Did you move to the valley and start by renting an apartment, condo or single-family home? We known so many people who moved here and started renting off the bat – they were able to get an impression of neighborhoods and find out where they wanted to buy.
We also know some of them that haven’t decided to become homeowners at all. It fits with the national trend of home-ownership rates dropping from 70 percent down to 65 percent. And a third of those renters are leasing out single-family homes, not apartments.
What does this mean for you? Investment properties, of course! Phoenix has a strong demand for housing, and paired with the popularity of renting, this is a good time for those interested in rental properties to strategize.
The good: Buying an investment property is a way to diversify your holdings, and renting increases cash flow.
The challenge: Are you prepared to make the right choice in property, and to maintain it while working with tenants? Do you have the means and some extra time to deal with issues that might come up?
If you’re not daunted by the idea of after-hours calls and taking care of surprise repairs, then investing in a rental home can be a solid decision for your financial future. Arm yourself with resources (or an experienced partner) to help choose the best property that fits your criteria. As a first-time investor, it’s important not to put too much on your plate – fixer-uppers and large, expensive properties can set you back.
You should also be aware that investment properties incur a large down payment; since mortgage insurance isn’t available for the rental property, you’ll need at least 20 percent down for traditional financing. And that is just the start of the numbers: Break out that calculator to check your margins, operating expenses and the return on your investment for your efforts. A study showed rental properties in Phoenix returned an annual average 8.7 percent, which is quite high. If this sounds like a venture for you, contact us!