The prices on lender-owned homes in the Phoenix area are getting to be incredibly low. It’s true that many of these homes will require some serious work to bring them back to turn-key condition. But others require little more than a cosmetic effort to return them to rent-ready condition.
Here’s the best news: Because the prices are so low, because interest rates are still very aggressive, and because rents are holding their own through the rough real estate market, it’s relatively easy to make a newer suburban home throw off positive cash flow. It could be that we’ve already found the bottom in the Phoenix real estate market. But, even if we have not, a well-chosen rental home will self-amortize. You can buy now, while the selection is great, as you wait for the market to fully recover.
A great example of a near-turn-key lender-owned home is 14912 West Watson Circle in Ashton Ranch in Surprise, Arizona. The home will need some cosmetic work, especially paint and landscaping, but it is in very good condition for a foreclosure. The cost to make it rent-ready might only be around $5,000, and, as this cash-flow analysis shows, the $115,000 list price should yield a positive cash flow even using relatively pessimistic assumptions.
Here’s the bad news: As I write this, I may have already sold this home.
Here’s the good news: There are dozens more like this, well-priced lender-owned homes in decent shape that can make very nice, cash-flow-positive rental homes.
These homes are not flip candidates. There’s not enough upside in the short run to justify the risk. But as buy-and-hold rentals, they could end up paying for a lot of feathers for your retirement nest.
Further notice: I ended up writing a contract on this house, but here are 26 more newer suburban homes priced at $115,000 or less. Some are in better condition than others, but all of these homes are in areas that can command premium rents and should appreciate well over time. Each one requires on-the-ground inspection, but I’m very choosy about what makes a good rental. If we pick the right home, it should stay rented consistently for the entire time you own it.
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