Phoenix Multifamily Investments | Greater Phoenix real estate and investments

Phoenix Fourplex Apartment Market for 2008

Wed, 07 May 2008 18:43:10 -0400

4 Plex sales in Phoenix, how many and how much.

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.

Steps To Finding A Profitable Tenant in Phoenix

Mon, 05 May 2008 17:26:19 -0400

How to find a tenant for your Phoenix income property.You can sometimes get a house rented by only sticking in the ground a "for rent" sign but just as with selling a home its worth going the extra effort to expose your home to as many prospective tenants as possible. Below are several things you can do to increase the possibility of renting a house, doing it sooner and possibly for more. Here is a simple quick overview of what to consider when leasing your property.

1. Start by having a clean and prepared property.

There is nothing worse to turn off good tenants then a property which is not clean and I mean really clean, clean enough that you would be happy living there. Even if you are prepping a property its probably worth it to finish it and clean it up before you show it. As imaginative as people are its just hard to imagine a dirty property clean. Just spend the money and time, you'll often get better tenants and better rents. Plus it will be much easier to take photos for additional exposure.

2. Have a "For Rent" sign.

This is almost free advertising. It exposes a property to people seeking rentals in a particular neighborhoods who may be driving around and to others in the area who may know someone who would like to rent there. Take it a step further and have a dedicated property website. You can get them for for a minimal cost online. A good example may be www.22032n74th.com. This was a bit more expensive but you can get a more scaled down version for much less. Then have a rider made for about $30.00 which will hang on the sign. The same site you created can be used for additional exposure online.

3. Expose online.

Not yourself but the property. The dedicated website you created can be used as a catalyst for additional exposure. Its an easy and quick way to have lot of photos, a floor plan, and full details. The website address can be placed in places like Craigslist.com. Photos rent properties. The more the better. I have up to 80 photos, but usually 10-20 is fine, as long as it shows the house well. Remember that many of your prospective tenants may be out of state and they will be searching online before they come here.

4. Consider paid placement and other types of advertising.

You can seek additional exposure though paid placement in some online rental sites, in the newspapers or local editions. your return for such advertising will vary depending on the exposure and the property being rented. It may or may not be worth it.
Sometimes a church or other organizations and local businesses may be in need of rentals. the more people know the better.

5. Consider placing your property for rent with an agent.

If you hire a Realtor to rent your property most of all those things will be done for you plus much more exposure then you may put together. Plus many Realtors have economies of scale for advertising. This means that they can expose your home in more paces for less money. Also consider your time to arrange meeting and show properties. This can be taken car of for you. Just a with selling, pick an agent that is active and can show you what will be done. There are fees involved but considering time and the hassle its usually worth if to hire an agent for leasing out a home or condo, but not an apartment.

6. Write an enticing ad.

Write carefully and be succinct. Make it easy for prospective tenants to reach you and get they information they need.

Having a clean well prepared property and not skimping on advertising will help you rent it out quicker and for more. Be open to negotiation. It may be worth it to lease a property for a little less and have a better tenant and leased our sooner.

Real Estate Investing, the 4th Annual AZREIA Conference and Expo

Sun, 04 May 2008 21:42:25 -0400

Making Phoenix real estate investing work for you.

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

Phoenix Light Rail and Real Estate Investment

Sat, 03 May 2008 22:26:57 -0400

Real estate investment opportunities for individual investors by the Light Rail in Phoenix

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.

I think this will be a turning point for Phoenix. I don't really know what it will mean for the entire city but its bound to have affect for those in the vicinity and even people who won't use it or care about it; because of residual effects of how others, visitors and businesses view the valley as a whole.
For me the view is improving and the city is maturing.

Real estate investors should have their eye on the opportunities that the light rail presents. With it, there will be additional appreciation and cause for redeveloping a lot of the land, including large and small lots within walking distance to the rail.

It's not too late. In fact, the slow down should spur investors to take advantage of the depressed prices. There is data out there showing the benefits a light rails system has to real estate owners.

In Dallas, Portland, San Diego and other cities where light rail projects have been completed there have been increased in values greater then properties not served by the rail. The possibilities are there, even for single family homes or small apartments.

Phoenix Small Income Property Market Update

Thu, 01 May 2008 18:41:55 -0400

April 2008 Small multifamily sales numbers for Greater Phoenix.

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

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.

Is it a Good Deal or Bad Deal, Phoenix Income Property Analysis

Thu, 24 Apr 2008 21:52:19 -0400

Is this Phoenix property a good investment?

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.

Real Estate Investment Measures. What is an IRR

Thu, 24 Apr 2008 20:16:48 -0400

The Internal Rate of Return as an investment performance measure.

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)

Phoenix Multifamily Investing 101, MAINTENANCE

Sun, 13 Apr 2008 13:08:45 -0400

Maintenance after purchasing a Phoenix apartment complex

In part one we discussed Purchasing, part two Financing and part 3 Cash Flow.

In part 4 below we discuss Maintenance just after purchasing an income property in Phoenix.

Maintenance: The big M, and a large expense. Even if purchasing and financing your apartment complex was easy, it possible you’ll soon feel pressure from the new tenants you’ve taken on, and they will call you, so be prepared. Managing an apartment community even a small one can be a full time job, especially in the beginning during the transition period.

Be prepared for the worst, and you should plan accordingly. You’ll have several tenants with their leaky pipes, noisy neighbors and lost rent checks, lost keys, weeds, parking issued, and any number of other things to deal with at any given time. This may seem overwhelming at first but once under control it just part of the process. It gets much easier when you have a team. Any vacant units will need to be prepped for rental before any showings occur.

The good side of it all is that if you currently manage several single-family units in different locations, buying a single larger complex could provide a big advantage for you. Instead of four lessees living in four separate homes, your tenants will now share a single roof, one lawn, and one parking lot, leaving you only one area to keep maintained instead of multiple. Take into consideration the value of time and the benefits of apartments multiply.

Consider hiring a property maintenance company to supervise, maintain and field calls for you, or if you have a lot of complexes or a very large complex have a handy-person on call. This will cut into your profit, but if you are a serious investor who wants to spend your time seeking new investments, it may well be to your advantage to hire someone else to take care of daily maintenance issues.

Apartment Investing should be considered a longer-term and possibly deeper commitment than owning and renting out single-family homes. Though there are other strategies, including repositioning and selling. Apartments take longer to sell than a home.

However, if done properly and run as a business, owning an apartment complex can provide a constant source of cash flow for years to come with considerable upside along the way. It may be a good hedge against inflation since rents increase at or above the inflation rate. As with any investment there is risk but reward as well. Its all about finding a balance between the two and matching it to your personal preferences, needs and plans.

Moving into multifamily is the next step after single family homes for many investors. Some just jump right into multifamily or expand their portfolios to contain both single family homes and apartment complexes to take advantage of both.

Which is better for you? A good place to start is to schedule a conversation with us. We have been in most of there roles personally and can help with your decision.

Multifamily Sales to Increase in 2008

Sun, 13 Apr 2008 12:02:03 -0400

Phoenix apartment sales to increase in 2008.

A research firm recently reported that apartment property sales should increase in 2008, but cap rates are to increase slightly as well.

Interest is definitely up with inquiries coming not just from local investors but Canada and the EU as well.

Most sellers have become more reasonable in pricing, adjusting to the current supply demand cycle.

Phoenix Multi family Investing 101, Cash Flow

Sat, 12 Apr 2008 19:27:57 -0400

Cash flow from Phoenix income properties.

In part one we covered Purchasing while part two covered Financing.

In part 3 below we discuss the ever important Cash Flow.

Cash Flow: A big advantage of a multi-unit complex is that you will get payments from multiple tenants each month, that is if you manage it right or you have a strong management team, making both vacancy and turnover easier to absorb. If a single-family home is empty, vacancy is instantly 100 percent and cash flow plummets to zero. This is a big risk to take, especially in a competitive environment where many homes are for for lease due to the soft market. In a building with four units, if one or two of the apartments are empty there is still income flowing to help pay the bills, at lease part of them. If you buy right you could be in the black even with a constant vacancy. Compare that with a single-family house where just a few months without rent can quickly put a landlord in a cash flow trouble.

Because multi-family property values to cash flow and net income than single-family units, they tend to be less prone to speculative swings in value during both rising and falling markets. Although the previous wave of price upsurges did take income properties with it along with houses and apartments, as well, are seeing less demand and price corrections even though their pricing is more stable. These values are often stated in the form of a “cap rate”, which is the ratio between the net income and capital cost. For example, a building purchased for $500,000 that generates $50,000 in net operating income has a cap rate of 10 percent. When valuing properties, it is useful to think of the cap rate the same way you would look at a rate of return for any other investment. The higher the cap rate, the higher the rate of return on the investment. A fully leased apartment complex in a rapidly developing area will command a lower cap rate than an older building in a questionable part of town which is perceived to be a higher risk proposition. This is so, because appreciation also plays a role in market price. Thus a seller commanding a lower cap rate because of future appreciation is taking advantage and monetarizing future potential gain from appreciation other then pure income. Cap rates in less desirable areas tend to be higher because the growth in value of rents and land is less likely thus the value has to be lower and cap rate higher to compensate and compete.

Have more questions about investing in Phoenix income properties? Give us a call.

Part 4 covers Maintenance.

Phoenix Multifamily Investments 101, Financing

Sat, 12 Apr 2008 17:43:32 -0400

Financing Phoenix Apartment Investments

Part 1: Multifamily Investing: Purchasing

Part 2 below discusses Financing Phoenix apartments.

Financing: Usually a residential loan is sufficient for buildings with one to four units, while a commercial loan is necessary for buildings with five+ units. Residential financing has less stringent guidelines and is based more on borrowers financial status while commercial financing puts more of the burden of the performance of the property. Typical financing for one to four units will require 20-30 percent cash down but 10% may be possible as well, fees vary, but usually average around 2-4% percent of the purchase price.
To add larger investment properties to your real estate portfolio you need to apply for a commercial loan, which has different underwriting and approval processes. Commercial loan lenders are much more interested in profit and loss histories for the project itself. That can make convincing your bank to give you the money based on forward-looking projections more difficult, but its often easier to get a larger loan then a smaller one. If possible, you should provide at least a 2-5 year historical report of income and expense data with your application package. Get this from the seller and compare it against current market conditions.

Commercial loan lenders prefer to do larger loans so it may be difficult to find financing for smaller amounts. That means you’ll either have to think bigger and spend more upfront or shop around until you find a bank willing to finance smaller deals. Some local banks will do smaller loans. Lenders tend to look at all cash flow including the amount of money you have in reserve. Lenders will also look at other costs you’ll incur besides the mortgage; including taxes, regular maintenance,management fees, vacancy rates, and deferred maintenance. Banks need to see an ability to make repayments. Most lenders will have a set income to debt ratio, called debt service coverage ratio. A DSCR of 1.0 means for ever dollar of income there is a dollar of debt repayment. Expect most lending institutions to require a DSCR of at least 1.25 before they consider a loan viable.

Let us know if you have specific questions about investing in apartment buildings.

Part 3 is about the good part; Cash Flow.

Phoenix Multi-family Investing 101, Purchasing

Sat, 12 Apr 2008 12:20:45 -0400

Phoenix Apartment Investing.

Investing in Phoenix Apartments 101 (a series)

Considering upgrading rental properties, perhaps moving from single-family homes to investment multi-family buildings? Have no fear. While managing these complexes, whether they are a fourplex or have 10 apartments or 60, can sometimes feel more like running a business, as it is a business, than managing a real estate investment, many of the tax, landlord and general real estate investing rules that apply to single-family housing also apply to multi-family investments and more. Below is a series on the process of investing in multifamily real estate in general and Phoenix Metro specifically. This series looks at the steps of the process in several entries.

Purchasing:
Obviously, the overall cost of a multi-family building or apartment complex is much higher than a single unit like a condo. Small buildings like, six units can range anywhere from under $100K per unit on up several hundred thousand dollars, depending on the market and location in the city; you’ll need to have more cash available up front than if you’re buying a single-family home. The cost “per door” varies widely from market to market and neighborhood to neighborhood, but is typically lower in larger properties, a result of various economies of scale.

An good building has a good mix of two-and three-bedroom apartments, but your more likely to find a mix of 2 bedroom and 1 bedroom units. The larger units provide an opportunity to rent to families, but 1 bedroom units can be an important part of the mix if your in the right area or targeting the right market. Of course, this all depends on the location of the property. A building near a college campus, for instance, might very well find plenty of tenants looking for one-bedroom apartments. In most cases, though, buildings with a mix of unit sizes will outperform those packed with studios or one-bedrooms. In fact I’d stay away from any units with studios.

Location matters, so if you can, choose a property near the bus lines, local shopping centers, recreation facilities and other local attractions. This importance of the former cannot be stressed enough. Well located apartment buildings command better sale prices and higher rents because they will be more desired and sought out by landlords and tenants.

The next step is Financing.

Investing in Phoenix Apartments 101 (a series)

The next step is Financing.

4Plex for sale in Arcadia Neighborhood in Phoenix

Tue, 01 Apr 2008 21:03:59 -0500

Phoenix Apartments For Sale

Just released for sale is this superb mid century modern fourplex in a great rental neighborhood and a great location and potential for condo conversion. Arcadia is one of the most in demand neighborhoods in Phoenix. Its in the middle of it all with shopping, schools, jobs, transportation, entertainment easily accessible. This is what makes it popular with residents and this is what could make it popular with second home buyers looking to buy a condo. Or buy the entire fourplex and keep one unit for your self as a vacation home. It could work and its a good property and neighborhood to do it in.

Priced at $550,000
3637 E. Glenrosa in Phoenix, AZ
4 Units
3 1 bedroom and 1 bath units.
1 2 bedroom and 2 bath unit.
Covered parking.
Laundry facilities for additional income.
Many improvements.
Lots of capital improvements.
11,285sf lot.
Zoned medium density multi-family.
No deferred maintenance.

Visit the property specific website at www.GlenrosaApartments.com for our multifamily demographic document, aerial photos, interior and exterior photos and a buy and hold financial analysis. Call us if you have any questions.

Phoenix Multifamily Investments | Greater Phoenix real estate and investments

Phoenix Fourplex Apartment Market for 2008

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Steps To Finding A Profitable Tenant in Phoenix

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Real Estate Investing, the 4th Annual AZREIA Conference and Expo

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Phoenix Light Rail and Real Estate Investment

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Phoenix Small Income Property Market Update

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Is it a Good Deal or Bad Deal, Phoenix Income Property Analysis

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Real Estate Investment Measures. What is an IRR

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Phoenix Multifamily Investing 101, MAINTENANCE

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Multifamily Sales to Increase in 2008

Phoenix Multi family Investing 101, Cash Flow

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Phoenix Multifamily Investments 101, Financing

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Phoenix Multi-family Investing 101, Purchasing

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4Plex for sale in Arcadia Neighborhood in Phoenix