This is my column for this week from the Arizona Republic (permanent link). I wrote this last Tuesday, but it coincides nicely with Barry’s post this morning.
Are you an investor looking for a rental home that will stay rented? Buy a home that’s worth living in
I represented tenants for my first two years as a real estate licensee. Working with tenants didn’t pay very well, but it was a good way to get a lot of real estate experience very fast. Gradually I started working with home buyers, and then with home sellers. By now, I only work with tenants as a courtesy. It still doesn’t pay very well.
But in those two years, I saw an awful lot of rental homes. Or, more precisely, a lot of awful rental homes. Again and again, I would find myself wondering why anyone would think a particular house would be appealing to tenants. Not just the condition of the property, often atrocious, but simply the location itself. It’s astounding to me how many vacant rentals are situated nowhere near where tenants might want to live.
In the years since then, I’ve represented a huge number of investors. Market conditions haven’t been kind to them lately, but Phoenix is once again a market ripe for landlords. Prices are low and cash flows are positive. If landlords buy the right properties to use as rentals, the homes should rent quickly and stay rented.
So which homes will work best as rentals?
I’m looking for a home in a built-out suburb. Buckeye is a bargain for owner-occupants, but why would tenants move to a town with no employment base? What I want are jobs, schools, shopping and entertainment, all nearby, with decent freeway and bus access. I want a north-facing home; tenants read their power bills, too.
Am I looking for the cheapest house? No. Price matters, but what matters more is livability. Parents worry about the kids taking a header down the stairs, so I want a single-story home. There has to be at least a little grass in the back yard so toddlers can romp.
Here’s the magic bullet: If you buy a house that will resell well, and you maintain it in a way that communicates that you like and respect your tenants, it should rent well the whole time you own it.
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Doug Quance says:
I just wrote a post today that included my take on the price-to-rent ratio… but as usual – your take is so much more eloquent and thoughtful.
The timing for buyers – especially investors – is at hand. Careful selection (including location, as you indicated) can be a fruitful experience.
May 12, 2008 — 11:52 am
Mike Farmer says:
I submitted my weekly contribution to Bigger Pockets this morning on a similar subject. We must all be on the same wave length.
May 12, 2008 — 6:16 pm
Tom Vanderwell says:
Good advice Greg. So many of the investors that I work with don’t look at things from that angle.
Thanks!
Tom
May 12, 2008 — 7:18 pm
Duh Only says:
Just a little rant from a tenants perspective: If you want to rent your house out, try CLEANING it first. Yeah, I’m sorry the last tenant trashed the place but what makes you think I want to clean it up? I looked at six apartments before I found the perfect one and at least three of them I couldn’t even believe were being shown. Would you rent a house that smelled like dog urine? With no screens in the windows? Holes in the wall? Sh*t stains on the toilet?
Don’t be surprised at the kind of tenant you’ll get who finds those conditions acceptable. DUH
May 13, 2008 — 8:05 am