 2 weeks in Mesa, AZ. It's a great place to network and meet other investors. Here is the link:
@Deepak Mahajan I think you are lucky already. Similar to other CA investors, I had no choice but to look out of state for cashflow, and the greater Phoenix area is exactly where I closed my first two rental properties last month.
@Deepak Mahajan Phoenix metro is a safe place to buy your first rental, especially being local to shop it and manage it.
We have low property taxes, landlord friendly rental rules, low income taxes, etc. The population is growing faster than new construction can keep up. Vacancy rates are low, and rental rates are increasing.
If you're in SE valley, take a look at San Tan Valley SFHs...I've heard through the grapevine that the price / rent ratio is pretty good out there.
Welcome to the forum! You're in the right place here at BiggerPockets, and as you see we have a fairly active user-base here in the Phoenix Metro Area to help guide you in your purchase and investment strategy.
If the local market fits your budget, I suggest that most first-time investors start locally. Why? Because you already know the lay of the land, and you're close by to effectively manage the property and oversee it in case anything goes wrong. That helps relieve many fears that most new investors have, and ultimately reduces risk.
When you open yourself up to looking nationwide, you've immediately compounded the complexity of the decision tenfold, as you now must compare and contrast multiple markets against each other. And if you don't know what you're looking for, it's easy to go wrong and make a mistake.
Plus, you must remember that no matter where you are looking, local wholesalers, turn-key providers, agents and loan officers are probably going to sell you on why you should be investing in that area. If you don't know how to see through the B.S., it's real easy to get sold up the river on some property you never should've purchased.
Now, may you get better returns elsewhere? Probably... but then again, it totally depends on your goals and the metrics you're using to measure ROI. Is it just purely cash-flow? But what about appreciation? Cash on cash return? Are you holding this property for 10-30 years? Or are you just hoping to sell it in 3-5 years and move up to something else? You oughta be aware of population and job projections before making that decision...
Main point is, a lot goes into making the decision. I moved to AZ for the opportunity to sell real estate, because I believe it's in a great place to invest in for the future. It's #4 in job growth and is set to nearly DOUBLE it's population by 2050! You've got huge migration from California folks looking for more affordable housing, and baby boomers by the dozen retiring and wanting to live out their golden years in warmer climates. That presents a market ripe for opportunity if you ask me.
Ultimately, you can make real estate investing work in any market, and investing locally is usually the smartest decision for beginners because you only have to learn the numbers, not analyze the local geographic area at the same time. This is shortcutted because of your familiarity with the area. You already know who's living there, what streets are good and bad, and have all the contextual information about local political views, news happenings, "word on the street", etc.
So, my suggestion would be to "window shop" for now and learn the local real estate market first. Explore it fully, learn all the numbers and analysis here first BEFORE exploring other areas. That way you won't have to do two things at once.
Once you know WHAT you're looking for, you'll better know WHERE to look for it.
Hope this helps! Feel free to reach out to any of the locals here on this board! We're more than happy to help and get your questions answered! :-)
I am in Gilbert too. I am running into similar situations BUT on the other hand, the rent we can reasonably get is higher as well. It is becoming a lot more appealing to young professionals with the development of DT Gilbert as well as DT Chandler.
@Deepak Mahajan Did you close on any rental, or are close to doing so? I am a NorCal newbie here. I live in the Sac area now but I've lived in Chandler for several years and am very familiar with the area. BTW, I amlooking for a BuyNHold investment in that vicinity 175-350K range with good potential for appreciation over a 7-10 year period.