Homes renters want similar homes to the ones you'd like to live in, in the same types of locations, shopping and transportation routes. Keep that in mind when looking for an investment property in Phoenix. The difference is that most people who rent will not pay you what you may want as rent for most homes. Below are a few things you should consider when searching for an investment home in Phoenix, AZ.
Characteristics of ideal rental homes include.
1. At lease 2 bedrooms but 3 or more bedrooms are preferable with 2 bathroom. The 3 bedroom, 2 baths home is a staple of real estate investing. These days tough, a den which can function as an office is often a welcome feature.
2. Most families that rent homes want to be in good school districts just as home buyers would be. This is also one of the keys to greater appreciation and resale value. Homes in neighborhood with good schools will always be in greater demand then those in schools that perform worse.
3. With good schools go along good neighborhoods. Clean and safe neighborhoods rent well and hold their value well.
4. Schools, cleanliness, safety all make up a good neighborhood but along with the former, good communication whether it be freeways or major streets will mean your rental home will be in more demand for a better rent as well.
5. When buying a home to rent make sure it’s not right next to a major street. Just as buyers try to stay away from home with a busy street in the back yard so do tenants. Such a home will be more difficult to rent and sell in the future. If you don’t have to don’t increase your risk. The better choice would be a home in the central part of the subdivision.
6. Though the outskirts of Phoenix metro are super bargains right now, it does not mean these are good deals or good investments. There is a reason Surprise and Avondale and other parts of the outer Phoenix valley took the brunt of the real estate decline in Phoenix. For one thing there are just too many homes out there; most of them are cookie cutter homes that will take time to gain some character. In addition the distances to most employment, shopping and the central city are too great for many people, especially renters who prefer to be closer to jobs. You don’t want to be an investor in the outskirts unless your are willing to take the risk of waiting for the neighborhoods, infrastructure, jobs and community to develop. For many investors, this may take longer then they expect. The most compelling reason not to invest out there now is the competition. In some parts there are literally dozens of homes for rent in small neighborhoods. These home rent for well below what they should. How does renting a $300,000 home for $900 sound? It’s very common. Some negative leverage may be good if other factors are in your favor but if you have a payment of $2,000 on that home and our take a hit if $1,100 a month, this investment is not a good one. Your taking on additional risk by investing on the outskirts of Greater Phoenix.
7. Stay in the central cities, like Phoenix, Scottsdale, and Tempe. There is more demand for rentals in these areas. Greater demand will mean increase rental income though higher rates and lower vacancy.
Keep in mind that just because a house is more expensive, it does not mean that the rent will be proportionate to that value. A $200,000 home may rent for $1,100, a $300,000 home may rent for $1,300 and a $600,000 may rent for $2,300 per month. If you are simply looking to generate income then lower priced homes will be a better buy. If your plans are different, then they need to be evaluated against the above information and adjusted to fit your future needs.
What I have written is to give you some ideas, a general feel. This should not be taken as the final answer. If you’d like to invest, and this is a good time to do it, give us a call and we’ll discuss your plans on an individual basis.
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