Just as the residential market has seen a decline in prices and a decline in sales, so has the small income property market.  Mostly, besides being a supply and demand matter it's the financial market that has put the investment market on the decline, at least for now.

In Greater Phoenix the sales have dropped dramatically from 43 in April 2006 to 10 in April 2008.

Besides that the price per unit has decreased from $89,873 in 2006 to $86,401 in 2007 and $59,525 in 2008.

	Jan.	Feb.	March	April
2006	44	47	50	43
2007	18	23	21	24
2008	7	6	19	10

In Phoenix sales have dropped as well from 15 in April 2006 to 3 in 2008.  The price per unit decreased from $96,293 in 2006 to $79,368 in 2007 to $53,368 in 2008.  That's a dramatic decrease in the price per unit.

	Jan.	Feb.	March	April
2006	16	21	24	15
2007	6	17	10	17
2008	1	0	12	3

What do all the numbers mean?  Well the decrease in price per unit is indicative of the difficult market.  It's not necessarily the same buildings selling for much less, but sometimes it is; its that just as with single family homes, people got stuck either with bad properties or with unreasonable loans. 

There were many speculators in the multifamily market.  Some of these speculators got the same loans as home owners and when the rates adjusted the rent could not cover the payments, and management became more difficult or was not considered even when the property was purchased.  Thus, we have a glut of low priced foreclosed or short sale apartment buildings that are skewing the price per unit lower. 

Most investors that have good properties don't need to sell. This is also one of the reasons it difficult to find top grade fourplexes for sale, though there are some.

For sellers of small multifamily properties the market is very competitive.  There are currently 357 fourplexes for sale in Greater Phoenix while only 42 sold during the first 4 months of 2008.  That is a 34 month supply; a very large supply, but a great opportunity for buyers, especially those that are in it for the long term.

Let us know if you would like to find out more about purchasing a small income property in Phoenix, we're not only agents but investors ourselves.

The Residences at 2211 Camelback is one of the most praised condominium high rises in Phoenix.  Located in the Biltmore area in one of the prime destinations in Phoenix at 24th st and Camelback Rd. This is also a major business district.
The twelve floors situated along the illustrious Camelback Corridor loom over Camelback Road with spectacular views.

To the North East lies the Biltmore Fashion Park, consisting of top-of-the-line clothing, jewelry, and exceptional dining; like Capital Grill or one of my favourites Christopher's Fermier Brasserie.

Each unit in The Residences has a luxurious master bedroom and bathroom, gourmet kitchen, study, and great room, all with recessed lighting. There is a concierge staff, 24-hour security, valet and underground parking, and roof-top pool and entertainment, along with a Physical Fitness Center and Business center. 

From many of the units you'll have amazing views of not only this business district but the Arizona Biltmore and Piestewa Peak to the North and the city lights all around.
The Residences at 2211 Camelback are a prime example of how Phoenix is maturing into a magnificent city.

Resale prices start at around $650,000 and reach to above $3.5 Million.

For buyers and real estate investors this is exceptional market.  It has not been like this for decades and it may not be like this again for decades to come. 

It's time to invest for the future.  For seasoned or new investors there is an organization of real estate investors just like you in many stages of experience.

The Arizona Real Estate Investors Association, AZREIA, has may benefits for its member.  One of the upcoming events is the 4th annual conference and expo for real estate investor and rental property owners, which will be held at the Phoenix Convention Center.

This is a two day event stretching from the morning of Saturday May 17th 2008 to late afternoon Sunday May 18th.  Some of the more prominent speakers will include Elliott Pollock, Don DeRosa and Sharon Lechter.

The event will cover topics including.

• Beginning Real Estate Investing.
• Rental Property Owners and Landlords info.
• Investing updates & foreclosures.
• Advanced investing.
• Investment strategies.
• and other sessions presented by sponsors.

For what you get and the opportunity that it may present the low cost ranging from $169-$249 is a bargain.  What's most important is that people take control of their finances and investing.  Real estate provides an ability for you to control your investment vs giving it up.

See you at the conference.

Get more information by visiting the AZREIA website. or calling 480.403.4610

The Phoenix Light rail, which will go through Phoenix, Tempe and Mesa, start up is just around the corner.  Before years end it will roll through 3 major cities, through areas with increasing populations and lots of development and redevelopment.

Phoenix Market Trends now has a new Phoenix real estate search.  This is an exciting more intuitive map based search.  Its very fast, flexible, visually pleasing and informative with some very great tools that make searching easier.

 Quick Link to Phoenix Home Search

www.SearchValleyHomes.com

Perform a search by moving the slider to indicate the high and low range.   You can also set criteria like zip code, city or subdivision.  The auto complete function makes it easier to locate subdivisions that you don't quite remember the name of. 

An "Advanced"  option allow you the get more detailed with your search.  Select "advanced to look for horse properties, multifamily, land, commercial or just to further refine your search.

Even better the search can be constrained to the area you selected on the map.  Zoom out to view the entire city of zoom into individual neighborhoods and see only properties in those areas.  The map shows you the locating of each home on the map.  Put you pointer on the location in the map to see a quick view of the property. 

The results of your search show up both on the map and on the left results panel.  The properties can be quickly rearranged by ascending or descending price, bedrooms, etc.

You can quickly switch between the results tab and search tab.  By picking a property you can see more details about it.

Searches can be saved, printed or emailed.  You can also receive updated daily or weekly of properties in your criteria when the come on the market.

This way you won't miss a home.  An even better way to receive updates of new homes on the market is through the RSS feed.

If your not familiar with RSS feeds take a look here for benefits and how use them and set them up.  It's well worth doing it this way.
get daily or weekly updates

If you see a property that you like you can get full detail about it, including multiple photos.  View larger photos individually or as a slide show.

View property details like size, bedrooms, lot, year built, days on the market and so on.

School and neighborhood information is available as well.  You can easily see where the closest shopping is or even do a quick search for a pizza place near by.

There is mortgage calculator as well.  It allows you to quickly see an estimate of your payment. 

A small map also provides you with an aerial/satellite view of the property and its surroundings.

In some cases a birds eye view may be available

Create one search or multiple searches view them anytime, get updates by email or RSS feed and we are always just a phone call or email away if you need more information or if you'd like to schedule a showing of a property you found. 

Start A Home Search

www.SearchValleyHomes.com

Many of you already subscribe to Phoenix Market Trends using the RSS feed and you know the benefits of RSS. 

We have now added a new Phoenix MLS real estate search which allows you to get updates of homes in your criteria via an RSS feed.  This is a very slick and easy way to receive properties that match your needs.  The search can be performed by almost any criteria including by map.

If your not familiar with RSS, we have a very good explanation which includes a short video plus links to some popular RSS readers at our sister blog here.

Below are two charts representing the sales data for small multi-family income properties in Greater Phoenix.  Sales are for April 2008 and are from the ARMLS, they do not include sales outside the MLS.

2-4 units.

April 2008 2-4 Units.	Active	Sold	Pending
Phoenix	353	6	13
Scottsdale	16	1	2
Greater Phoenix	715	20	31

5-12 Units.

April 2008 5-12 Units	Active	Sold	Pending
Greater Phoenix	120	3	2

What does this mean?  The numbers above don't by themselves shed any light on the state of the multifamily market in Phoenix.  I just threw them up as a starting point.  Tracking of sales for small income apartments in Phoenix will expand in the future. 

We do have a cool new map based search for multifamily properties at www.SearchValleyHomes.com just pick the advanced button the the bottom left then select multifamily and you can view by map and by area and you can even get new properties by email or RSS feed.  The RSS feed is the way to go.

The map below shows new multifamily listings in the last 7 days and is updated daily.

In the current real estate market one of the difficulties of reducing the huge inventory is access to financing.  If you consider it carefully, financing may be even more important then the house or real estate investment itself. 

It is the accessibility to financing that allowed so many people to purchase homes and speculators as well as investors to acquire real estate.  It is financing that is part of the cause of the current slow down in the market.  It is also financing that makes real estate investing so much better in general then stocks; that being leverage.  

There are many options for financing a home either through a bank/broker or short term money through a hard money loan and the less common, through the seller.  Seller financing is an option, more so in the current market. 

When money was easy anyone could have received very low interest financing from a traditional bank.  Though this is still true it's much harder.  Banks have tightened guidelines and there is just not that much money floating around.  Scarcity increases cost.  For sellers in a position of large equity seller financing may be an option either to sell a property or to create cash flow secured by real estate without the maintenance and risk of owning real estate. 

Some reasons seller financing may be an option for real estate owners.

• Seller financing can be used as additional leverage for selling your property.

• Sellers can carry the note to generate cash flow secured by real estate and its cash flow that makes people financially secure. 

• It can give you an edge over other competing properties.

• Because you hold the note, you be as flexible or accommodating to a buyer as you choose.

• If you're selling an income property such as a multifamily property or even land with a large equity position, by holding the note you deffer capital gains.

The note holder can also sell the note.

Just as lenders sell notes, a seller can do so.  There are requirements that need to be met so look into what a note buyer will want before you create the note.  It can be sold at any time.  Some will even buy a portion of the note.

Buyers can benefit from buying real estate with seller financing.

Joanna wrote her impressions about three new condo projects we visited in Tempe at RealEstateConfluence.com. Two along the Tempe lake and one close to Mill Ave which is still under construction. 

CenterPoint got me excited as well.  It seems that this is a well thought out project which despite its size will try to be human sized. 

But what got my attention were the kitchens in some of the finished units at Bridgeview on the Tempe lake. 

This would be a great kitchen to have. Clean modern yet warm and functional, except for that refrigerator.  There was another kitchen in blue which had the essential built in espresso maker from Miele.  There was another espresso machine in the bathroom.  The bathroom by the way had a sitting area, a much missed feature in most bathrooms.  

The following will be an analysis of an actual income property located in Phoenix.  In all cases I'll analyze on a simple basis an actual property for sale.  These will be rather simple analysis because my full analysis are often 20-30 pages and are based on investors individual criteria. 

The subject of this analysis is a foruplex located in North central Phoenix near the Pheonix mountains in a mature neighborhood.  It is a good subject for a "good deal / bad deal" analysis, more so because its for sale, and even more so because I'm handling the sale of this property so I'm biased on that point, but I won't be biased on the facts and the deal itself.
Now a bit about the property.

• 4 Units.  All 2 bedroom and 1 bath units.
• 2 story property with no deferred maintenance.  Most items have been taken care of, like the roof, heat-pumps etc.
• The owner is only responsible for maintenance and regular repairs, loans, taxes and insurance.
• The tenants pay for all utilities.  This is a unique property.  In most multifamily properties water, sewer and trash is paid by the owner.  Not in this case.  This does make the analysis a bit easier and it certainly makes this property worth further investigation.  It's not only these cost that will be saved but related ones as well, so this is a big plus in favour of the property, but its of little use if it does not pencil out.
• Great location with little landscaping maintenance needed since its desert landscaping. 

Income based on actual number for 2007 and below are some assumptions (the first table) 

So the gross income for first year of purchase is $32,026 and annual expenses are 17% of annual income or $2,669.  If you had a management company handle that property then your expenses would increase by the 7-10% fee of Net annual income.

Above is a chart with some of the most common measures applied.  These would include NRI, IRR and NPV analysis.  Almost any number you look at its a positive return and one higher then you may find in other properties, especially if you consider the value of other factors like time.

Below is a before tax IRR or Internal Rate of Return (read more about the IRR) This means that over the time period of his analysis, our money invested returned a yield of just over 20%.  That is fairly good and some would consider very good. 

Compare it to your return on a savings account or stocks.  The after tax IRR was just over 17% and I bet you its much higher after tax proportional then a stock would be, simply because you don't have depreciation on stocks or savings accounts and you don't have long term capital gains at a current rate of 15%.   

Is it a good deal or bad deal?  Thought the final decision is based on an investor's individual needs and and criteria, this deal is good and if you consider some of the other factors that make this property unique amongst the others, this is a very good deal.  Take a look at your return after a 10 year hold.  The return is just as attractive fora 6 year hold.

If you'd like to see a full 12 page review of this property and a demographic profile then call me or send me an email and I'll send over the PDF. 

I can also customize it based on your tax brackets with after tax results or results based on different criteria and loan structures.  I can also help compare a real estate investment to money placed in other investment vehicles.

The internal rate of return (IRR) on an investment is the percentage rate earned on each dollar invested for each  period it is invested.

The IRR gives investors the means to compare alternative investments based on yield.  The IRR has become the corner stone method for investment analysis, performance and selection.  It is a very good measure but it must be used in conjunction with other measures.

The IRR is a fairly straightforward measure of annualized yield on each dollar invested for the time period that the investment remains in the investments.  There are some limitations.  One of them is that the IRR makes no assumptions about the reinvestment of periodic cash-flow.

There is more to the IRR then discussed here, but for simplicity sake its a more accurate and informative measure then cash on cash or the very simple and overused CAP rate.

Should you have more questions about the IRR or investing in Phoenix real estate or income properties and measuring investment alternatives call me, Artur at 602-861-3300 (office)

With the price correction during the current real estate cycle homes once out or reach for many buyer can now be purchased with more affordable loans.  

This is also a great market for first time home buyers, because not only are there many homes to choose from with very attractive prices but there are loans as well, even very low down payment loans though the criteria is more stringent for obtaining those loans. 

Just to give you an idea. &n