How are Arizona Investors Adapting?

Question

I have been hearing investors taking just about every stance right now during the Covid Pandemic. Some are taking this as an opportunity to buy and have increased what they previously were looking to add. Some have taken a step back and refined their buying criteria and strategies. Others have completely hit the breaks on buying and are playing things very carefully right now.

I personally have no clue what the right strategy is or if any of these will end up being better than others in the long term.

I want to hear from Investor's and their personal strategies during these times. Putting your personal ideas out there will only start the conversation while we all wait to see what happens next.

I wanted to keep this brief but want to hear from all of you to see what you are thinking and why?

I truly appreciate the collaboration and synergy from everyone.

-Brady

Ryan Swan · Answer

I just put a newly renovated house on the rental market in Tempe...I was a bit nervous about decline in rental activity and/or showings due to covid, but ended up being pleasantly surprised. I had about 30 inquiries within the first 48 hours of posting on Zillow, and 6 or 7 staggered showings on the Saturday after I listed. Had three different qualified rental applications in hand by end of day Saturday, and have a great group of students moving in on May 29th. I'm getting over $1900/month for a 3/2, while the neighboring house is only getting $1550.

David Weymouth · Answer

Brady, thanks for checking in. Rented, although they won't move in until the 15th. 3 weeks after closing, deep cleaning, landscape tune-up and luckily no other cash inputs. I am watching the East valley market everyday, seems to have stabilized for the moment. Will probably look closer in for the next one, I really like Gilbert. Time will tell, wish the best for everyone else during this period of time. Don't know if buying anything right now is the best game plan, but the interest rates are a driving force for me right now.

Cameron Lam · Answer

@David Weymouth what was your purchase price and rental rate? Would love to know what your numbers are looking like.

Account Closed · Answer

Glad to hear that you did get it rented out so quickly! That quick turn around is clutch in times like these for sure. Seems like the East Valley is gaining more traction every time I talk with somebody new when compared to the West Valley. Take advantage of the market and find the deals that work for you wherever you can- with interest rates so low right it is hard to not want to make something happen!

Account Closed · Answer

@David Weymouth Did you successfully get it rented by the weekend??

From my experience location is almost always one of the first things tenants consider when looking for a place to rent. That and rent cost are by far the two things that tenants care about before further vetting a property to rent. From the standpoint of an investor I guess it would really come down to if your buying criteria and how aggressively you are looking to add properties. If there is a right method I most certainly have not found it yet- but I am sticking to my buying criteria and making sure not to waver from my perspective of what makes a "good deal". Trusting the process.

David Weymouth · Answer

So when does the ride end, as far as a possible bubble/recession, etc? As bad as the economic news has been concerning unemployment, travel industry, food and services, today I am a little confused. I am looking at the active listings in the greater Phoenix area and come up with just shy of 13,000. My realtor tells me and I have seen other postings agreeing a healthy market of that size should be roughly double that. Now I don't always trust zestimate, but have found them to be in the ballpark. In previous postings, I described my last purchase. And yes the positive cash flow doesn't look great. However, within a month I will have recovered my closing costs  of 5k, on paper anyway in appreciation. Trying to pull the trigger on another one but just don't know how long this level of appreciation will continue. Any thoughts?

David Weymouth · Answer

Matthew, The place in Queen Creek is a block away from the mall, appears to be in a good location. HOA seems well organized. 1850ft2, nice extended covered patio, not a huge back yard, turf so hopefully easy to maintain. Prior issue with hopefully no issues moving forward, ment brand new flooring down stairs, and all new kitchen cabinets. Purchased at 265k, 270k with closing.

David Weymouth · Answer

Cameron looks like you would be and are a good resource. I am in this property for 270K, wrote a 2yr lease @$1625/month. Positive cash flow $300/month. ROI around 5.5% not counting principle paid. You and many may laugh, I always think the numbers should be better myself, but up to this point AZ has worked for me. Have been looking to get back to Gilbert but at the $275k and under price point you know what is available. Would love to hear your or any other investors thoughts.

Matthew Terry · Answer

@David Weymouth what are the specs of the property if you don't mind me asking? There are many opportunities for the $250K range in good Gilbert/Mesa areas but they are either Townhouses with HOAs and no backyard or they are smaller 1200 sqft 2/2 homes. I'm considering investing in one, but my gut tells me there is a higher chance of turnover risk if I'm not doing detached SFH at least 3/2 1,500 sqft. With all the apartments available, I feel like someone who only wants a small 2/2 would also rather have no maintenance and integrated amenities. I wonder if there is data out there to show history on 2/2 rent and turnover trends and who would have it?I wish I had a capital pool for flipping. Wholesalers are dumping properties in minutes after they are emailed out. Many of them present great BRRRR opportunities, not to get 100% of capital back out, but at least only leaving in 5-10% as opposed to 20%+. Cash-out refi is still out there at reasonable rates.

Your cash flow numbers aren't great, but Maricopa has been all about appreciation. Cash flow is just a way not to go bankrupt while waiting for the property to build your net worth. I'm closing on a cash-out refi on a 3/2 SFH I bought in 2015 in Mesa. It will add about $250 a month to my mortgage. I will use this cash to invest in mid-west cash flow areas and gain about $400-450 in cash flow. In 2030, I will 1031 it. As long as rents grow as well, refi every 5-7 years might be a good strategy considering supply for "starter homes" in the east valley won't go up for quite a while, if ever.

Doug McVinua · Answer

From an Arizona, Property Manager perspective rents are 100% collected for the year and zero vacancies. Rents are up on every property at turnover, values are up, job growth is strong, inbound moves are high, the weather is great and the only issue I have is not enough properties to meet the tenant demand.

How are Arizona Investors Adapting?

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