Steve Rozenberg is the VP of Investor Education with Mynd Property Management, and he asked Brandon Graham, the Portfolio Manager of Phoenix Operations with Mynd to talk about some of the common issues and challenges that face Phoenix real estate investors and landlords.
Today, our focus is on investing in Phoenix. If you’re not from the Phoenix area, you should get to know some of the real estate opportunities that exist here. It’s becoming an excellent place to own rental property, and the secret is getting out. More and more investors are flooding the Phoenix real estate market in the hopes of generating some early cash flow and enjoying plum long-term returns.
So, let’s talk about Phoenix and why you should invest in property here.
People are Moving into Phoenix
For starters, the pool of Phoenix tenants grows stronger every day.
Phoenix is a booming area. Lots of people have begun buying investment property here because of the strong economic factors and the increase in new residents. It’s an excellent place to put your investment dollars, whether you’re thinking in the short term or the long term.
Unlike a lot of real estate markets around Phoenix, the property prices here are fairly low. Now is the time to enter the market because there are outstanding price points. When you think about what it takes to invest in some of the California markets or even in cities on the east coast, you will quickly see that you get more for your money in Phoenix.
We always tell potential investors to get in now, while prices are still low. Because as people continue to migrate into the state from places like California and the Midwest, the market will respond. It’s a lot harder to get a job and find affordable housing in California. And, people from places like Michigan and Chicago are tired of shoveling snow every winter and scraping ice off their car windows. Population growth will continue.
The surge in industry and commercial activity is also helping the market. There’s a lot of growth in the technology sector. More and more companies are coming to Phoenix, and they’re hiring. We expect the market will only continue to improve.
An Example of Investment Opportunity
Here’s an example that beautifully illustrates what we mean.
A client of Mynd Property Management with just one property in Phoenix also had a townhouse in Denver that they owned for several years. The value on that townhouse was high, and we didn’t think that the Denver market would support it gaining any additional appreciation in the near future. So, we helped the client sell that Denver townhouse.
Using a 1031 Exchange, our client was able to buy two single-family homes in Phoenix. That’s how much further their money went in this market.
It’s a good example of an investor knowing to work with a Phoenix property management company to leverage their investment and set themselves up for greater returns.
Timing Matters for Phoenix Real Estate Investments
One thing that we always tell investors to look at is the economic drivers in a particular market. If you find a great city to invest in and the price structure works and the property matches your investment goals, you’re making a good start. But, you have to look at the market before you close the deal. Find out where people are working and what the major industries are. If there’s one major employer in town and a single industry driving the economic engine, that’s a big risk. Instead, you want a number of different industries driving the economy. That way, if one of them takes a huge economic hit, the value of your real estate won’t tank. There will be other industries and employers to keep the city afloat.
There’s also the matter of timing.
Timing is everything. Think about what things looked like 10 years ago, after the housing recession. Phoenix might have been a great place to invest then, but it wouldn’t have been the best place to try and sell your asset. You probably would not have been able to sell it for the price you wanted.
This is a good reminder about the nature of real estate. It’s cyclical. The markets go up and down and the value of your property goes up and down too. Make sure you’re buying when it’s smart and selling when it’s profitable. You have to make sure you have access to reliable data. Look at those numbers and ask questions about what is driving the statistics. You’ll know if it makes sense.
Phoenix makes sense because it’s easier to enter the market than other cities. It’s also easy to see that the values are climbing. Phoenix also has a lot of employers. There’s no single company in town where everybody works. If one of the main companies in town pulls out, it won’t cause an economic downturn across the community and the market. More companies are actually moving into Phoenix. They find that it’s cheaper to run their operations out of our city, so they’re shifting to this area.
You should invest in Phoenix real estate because there’s an influx of new tenants coming from California and other states that have higher housing prices and lower quality of life. Phoenix also has more space to grow. The market can continue to expand. In other cities, the only way to go is up, and prices are heading in that direction, too.
Phoenix is also a smart place to invest because it’s popular with retirees. We’ve found that people who are retiring want to rent instead of buy. They like the flexibility and freedom of low maintenance living.
If you’d like to talk more about investing in Phoenix rental properties, please contact us at Mynd Property Management.
You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.