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I have come to the conclusion that the market will peak off again after a short pause. That’s at least how I see it in the trenches here on the front lines.
I have been in the midst of it all since 2003! I flew into Phoenix with two other brokers from Vegas in May of 2003 after the market started showing signs of cooling off there.
I picked Surprise, they picked Queen Creek. In Queen Creek, we drove through some rough muddy roads on the way to a new home subdivision that turned me kind of off. I had seen a drawing of what is now the post office complex on Bell Rd by Sun City Grand in Surprise and the hotels and shopping center at a developer office in Las Vegas prior to flying in.
I think that day I put my name on 20 to be built houses by Pulte at Cotton Farms in Surprise. When I went back to Vegas, we immediately transferred those to the investors and the journey had just begun! Picking up one to three investors at the Phoenix Sky Harbor airport daily, taking them to a subdivisions, signing them up for a few properties here and there, and kept doing it for a good one and half year mostly in the west and northwest valley area.
What a ride it has been since. Two BIG ups and one BIG down so far and everything in between.
The game is changing. There is more competition for the same product, affordable single-family homes for the purpose of turning them into rentals. Not all homes make the best rentals. Unfortunately, that’s not what we see happening out there! Buying a desirable rental property is the key to your success and not all agents are in tune with that market.
Don’t expect any exceptional deals! Inflation has already got the best of it and is not going anywhere anytime soon! Not quite yet, but soon, you maybe able to find what you are looking for at slightly lower price than todays values. This window of opportunity is a very small and possibly towards the second and the third quarter of 2022. If you find the right one between now and then, take it.
If you are looking for immediate cash flow it is definitely not the right market for the time being. The return is not that great but with the right down payment it keeps you afloat for the first couple of years before it goes up the 3 to 5 usual percentage. At long as it appreciates at the same rate of inflation and above, it should be ok. With all the new money put into the circulation there’s only way it could go back down like in 2008; a natural disaster of some sort or an event somewhere in the world that is going to affect us directly. Riots and Chaos is short lived.
Everywhere you look they are building multifamily housing of some sort with many towards completion. Currently a lot of families and friends are moving in together to afford the rents. Once they move out into these units, it relieves some pressure from the SFR rental market, that is more like a year from now or so. It is expected that some of the other iBuyers like Zillow are going to stop or slow down their purchases substantially as the Fed is tapering down their asset purchase.
What the cash iBuyers have been buying in 2020-2021 are mostly 4 bed room, 2000 and newer, properties around $350-425K that rent for $2,000 to $2,500, just like in 2010 and 2011 when they were buying almost every property at the auction at over the market value. Look at them now! What did they know?
It's simple. There will more people renting in the future than buying. Renting is not necessarily cheaper but you can work remotely from anywhere. Why tie yourself down to one place or another for too long?
They are moving a lot of distribution centers to Phoenix metro as well as some high-tech industries. Once we pass through this hurdle, market should get back to its normalcy. It would take a few years maybe three to even four.
There will be a place to live for everybody across the board.
The influx of population to Phoenix is slowing down a bit for now. We used to have more out of state applicants in management position applying for our properties. Now a days, it is mostly the folks who come here to work at these facilities.
In about five years Phoenix Metro may become one of the main tech hubs in the country as fast as they are are moving in ; Intet, Taiwanese microchip manufacturing facilities, Microsoft in addition to what we already have.
So, expect a short pause before the prices go back up to the next level.
Yes, you should invest for the long run. Speculation is what got us where we were in 2006. This time is different; Yet, don’t get too excited to pay over asking price on the wrong type of rental investment. There is NO rush in this market. Do your due diligence first.
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