6
Jul

From Our Perspective

.
From Our Perspective

.
The END IS NEAR!
.

Wait a minute, I’m not talking about the Zombie Apocalypse so don’t run and hide, but do prepare yourself for potentially bad news: REAL ESTATE PRICES ARE ON THE RISE! Bad news? Actually this is GREAT news for anyone who owns property, but somewhat bad news if you are still shopping for an investment property, and hoping to earn 12%-14% cash-on-cash returns? I believe those days are officially behind us. Supply has dropped from an estimated 40,000+ homes on market last year, to just over 20,000 homes available right now.

Since we have just as many buyers (maybe even more than last year), the demand has forced prices to rise at a very fast pace. Homes that I sold to investors in 2009, 2010, and 2011 have already risen in price by approximately 20%-30%, plus those same homes are very tough to get. New listings get multiple offers in the 1st few days.

The same is happening at the auction as witnessed by our buying source, Luke Rosenberg with “Its Flipping Simple”, who says The name of the game now is percentages. With so much competition (we actually got out bid by $150k today on a $285k property!!) you have to bid maybe 100-200 times to get a property where as before it was maybe 10-20″. I experienced this same phenomenon when I recently assisted an investor with an auction purchase as we bid at what we thought was a ‘fair’ price based on comps and condition, and we were getting out-bid at times by as much as $50k-$80k.

Does this mean that Phoenix is a “dead” market for investors? No. We still have the ability to cash-flow on rentals in multiple price ranges, flipping is always an option, and now it appears that we may actually begin to see real “appreciation”. Phoenix still has a huge pool of renters, and if we add the continuing flow of displaced homeowners-turned-renters, we know that we will continue to have a very strong rental market in Phoenix for many years to come.

Rents are creeping up for the first time in 5 years, and we have broken two company leasing records already this year with 15 & 16 leases in a week. Again, this shows that demand is still high for quality rental properties. The return on investment is still better than almost any other financial vehicle out there. 6%-10% is still attainable on cash purchases, and 15%-20% is easily attainable on financed properties – Where else can you beat that?

So, the “end is near” may be a bit of an overstatement as we can still get great deals done. They may just a be a bit harder to find. This is why you need a true expert in the market who can help find the right properties, make sure you pay the right price, and ensure that you know what to expect for performance. If you are looking to get in the game, the time is now! It looks like prices will continue to climb in the coming months.

If you still own a property you felt was “underwater,” you may be to a point where you can sell without losing money. While we would encourage you to keep your home, if you are looking to sell our investors are hungry for great homes.

by Noel Pulanco, Broker/Realtor(R), Investor

Leave a Reply