Archive for the 'Rental Home Investment' Category

Don’t you love reading all that good news about the the Phoenix real estate market’s recovery? Guess what? You’re being lied to — as always.

This is what’s really happening: FannieMae and FreddieMac are holding foreclosed houses off the market, in anticipation of “selling” them to campaign donors.

Meanwhile, the town is being picked clean, with prices being bid up by buyers convinced that houses are going out of style — a story we’ve heard before, yes?

As an example, my BargainBot search, which is shared with hundreds of investors all over the world, is at less than 5% of it’s peak. A search I use to select premium rental homes produces one listing this morning, where it stood at 45 homes in April of 2011.

If Fannie and Freddie “sell” the homes they own to politically-connected “investors,” the rental market in Phoenix will be slaughtered.

And if they release the homes they have been hoarding into the MLS, Phoenix will hit a third bottom before the market can finally recover.

You can call the news media idiots or you can call them liars. But any news from any official source about Phoenix real estate is dangerously misleading.

Meanwhile, if you need to sell, your house will go for top-dollar at blinding speed.

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The philosophy that informs our real estate practice is the same one that will drive our property management business: Do everything we would want done, if we were the landlord or the tenant, and nothing we wouldn’t.

Everything we do as Realtors is informed by two simple ideas:

  1. We want to do everything we would want done for us if we were the buyer or seller, not the agent.
  2. We want never to do the things we hate when we see other agents doing them.

That’s a pretty simple ethic, a hard target to miss. And it is the philosophy we will deploy as we enter the property management business.

Despite many requests from our investors over the years, we’ve avoided doing this, primarily because we have never liked the way that other companies handle property management. Real estate is an active pursuit, best undertaken out in the world, where property managers have always seemed to me to be much too interested in working office hours and taking weekends and holidays off.

But that creates a market niche, doesn’t it?

We bring years of careful thinking to our representation of suburban Phoenix rental home investors. We go to great pains to find the right houses in the right neighborhoods, homes that will rent easily and stay rented to premium tenants, and then we prepare those homes to make sure they will be appealing to those tenants. I don’t blow smoke up anyone’s nose, and I don’t let the investors I work with make profit-killing mistakes. We have gotten so good at this, over the years, that the homes we are involved in routinely command the highest tier of rents, among comparable properties, attracting their first tenants in less than twenty days on market.

And we want to bring that same level of commitment to the property management business. We know what we don’t like, in the way this business has been done until now in metropolitan Phoenix, and we know what we would want done, if we were the landlords or the tenants. So now we’re going to put our philosophy to the test, to see if we can’t reinvent property management, just as we have reinvented investor representation.

We’re starting with one house, a four-bedroom ranch home in Avondale’s Coldwater Springs. We represented the buyer in the purchase of the home, and we got it at a deeply discounted price, because no one else wanted it.

Handyman of Phoenix Mark Deermer whipped the home into shape, and we were able to put in on the MLS system just a week after we had closed escrow.

Do you want to take a moment to sharpen your pencil? The home was leased for two years at full price in twelve days on market. We got $1,050 per month in rent, even though there are two competing homes in Coldwater Springs in that exact same floorplan languishing on the market at $995 and $895 a month. We had our choice of applicants, and the house was showing so much I took the lockbox off once we signed the lease.

Your mileage may vary, of course. Every house is unique, and no one hits a home-run every time at bat. But we’ve always been able to select and prepare houses that rent well and stay rented, and we are confident that we can apply the same kind of intelligence and diligence to the job of keeping our tenants happy and our landlords profitable.

Even so, this is a work-in-progress, and we’re boot-strapping the business, rather than trying to take on hundreds of properties all at once. But the systems we’re putting in place will be unprecedented in the Phoenix real estate market. As an example, every landlord and every tenant will have a page on our computer system. Tenants can log-on to post maintenance requests — or to pay their rent electronically. Landlords can check into the system to see an up-to-the-minute accounting of their funds. Every dollar of inflow and outflow will be accounted for on-line, with instantaneous posting. No more waiting to find out where your money is. No more float games with your proceeds.

There’s more — and more to come. You can see our Property Management Agreement by clicking this link. We’ll be working with the court-tested Arizona Association of Realtors Rental Lease, modifying its terms with our custom Lease Addendum, which you can review by clicking this link. The bottom line is, we’re going to do property management the way it’s never been done in greater Phoenix — happy landlords, happy tenants, happy neighbors.

I would love to talk to you more about this. We can discuss taking on the management of your existing rental properties, when their current management contracts come up for renewal. Better yet, we can go out shopping for suburban Phoenix rental homes and put them under Bloodhound Realty’s management from the first tenant. If you want to explore your opportunities, contact me by email or give me a call at 602-740-7531.

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When I write the book on earning profits on suburban Phoenix rental home investments, this house will be my example of what not to do.

That’s a nice looking home, isn’t it? It’s in Coldwater Springs in Avondale, Arizona, one of my favorite subdivisions in one of my favorite suburbs of Phoenix. I have sold many homes in Coldwater Springs, both to owner-occupants and to rental home investors, always with happy results.

So what’s wrong with this wannabe rental home? A lot, as it turns out.

For one thing, the home is facing straight west. The entire front of the house is going to get blasted by the brutal desert sun all summer long. That means much higher air conditioning bills. Tenants can glower at their bills just as well as homeowners. The result is that west-facing homes in Coldwater Springs sit vacant an average of 21 days longer than comparable north- or south-facing homes. That’s three extra weeks on market — if you’re lucky — every time the house goes vacant. Money talks: Call it a $750 loss in real cash money every time the home has to find a new tenant.

That’s a bad mistake on the investor’s part, but here’s a worse one:

Yes, that’s a major thoroughfare right behind the home. The house will always suffer from traffic noise — but never quite so much as when potential tenants are rejecting the home and moving on to the next candidate on their shopping list.

It gets worse. The house is oriented toward the corner in such a way that anyone heading south at night will flash their headlights right in the living room window. Dozens of times a night, every night. Tenants may learn to ignore the traffic noise, but they’re never going to learn to love having headlights in their home all the time.

There’s more. Check this out:

At $1,095 a month, this rental home is overpriced, but not by a huge amount. Facing north, without the headlights and traffic noise, it would be worth around $1,050 a month. Discounting for the truly awful location, it’s going to rent for less — maybe $975 if the landlord gets very lucky.

So what’s the benefit of pricing this house at least $120 a month over the rent it can reasonably be expected to earn? No pesky phone calls — to the landlord’s phone in Riverside County, California. The “marketing strategy” of posting two hardware-store signs in the window is just the icing on the cake.

Just think! Tenants can over-pay on the rent in order to have a home in a poor location. They can suffer traffic noise and headlights in the living room all night. They can pay at least $1,000 more a year in air conditioning costs. And they can deal with a remote-control landlord who, to all appearances, is committed to demonstrating in his every decision that he can’t get anything right. Why would they ever even consider renting another home instead?

In real life, the only tenants who will apply to lease this home will be the folks who have been turned down by every other landlord they have approached. All of the premium tenants — good jobs, good credit, good rental history — will be living in premium homes, while the tenants who land in this home could easily be slow-pay — or no-pay — candidates for forcible eviction. And remember, this home will cost an extra $750 in vacant days, on average, every time it goes vacant.

All of the identifying details about this property have been obscured to avoid humiliating the guilty party. But this exercise is a slam-dunk demonstration of the reasons why rental home investors need representation — expert representation.

I’m a salesman, that’s a fact. I make my money selling houses. But I don’t ever sell the wrong house, and I don’t ever let my investors make even minor errors, much less boneheaded mistakes like these. I have lots of ideas about how to make money investing in rental homes in the suburbs of Phoenix. If you would like to explore every idea I have for getting things right — buying the right house in the right location and then marketing that home to premium tenants, all at very substantial annual cash-on-cash returns — drop me an email or give me a call at 602-740-7531.

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My kind of rental home investment in Avondale’s Coldwater Springs

I’ve been watching this house for months. I wanted to snag it for one of my investors when it was a short sale, but the bank foreclosed on it before I could get an offer in play.

I took pictures of the home when I was in it then. Since it was relisted as a lender-owned home, I’ve been back in to see how it’s holding up.

The home is the Lavender floorplan by Fulton Homes, three bedrooms and two baths in 1524 square feet. It’s a greatroom floorplan, so the common spaces are abundant. There is no space wasted on hallways, and the home feels open and bright everywhere.

Even better, it’s in Coldwater Springs, a subdivision I have loved since it was built. The Coldwater Springs Golf Course threads through the community, and the Collier School, grades K-8, is right in the middle of everything — a short bike trip from this home.

The home is listed at $87,500. Handyman Mark Deermer estimates that it will take around $8,000 to make the property rent-ready. Total entry cost would be $95,500. With anticipated rents of at least $950 a month, that puts this home at a Gross Rent Multiplier of 100 months, right where I want to be.

And that’s just one house. In the weeks since the tax-credit lapsed, inventories have come back strong. These kinds of houses — premium homes attractive to premium tenants — are being offered at breathtaking prices, with plenty of room for investors to show ample positive cash-flow. Meanwhile, lender Connie Moss can do investor loans at 5.75% or better with 25% down.

I talk to a lot of folks who say they want to invest in rental homes in Metropolitan Phoenix. Many follow through, but some people seem to sit on the sidelines, waiting for someone to pull them along. This I can’t do. I am very good at identifying properties that will rent profitably and stay rented. Mark Deermer can refurbish them so they are irresistible to tenants. But if you want to get in on a house like this, you need to assert yourself.

Shoot me an email or phone me at 602-740-7531 and I’ll help you line up a rental home like this one.

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Buy and hold investors in Phoenix-area rental homes want to know: Is now the time to buy?

One of my rental home investors asks:

How are things looking one week past the expiration of the home buyer credit? Time to plan a trip?

My answer: I should track this number daily, instead of relying on memory. These numbers are approximate, but reflective of reality. This is from the BargainBot search many of my investors are subscribed to:

October 2008 — ~1,500 listings
October 2009 — ~350 listings — this was the first tax credit
January 2010 — ~650 listings — somewhat replenished
May 4, 2010 — ~420 listings — second round of tax credit
Today — 492 listings — replenishing

I’m watching particularly for houses I would want to buy for investors, since these are the ones that were picked over the most by tax credit shoppers.

It’s not my style to say, “No, don’t spend any money!” But it remains that you’ll do better if you wait for the inventory to replenish.

May 21? May 28? The big jump this week is not so much new listings but contracts that failed — usually because the contracted price was above the appraised value. We want for there to be more good houses than qualified buyers.

That’s where I’m at for now.

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For rental home investors in metropolitan Phoenix, the perfect storm is almost upon us.

I have a lot of investor clients, folks who want to buy rental homes in greater Phoenix — to buy and hold them as long-term investments. Early last fall and again late this spring I have advised many of them to sit tight, to wait the market out.

What are we waiting for?

The final lapsing of the first-time home-buyers’ tax credit. We can be quietly delighted for all the nice folks who were able to get into houses because of the tax credit. But it remains that those sweet people were driving up home prices, making it difficult for investors to latch onto better-quality rental homes.

All that changes this week. The tax credit lapses on April 30th, so we should start to see a significant increase in available properties. Still better, it will be easier to negotiate deals with sellers, and prices should be more attractive.

The first round of the tax credit, last summer and fall, had a much more profound impact on the real estate market. For the kind of stucco and tile suburban homes I like to buy for investors, prices last fall looked like this:

September 2009: +3.15%
October 2009: +2.14%
November 2009: +2.22%
December 2009: -8.03%

That’s a $10,371 drop in average sales prices from November to December. Demand from first-timers has been lighter in this second installment of the tax-credit, but inventories of the homes I’m most interested in for investors have declined by 20% from the start of the year. More significantly, it’s the choice homes that are being cherry-picked, the ones that need the least work to make them rent-ready.

All of which means that we are on the cusp of a perfect storm for real estate investors: Good homes at very attractive prices. Money is still every cheap, if you need a mortgage, and rents are holding firm. There is no appreciation in sight, of course, but positive cash flow is easy from the first tenant.

I’ve written a guide about how out-of-state investors can make good money investing in Phoenix-area rental homes. If you want to discuss this in detail, you can phone me – Greg Swann – at 602-740-7531 or shoot me an email.

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Rental home investment possibility in Goodyear, Arizona: 15814 West Papago Street, Goodyear, AZ 85338

Short sale, very aggressively priced against the comps. The downside is that it might need more work than it’s worth.

Needs window treatments, paint, landscaping, repairs.

For more details, click here.

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Channel 15 News: “Arizona real estate being snapped up by Canadian buyers?”

Further notice on Canadian real estate investors buying real property in Metropolitan Phoenix, this time from Channel 15, ABC-TV News in Phoenix:

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Rental home investment possibility in Goodyear, Arizona: 15262 West Taylor Street, Goodyear, AZ 85338

A short sale offered at a deep discount on the comps. No telling if that price will sail with the bank, but there’s no commitment until the lender gives full approval.

Nice overall, needs carpet, paint, landscaping.

For more details, click here.

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Got Loonies? Barrack Obama is the best American president Canadian real estate investors have ever seen!

The Canadian Loonie is trading at parity with the once-robust American dollar.

If you’re a Canadian real estate investor interested in buying rental homes in Metropolitan Phoenix, it would be hard to pick a better time to make your move.

Depending on your point of view, the Barrack Obama administration has been either great or lousy for Americans. But there is no doubt that Obamas’s “creative” management of the American economy has been a huge benefit to Canadians and other foreign investors.

Even if you’re buying with dollars, don’t let that stop you. Bargains abound, and the prospects for the greater Phoenix real estate market are sunny — not to pun. I shop every day for premium value in potential rental homes in the Phoenix metropolitan area. If you would like to explore your opportunities, shoot me an email or give me a call at 602-740-7531.

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Rental home investment possibility in Goodyear, Arizona: 15246 West Jefferson Street, Goodyear, AZ 85338

It’s offered as a short sale, but, for now, lender-owned homes are a tough get: Too much competition from first-time home-buyers looking for that $8,000 tax credit.

Nice overall, a lot of tile but needs some carpet, paint can just be touched up in many places, some new paint needed, needs landscaping. No range, no fridge.

For more details, click here.

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Rental home investment possibility in Goodyear, Arizona: 15241 West Monroe Street, Goodyear, AZ 85338

It’s a short sale, but that makes it eminently doable for cash investors.

Good shape overall. Needs carpet, paint, landscaping.

For more details, click here.

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More potential rental homes in Avondale, Arizona

I look at homes in the Phoenix area for investors several times a week. Here are four I saw yesterday:

The home on Granada is sweet. I don’t love lakefront lots for rental homes, but this is truly a premium spot on the globe. The house could command a premium rent, and it should do well on resale. For what it’s worth, it would make an excellent residence.

The homes on Fairmount and on Lincoln are both excellent values at their list prices.

I’m shopping for premium value in potential rental homes in the Phoenix metropolitan area. If you would like to purchase one of these homes — or one like it — shoot me an email or give me a call at 602-740-7531.

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Rental home possibilities in Avondale, Arizona

I look at homes in the Phoenix area for investors several times a week. Here are four I liked today:

I’m shopping for premium value in potential rental homes in the Phoenix metropolitan area. If you would like to purchase one of these homes — or one like it — shoot me an email or give me a call at 602-740-7531.