Even in a real estate market where you can acquire property at huge discounts, you still need to do your homework! What you know, or don’t know, will impact the outcome of the investment. For example if you purchase a property in the wrong area of town or inaccurately calculate the rental market, then you may significantly hinder the growth of your investment. The proper research will allow you to minimize risk. Take the guesswork out of your decision to invest in real estate. This article will not necessarily tell you exactly which piece of real estate to purchase; however will highlight key components that should be researched when buying investment property in Arizona. You will also be provided with a few tools that will aid you in your analysis.
Buying Investment Property: Location
The first component of buying investment property in Arizona is to determine the best location. How would you know this, unless you are actively working in or studying the Arizona real estate market? Just because you can pick up a single family home for $40,000 doesn’t mean it is the greatest deal out there. There is a lot of money flowing into the Arizona market from investors located in other parts of the country, as well as other parts of the world. Many of these investors are buying investment property because it is cheap, not necessarily because it is in the best location. We at Leagan Realty know the areas that perform well both as rentals and for resale when you decide to sell. There are many factors that determine a good rental area in Arizona that we help our investors to narrow down.
Buying Investment Property: Property Type
The second component of buying investment property in Arizona is to determine property type. Whether it is a single family, townhome, condominium, or multi-family, you need to make sure the property fits in with your overall investment strategy. If you are looking to buy and hold for cash flow or if you are looking for a fix and flip property will be an important component when buying Investment Property in Arizona.
Obviously the goal is to acquire a property at the lowest cost possible producing the highest possible rate of return.
Buying Investment Property: Market Value
The third component of buying investment property in Arizona is accurately determining the market value. This is a MUST and to ensure the best information it is recommended that you contact a real estate professional who can do a market analysis on properties with price comparatives and rental comparatives so you know the value of what you are buying and you know your true rents that area will support..
This section is not a guide to completing your own market valuation; however will provide you some tools to do your own due diligence and to be knowledgeable of the assessment process. There are many websites that will run an automated valuation for a specific property. In determining the actual value, these should only be used to give you a ball park and do not always take into account all factors that could impact what the property is really worth.
How is a property’s value determined? This is not an exact science, but more of an educated opinion. The true value of a property is what someone is willing to pay for it. Whether it is an appraiser or other real estate professional, the market value is determined by analyzing comparable home sales in the subject property’s locale. Some comparable factors include; age, lot size, square footage, number of bedrooms and bathrooms, and amenities (pool, upgrades, etc.).
At the end of the day, the market value will have a direct impact on what you will pay for a property. If the value is miscalculated, then you may find yourself overpaying for a property. This could result in a hit to your expected profit.
Buying Investment Property: Rental Market
The fourth component that should be researched before buying investment property in Arizona is the rental market. Whether your intention is to buy and hold or to fix and flip, it is important to know the strength of the local rental market. For those investors looking for a cash flow investment, the rate of return is largely dependent on this component. How much can you charge for rent in this area? How quickly are properties being rented out? For those primarily looking for a short term fix and flip investment, do not overlook this component. What happens if you are not able to sell your property as quickly as you had intended? This is your exit strategy.
Knowing the rental market is a MUST when buying investment property in Arizona.
There are 2 main factors to research when studying the Arizona rental market, monthly rents charged and vacancy rates. You may notice significant differences in these factors from one location to another. For example, the Department of Housing and Urban Development’s 2011 Estimated Rent Report shows the estimated monthly rent for a 3 Bedroom Property in Phoenix with a 85021 zip code is $1,220 whereas the estimated monthly rent for a 3 Bedroom Property (also in Phoenix) with a 85022 zip code is $1,440. These estimates may have a large impact on where an investor purchases their property.
There are a many resources available to you with information on the Arizona rental market. However as with determining the market value, it is important to consult with a real estate professional that specializes in buying investment property in Arizona.
It is a great time to be buying investment property in Arizona; however it is important to do your homework. Now that you are familiar with the key components to purchasing a successful investment, it is time to do your research. Learn how to buy investment property in Arizona with an experienced team at Leagan Realty. This is our specialty and our goal is to have you as a client for life so we are educational and informative and use our experience to guide you in your purchase.
If you want to work with a professional team with years of investment experience, contact us at Leagan Realty.
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