This from my Arizona Republic real estate column (permanent link):
I work a lot with investors, and I’ve written in the past about the factors I think are important when buying a rental home in the Phoenix real estate market.
I want for the homes I choose to be in built-out neighborhoods in built-out communities with ready access to schools, churches, entertainment, shopping and transportation. More than anything else, I want for there to be plenty of good-paying jobs nearby.
But even taking account of all that, tenants seem to be getting thin on the ground. Is there a shortage of tenants? To the contrary. Folks who have just lost their homes to foreclosure need to rent for a couple of years to get back on their feet.
There’s no shortage of tenants, but we’re seeing a sudden surplus of landlords. Out of state investors are snapping up Valley tract homes at bargain prices and posting their “For Rent” signs in the front yard.
Are these homes necessarily good rental candidates? Probably not. Will they rent? At a low-enough price they will. And landlords are feeling price pressure for the first time in years, all across the Valley.
What is missing, as is so often the case in real estate, is intelligent marketing. There is a huge supply of tenants in Metropolitan Phoenix who would love to live in suburban single-family rental homes. Where are they? In apartments.
Any why are they in apartments? Because apartment communities market very intelligently to tenants. Can an ordinary landlord compete against a $99 move-in special? Probably not. But here is an offer for appealing to apartment renters that makes sense to me.
Instead of a 12-month lease at $900 a month, offer 24-months at $950 — with two months rent-free. You might go for the second and twenty-fourth months, but I think making both Decembers rent-free could be a killer proposition.
The tenant pays more per month, but less over the 24 months. The landlord gives up $700, but nets a faster lease-up on a longer lease. Everybody wins — and that’s the power of marketing applied to real estate.
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