4 Things You Must Know When Buying Arizona Investment character
already in a real estate market where you can acquire character at huge discounts, you nevertheless need to do your homework! What you know, or don’t know, will impact the outcome of the investment. For example if you buy a character in the wrong area of town or inaccurately calculate the rental market, then you may considerably hinder the growth of your investment. The proper research will allow you to minimize risk. Take the guesswork out of your decision to invest in real estate. This article will not necessarily tell you exactly which Arizona investment character to buy; however will highlight 4 meaningful elements that should be researched when making the buying decision. You will also be provided with a few tools that will aid you in your examination.
The first part of buying an Arizona investment character is to determine the best location. How would you know this, unless you are actively working in or studying the Arizona real estate market? Just because you can pick up a single family home for $40,000 doesn’t average it is the greatest deal out there. There is a lot of money flowing into the Arizona market from investors located in other parts of the country, in addition as other parts of the world. Many of these investors are purchasing character because it is cheap, not necessarily because it is in the best location.
The September 2010: Repeat Sales Index Report, published monthly by Arizona State University’s W.P. Carey School of Business, provides detailed information on the state of the Arizona real estate market. This report highlights changes in housing prices by location, which is a great indicator for possible investors.
June 2009 – June 2010 Changes in Housing Prices by vicinity
Based on the data above, it would appear that homes located in the Central vicinity (Phoenix) have outperformed other areas of the Valley. Some of the other indicators used in calculating the best Arizona investment character location are foreclosure rates, median home prices, and pending home sales.
The second part of buying an Arizona investment character is to determine character kind. Whether it is a single family, townhome, condominium, or multi-family, you need to make sure the character fits in with your overall investment strategy. If you are looking to buy and keep up for cash flow, then you are looking for the character that can provide the highest monthly rent (a duplex or tri-plex over a condominium or townhome). If you are looking for a fix and flip character, then a single family home with the most resale possible may be the best option. Once again, this article is not looking at what you should do, but to explain that there is a difference in character kind based on your investment expectations.
Let’s look at the investment strategy of purchasing a cash flow character. clearly the goal is to acquire a character at the lowest cost possible producing the highest possible rate of return. The comparison below will show the possible impact that a certain character kind could have on your cash flow strategy.
Condominium vs. Duplex Example
buy Price – $50,000
Monthly Rent – $650
Monthly Expense – $270
Monthly Cash Flow – $380
ROI – 9.12%
buy Price – $100,000
Monthly Rent – $1,150
Monthly Expense – $270
Monthly Cash Flow – $880
ROI – 10.56%
Based on the above example already though the condominium is half the cost of the duplex, it yields a smaller Return on Investment (ROI). It is important that you factor in the monthly expenses associated with each character kind. This particular condo had a $200 monthly homeowner association due (shared on condominiums and townhomes), which lowered our monthly cash flow.
The third part of purchasing a profitable Arizona investment character is precisely calculating the market value. This is a MUST and to ensure the best information it is recommended that you contact a real estate specialized. If you are not sure who to contact in the Arizona market, feel free to contact Clear Vision Investment Group for a recommendation.
This section is not a guide to completing your own market valuation; however will provide you some tools to do your own due diligence and to be knowledgeable of the assessment course of action. There are many websites (Zillow.com, Cyberhomes.com, etc.) that will run an automated valuation for a specific character. In calculating the actual value, these should only be used to give you a ball park and do not always take into account all factors that could impact what the character is really worth.
How is a character’s value determined? This is not an exact science, but more of an educated opinion. The true value of a character is what someone is willing to pay for it. Whether it is an appraiser or other real estate specialized, the market value is determined by analyzing comparable home sales in the subject character’s locale. Some comparable factors include; age, lot size, square footage, number of bedrooms and bathrooms, and amenities (pool, upgrades, etc.).
At the end of the day, the market value will have a direct impact on what you will pay for a character. If the value is miscalculated, then you may find yourself overpaying for a character. This could consequence in a hit to your expected profit.
The fourth part that should be researched before purchasing Arizona investment character is the rental market. Whether your intention is to buy and keep up or to fix and flip, it is important to know the strength of the local rental market. For those investors looking for a cash flow investment, the rate of return is largely dependent on this part. How much can you charge for rent in this area? How quickly are similarities being rented out? For those chiefly looking for a short term fix and flip investment, do not overlook this part. What happens if you are not able to sell your character as quickly as you had intended? This is your exit strategy.
There are 2 main factors to research when studying the Arizona rental market, monthly rents charged and vacancy rates. You may notice meaningful differences in these factors from one location to another. For example, the Department of Housing and Urban Development’s 2011 Estimated Rent Report shows the estimated monthly rent for a 3 Bedroom character in Phoenix with a 85021 zip code is $1,220 while the estimated monthly rent for a 3 Bedroom character (also in Phoenix) with a 85022 zip code is $1,440. These estimates may have a large impact on where an investor purchases their character.
There are a many resources obtainable to you with information on the Arizona rental market. However as with calculating the market value, it is important to consult with a real estate specialized or character management company. If you are not sure who to contact in the Arizona real estate market, please feel free to contact Clear Vision Investment Group to get a recommendation.
It is a great time to buy Arizona investment character; however it is important to do your homework. Now that you are familiar with the meaningful elements to purchasing a successful investment, it is time to do your research. Learn how Arizona Investment character by Clear Vision Investment Group can assist you in that research.