Renting vs Buying Phoenix Metro Area

 
 
 
Where you decide to live and whether you decide to buy or rent are large lifestyle decisions. We break down some of the top reasons for each option. 
REASONS TO RENT IN PHOENIX
  • Bad Credit. Maybe you need time to rebuild your credit from a bankruptcy, foreclosure or divorce.  These are all large lifestyle changes that can impact your credit and while renting you can work on re-building.
  • No Maintenance Expenses. Perhaps right now your time is tight so you would rather have someone else be responsible to fix the leaking faucet.  With renting you call the Landlord for these issues.
  • Job Uncertainty. Are you between jobs, or maybe thinking about switching soon. Being a renter allows you the freedom to do so. Especially if you are on a shorter lease agreement, or even a Month to Month.
  • Which Neighborhood Is Best? Perhaps you are new to the Phoenix metro area.  If so, it is nice to have some time to find the right place for you and renting allows you to have that time before settling down some roots.
  • Big Life Changes. As we all know, you can’t predict your future. We do our best to plan it out, but it doesn’t always turn out that way. Being a renter allows so much more freedom and can be a much-needed relief while you’re dealing with some bigger things in life.
REASONS TO BUY IN PHOENIX
  • Decorating Control. As a renter you really have no control over things like paint & carpet color but of course once you own a home all of those decisions are up to you!
  • Equity. When you have a mortgage, you increase your degree of ownership in your home with every payment. A good general rule is that if you plan to stay in your home for at least five to seven years, the costs of owning the home are more likely to be offset by accrued equity and increased housing value. If interest rates drop, you have the option to refinance your mortgage at a better rate. When you pay rent, you are actually paying your landlord’s mortgage and adding equity to their bank account.
  • Tax Deductions. Being a homeowner you can deduct mortgage interest along with your property taxes. Renters do not get this bonus! Also, if you meet certain requirements the IRS won’t apply “capital gains” tax on your profits when you sell your home. In addition, those who work from home may be eligible to take deductions for their home office and a portion of utilities.
 
RPMWV Phx offers full service Phoenix Real Estate & Phoenix Property Management services.  For additional information you can contact us at info@rpmwvphx.com or 623-748-7800.

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Phoenix Property Management Does come with an Instruction Manual

 

Throughout our 25 years of Phoenix property management, we have witnessed far too many hardworking families fail at the real estate investing game. We have watched as they consider investing as part of their retirement plans, find the perfect homes at the perfect times and perfect prices, make the offers, and never even stop to consider the fact that real estate investing is a JOB. And it’s not an easy one. They do not factor in the time they will spend at their properties, preparing them for tenants, showing,  leasing, responding to maintenance calls at all hours of the day (or night), dealing with tenants who don’t care for their properties, inspecting the land and homes to be proactive about maintenance, and possibly even dealing with evictions. When you factor all of those aspects into the purchase, it may seem like a daunting task to be an investor, and may cause you to question why people even do it in the first place.


Enter the Instruction Manual
With the right team and council behind you, Phoenix property management does not need to be an overwhelming burden. As the leading property management company in Phoenix we know what it takes to be successful. We have witnessed, far too many times, when people bite off more than they can chew in this industry, but we have also been present for success stories. In fact, we wrote the book on successful property management…literally.
If you are considering taking the leap into the world of rental property investment, don’t.  At least not right away, Instead, make sure that you are properly educated and have thought everything through – that’s the best way to be successful.

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Multi-family vs. Single-family Phoenix Rental Property Investment



WHAT YOU NEED TO KNOW ABOUT MULTI-FAMILY VS. SINGLE-FAMILY RENTAL PROPERTIES BUT WERE AFRAID TO ASK
For a new real estate investor, the question of whether to buy a Multi-Family Residence (MFR) or a Single Family Residence (SFR) can be a tough question. Like most things in life, there are pros and cons to each. You simply have to decide what is best for you in either case after knowing a few facts. Investing in real estate, either an MRF or an SFR, is a good investment. As long as you have a long-term plan in mind, you can make it successful.
Why Invest in a Multi-Family Residence? 4 Reasons to Consider….
At first glance, investing in a multi-family residence seems to bring the most cash flow. After all, more units to rent means more money, right? Well, that depends on your long-term goals. Here are 4 reasons consider investing in an MFR.
Property Cost
While it’s true that the overall cost of an MFR will outstrip an SFR every time, the per unit cost will be far less. Additionally, your cost to maintain that unit and even property manage that unit will be far less on a per unit basis. Let’s say you owned 2 SFRs and 1 MFR with 2 units. The MFR enjoys economies of scale for things like repairs and maintenance. If you need to replace the plumbing in the MFR, you can do one big job on both units, whereas with the SFRs, you’ll have two completely different plumbing jobs and that will mean higher cost. In addition, your state may require an onsite employee if the MFR is over a certain number of units.
Financing
The main difference you may not know about property financing is that even with best credit, banks will limit the number of mortgages you can hold—usually to 10. But, if you finance 10 MFRs with 5 units each, that’s 50 units you can call your own. And you can enjoy the cash flow of all those tenants.
Vacancy Expenses
This is a no-brainer. If your SFR remains empty, that means the cost for that unit is going to come right out of your pocket. On the flip side, if you have an MFR that’s only partially rented, you can offset some, if not all of the cost with the rent of the other units that are leased.
 Cash Flow
This has been mentioned before, but it’s worth bringing up separately; typically with MFRs, you’ll generate a positive cash flow quicker, especially with new units. That said, as MFRs age, and they typically don’t age as well, more of that initial cash flow will be eaten up by maintenance and upkeep costs, so be sure to keep that in mind as you consider where to invest your resources.
Why Invest in a Single-Family Residence…5 Things to Consider
So with all of the above reasons, why would someone consider investing in an SFR instead of an MFR. Again it depends on your long-term goal. If you’re looking to invest in a property and see a greater return on your investment in the long-run, SFRs might be the best option.  Here are 5 reasons to consider a SFR.
Location
Typically, an SFR is located in a nicer locale than an MFR. Consider a quiet neighborhood and its typical location compared to where apartments are located. Good property locations can make a unit easier to rent.  After all, location, location, location still matters in real estate.

Tenant Quality
Most property management companies will tell you that tenants in SFRs are usually more conscientious about their property than tenants in an MFR. That’s usually because they’re looking for a home rather than just a place to live. Tenants that choose a SFR can have more long term residential goals.
Tenant Turnover
Phoenix property management team RPMWV Phx says that tenant turnover is the single largest cost for real estate investors. That’s why SFRs are often a better play. Longer renting tenants means you won’t have to constantly advertise, show, and re-lease your property.
Appreciation
The Phoenix area is a booming housing market and for Phoenix property management, there is ample opportunity to get a good return on your investment. SFRs usually go up in value over time and so the opportunity to make money just by owning a property can be significant.
Exit Strategy
Here is where we talk about long term goals. With an SFR, you should have a goal to sell the house and pocket the investment once the property is paid off or go for a 1031 exchange. If you handle it correctly, you can have a big payday at the end of your investment which can fund a retirement or other investments.

So, which is right for you? That depends on your personal goals and situation. Rental property investing requires time and patience, and with a really good partner like RPMWV Phx you can be successful.


RPMWV Phx offers tenant & full service property management throughout the Phoenix metro area.  Call today for information on local specials. 623-748-7800

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Is Now the time to Buy a Rental Property in Phoenix – Pines Unit Subdivision ?

Last week we took a look at the Greater Phoenix Rental market data and broke it down by city in different categories. This comparison showed the rental market patterns in Phoenix over the last three years


All of the data was good for landlords. Rental prices have gone up Valley wide and inventory is down. This is resulting in many less vacant days while waiting for a renter.

So is it a good time to buy a rental property in the Phoenix market now? Perhaps, but while the rental market has been getting better over the last three years, the price of buying a home has also gone up.  

Over the next few posts, we will take a look at whether buying a rental property makes sense. We will focus on specific subdivisions and “run the numbers”. At least the basic numbers to see if further investigation is warranted. 

We will take a look at actual and current for sale properties. So if you keep reading you may want get a started with being a landlord.


The property that we are looking at is at 14002 N. 49th Ave. #1020 in the Pines Unit subdivision. It is currently listed at $82,300. Let’s take a look at the basics of a five year investment.


Sale price= $79,000 (you probably can get a 3% reduction off the list)
Turnover= $5,000 includes new paint and carpet
Marketing Costs= $400 for tenant placement services from RPM West Valley
Rent=$750 per month
Maintenance Reserve=$5,000

Property Specifics
Sq Ft 842
2 BDR 1 Bath
T-Bird and 49th – Pretty good location for renters

Ok, so you are out $89,400 which includes the sale price, a pretty decent turnover budget and hiring a company to lease it for you. At this price, it should conservatively rent in a month and you have a pretty high percentage of keeping it occupied for at least two years (just a bit less than the average tenancy projection for this location).

First two year return= $750*13=$9750/2 = $4,875 – $520 tax (annual) – $300 insurance (annual) $1,848 HOA fees (annual) = $2,207 = 2.4% ROI annualized

Next three years= $800 *35 (one month to re-rent and realistic rent increase) -$1400 (turnover & marketing costs from first tenants and to re-rent to second tenancy) = $26,600 – $1,650 taxes (3 yrs) – $1000 insurance (3 yrs)- $6000 3 yr HOA fees with projected increase (these are painful)= $17,950

Annualized return pre-sale =$20,157 revenue /5  yrs / $89400 outlay = 4.5% ROI per year.

So lets say you sell the home after 5 years, there is  good chance it will increase in value. Let’s assume the price will go up 2% per year (a very conservative estimate judging by today’s market figs).  You will get $85,512 at the end.

5 year Revenue-Expenses = ($6,512 gain + $20,157)= $26,669
Initial Expenses=  $89,400 initial outlay 
=29.8% ROI

This assumes your 5K maintenance reserve will be exhausted over the five year’s of tenancy and does not include any tax advantages or disadvantages. The market rent and appreciation numbers or conservative and based on present and historical facts of the Phoenix rental market.
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Help With Predicting your Rental Properties Fortune in Surprise, Arizona

Last week we reviewed our 2014 Glendale rental property listing statistics. Hopefully this was helpful for you in analyzing your  property rental in Glendale and figuring out whether your rental home was priced right.

Today we will continue with another game show allusion. We will go over our rental numbers from the homes we manage in Surprise. This may help you determine your Surprise rental properties fortune.
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RPM West Valley listed 31 properties for rent in Surprise in 2014.  The property type breakdown was 29 Single Family Homes and 2 Condos/Manufactured Homes. The listing rental price was from $650 to $1695 with an average rental price of $1090 and a median price of $1099.

Focusing specifically  the single family rental homes in Surprise in 2014, the average time on the rental market was 23.3 days and the median days on the market was 12 days. The average rental price was $1,113 and the median listing price was $1099.

There were four Single Family Rental Properties in Surprise that took over 30 days to rent because they were originally offered at prices higher than our recommendation. When they were subsequently brought down to our price recommended (and market rent) the houses rented quickly.  Bringing these properties to average would put the average days on the market of our Surprise Single Family Rental Homes to a bit below 20 days.

In summary, there is a high probability we can rent a property Surprise in less than 30 days if we are able to price a rental home at market value. If you are having difficulties renting your property in Surprise, Arizona chances are you may have the rental property priced too high or may need a bit of help on the marketing side.

We do offer an aggressive marketing strategy for our property owners and have licensed and motivated leasing agents that can sift through the applicant pool quickly and get a qualified tenant in place for you.

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Is Your Rental Property Priced Right In Glendale,AZ

Yesterday’s Super Bowl in Glendale and looking at all of the game stats got me thinking of all the properties we manage and the associated statistics we had for 2014 in that rental market. I reviewed last year’s market statistics from the rental properties we manage in Glendale and have come up with some interesting numbers.

RPM West Valley listed 20 properties for rent in Glendale in 2014.  The property type breakdown was 15 Single Family Homes and 5 Condos/Townhomes. The listing rental price was from $675 to $1875 with an average rental price of $953 and a median price of $847.

Focusing specifically  the single family homes in Glendale in 2014, the average time on the rental market was 26.5 days. The average rental price was $1,076 and the median listing price was $995.

There were three Single Family Properties that took over 30 days to rent because they were originally offered at prices higher than our recommendation. When they were subsequently brought down to our price recommended (and market rent) the houses rented quickly.  Bringing these properties to average would put the average days on the market of our Glendale Single Family Rental Homes to below 23 days.

In summary, there is a high probability we can rent a property Glendale in less than 30 days if we are able to price a rental home at market value. If you are having difficulties renting your property in Glendale,AZ chances are you may have the property priced too high or may need a bit of help on the marketing side.

We do offer an aggressive marketing strategy for our property owners and have licensed and motivated leasing agents that can sift through the applicant pool quickly and get a qualified tenant in place for you.

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3 Key Steps to Determine a Good Rental Investment



If you are considering becoming a landlord and have researched the neighborhood including crime statistics then it’s time to run the three most important numbers to see if the property is a good rental.  

1. Net Rental Income = Gross Income – (Operating Costs + Debt Payments)
In this case your operating costs include such things as taxes, insurance, utilities while vacant, property management fees, monthly mortgage payments as well as annual or variable costs like repairs, vacant periods and possible utility deposits. Many investors utilize 1.5 times the monthly rent amount for repairs during tenancy and 2 times the monthly mortgage payments for your vacancy costs.  If your result seems to be less than you consider “worth your time”, it’s time to start looking at a different property.

2. Calculate Cash-on-Cash Return: to do this multiply the net rental income by 12 to determine your annual cash-flow.  Next divide your annual cash flow by the total amount you’re going to have to invest to get the property rented out not including the cost of the mortgage but the out-of-pocket expenses.  For example, if you will be purchasing the property for $100,000 with a mortgage for $75,000 you divide the annual cash flow by $25,000.  The closer your result is to .4 the better and really .3 and up is a good sign to move forward.  With a number less than .2 you probably want to move on because it will simply take too long to recoup your expenses.

3. Determine your Net Rental Yield = Net Rental Income *12/Property Value.  For example, if you have the $100,000 property from the example above and the rental income is $900/month than the Net Rental Yield is 10.8%.  In other words, your investment property will produce 10.8% of it’s own value each year paying itself off in under 11 years.  Once you reach 100% your investment is paid off and you have an investment that is producing “pure capital”.  Keep in mind that property values change and as such the Net Rental Yield will change.  The higher the Net Rental Yield of the property, the better the opportunity for net positive cash flow.  Many investors think that 8% is a good bench mark however you can calculate these numbers for several properties in your area to get a good idea of the range.

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Phoenix within the TOP 10 for Rental Properties!

With the crazy adjustments in the stock market and large global cities on the verge of filing bankruptcy, investment property continues to be a valuable place for cash heavy investors.  Additionally, with interest rates rising, several hot cities should see a small increase in inventory available for purchase.  According to MSN Money, the top 10 rental cities are the following:
 
1. Las Vegas – 8.6% vacancy rate and average rent amount of $803/month
 
2. Orlando, Florida – 7.9% vacancy rate and average rent amount of $871/month
 
3. Colorado Springs, CO – 5.3% vacancy rate and average rent amount of $713/month
 
4. Memphis, Ten – 11.2% vacancy rate and average rent amount of $682/month
 
5. Jacksonville, Florida – 10.2% vacancy rate and average rent amount of $800/month
 
6. Houston – 10.2% vacancy rate and average rent amount of $792/month
 
7. Atlanta – 9.1% vacancy rate and average rent amount of $849/month
 
8. Columbus, Ohio – vacancy rate 8.6% and average rent amount of $690/month
 
9. PHOENIX, AZ – 8.9% vacancy rate and average rent amount of $755/month
 
10. Oklahoma City – 8.3% vacancy rate and average rent amount of $584/month
 
RPM West Valley offers full service phoenix property management services including but not limited to marketing/advertising your property on 40+ websites plus property signage; conducting thorough checks of background, criminal, credit, employment and rental history; handling all lease documentation; coordinating maintenance with our own maintenance staff or sub-contractors; full interior/exterior inspections with pictures; collecting rents, serving notices, handling evictions, providing detailed monthly accounting statements and notifications online and also offer direct deposit options with a dedicated Accounting Manager; and filing Monthly Privilege Taxes for your property.  
 
For more information contact us info@rpmwestvalley.com, 855 748 7841


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