Investing in 55+ community in AZ a good idea?

Question

I'm interested in buying and renting houses in the Phoenix area (in which I live)  The area I am looking in has several good schools plus  a couple of golf courses in a 55+ community.

The average price for a 3 bedroom house in this area is $350,000.  In the 55+ retirement community, I can pick up a 2 bedroom townhome on the golf course for about $280,000 or a 3 bedroom house in the low $300,000 range.

Since this is going to be my first rental house, should I start with the 55+ community since it is less money, or do I spend more hoping that the house stays rented year round because it is located near the schools?

Which one sounds like a better first investment?

Doug McVinua · Answer

@Dana Vijum I manage a number of properties in the Valley of the Sun that are in 55 plus areas and they have been good properties. As Account Closed mentioned the tenants being 55 plus tend to be very easy on the property.

Single-family without any age restriction tends to see a little higher demand, makes sense since 100% of the market fits the bucket. Even with that stated our vacany is extremely low and the best item is that the tenants tend to stay for years.

Not uncommon to see limited income and low debt so the screening can be a bit different.

Overall the 55 plus market has offered good returns with low turnover, minimal repairs, and great stability.

Account Closed · Answer

Rentals should be about the "cash flow". Most people make the mistake of thinking that properties will simply go up in value over time. Usually they do, but not always. You still have to service the debt in the meanwhile. 55+ communities can have a transfer fee and HOA fee. The communities are limited to the people who meet the requirements and in Phoenix, Sun City, Mesa there are plenty of people who do. Normally 55+ also are good at taking care of the property properly and easier to work with. There is even a bigger demand for housing for families though. When I advertise one of my Turnkeys, it is common to have many, many families apply who are paying a rent amount substantially greater than the cost of a mortgage. I offered a 5 bedroom 3 bath house to the market at $310,000 and was swamped with renters who had 5, 6 and 7 people living in 2 and 3 bedroom apartments. Crazy. Now, the 2 bed 2 bath in Mesa in a 55+ I will soon be offering is across the street  from the golf course and is $225,000 just for a comparison to the numbers you've mentioned.

There is a formula for figuring a safe investment, you can use my model from the spreadsheet if you want at:

Average Turnkey Cash Flow Per Door In Phoenix Metro Area No Bank Needed

https://www.biggerpockets.com/forums/600/topics/584916-average-cash-flow-per-door-in-phoenix-metro-area

Dana Vijum · Answer

Thank you all for your input!

Justin Kane · Answer

if you could do this in an opportunity zone it may be an awesome idea

Thomas S. · Answer

You need to do the numbers on expenses and rent. My guess is that neither option will produce positive cash flow based on the purchase prices. I could be wrong.

Need to know market rents, do they meet 1% of purchase price guidelines.

I personally target the senior/retirement demographic for the reasons Doug states but you still need positive cash flow.