Is Now the time to Buy a Rental Property in Phoenix - Pines Unit Subdivision ?

Last week we took a look at the Greater Phoenix Rental market data and broke it down by city in different categories. This comparison showed the rental market patterns in Phoenix over the last three years

All of the data was good for landlords. Rental prices have gone up Valley wide and inventory is down. This is resulting in many less vacant days while waiting for a renter.

So is it a good time to buy a rental property in the Phoenix market now? Perhaps, but while the rental market has been getting better over the last three years, the price of buying a home has also gone up.  

Over the next few posts, we will take a look at whether buying a rental property makes sense. We will focus on specific subdivisions and "run the numbers". At least the basic numbers to see if further investigation is warranted. 

We will take a look at actual and current for sale properties. So if you keep reading you may want get a started with being a landlord.

The property that we are looking at is at 14002 N. 49th Ave. #1020 in the Pines Unit subdivision. It is currently listed at $82,300. Let's take a look at the basics of a five year investment.

Sale price= $79,000 (you probably can get a 3% reduction off the list)

Turnover= $5,000 includes new paint and carpet

Marketing Costs= $400 for tenant placement services from RPM West Valley

Rent=$750 per month

Maintenance Reserve=$5,000

Property Specifics

Sq Ft 842

2 BDR 1 Bath

T-Bird and 49th - Pretty good location for renters

Ok, so you are out $89,400 which includes the sale price, a pretty decent turnover budget and hiring a company to lease it for you. At this price, it should conservatively rent in a month and you have a pretty high percentage of keeping it occupied for at least two years (just a bit less than the average tenancy projection for this location).

First two year return= $750*13=$9750/2 = $4,875 - $520 tax (annual) - $300 insurance (annual) $1,848 HOA fees (annual) = $2,207 = 2.4% ROI annualized

Next three years= $800 *35 (one month to re-rent and realistic rent increase) -$1400 (turnover & marketing costs from first tenants and to re-rent to second tenancy) = $26,600 - $1,650 taxes (3 yrs) - $1000 insurance (3 yrs)- $6000 3 yr HOA fees with projected increase (these are painful)= $17,950

Annualized return pre-sale =$20,157 revenue /5  yrs / $89400 outlay = 4.5% ROI per year.

So lets say you sell the home after 5 years, there is  good chance it will increase in value. Let's assume the price will go up 2% per year (a very conservative estimate judging by today's market figs).  You will get $85,512 at the end.

5 year Revenue-Expenses = ($6,512 gain + $20,157)= $26,669

Initial Expenses=  $89,400 initial outlay 

=29.8% ROI

This assumes your 5K maintenance reserve will be exhausted over the five year's of tenancy and does not include any tax advantages or disadvantages. The market rent and appreciation numbers or conservative and based on present and historical facts of the Phoenix rental market.

Phoenix Rental Market Data by City 2013-2015

On the last post, we took a look at the city of Surprise,AZ and the Roseview subdivision's 2013 to 2015 pertinent rental market figures.

This week we will take a look at the Greater Phoenix Rental market data and break it down by city in a few categories. The cities are as follows:

Scottsdale (SCD)

Phoenix (PHX)

Peoria (PEO)

Avondale (AVD)

Buckeye (BUK)

We will focus on the rental homes that rented between January and August and break down the resulting rental data by year.The rental property data we will look at focuses on closed, unfurnished rental properties and is taken from the Arizona MLS.

We will present three charts. The first chart shows raw rental price per square foot in each city. 

 It is interesting to note that renting a property in Scottsdale is almost twice as much per sq. foot as renting in Buckeye. Watch out though Scottsdale, Buckeye is gaining on you though percentage wise.

The next chart shows rental property inventory.

This chart details the significant reduction in rental properties available and also shows that the Phoenix rental property inventory is greater than the rest of the cities inventory combined.

The final Chart shows the increase in rent price/decrease inventory as a percentage

This one shows the Phoenix rental market as the biggest winner with a 24% increase in rental price per sq foot. The Buckeye rental market also looks like landlord's treasure with a 14% rental market increase and a 44% rental market inventory reduction.

Surprise, AZ and Roseview Subdivision Rental Property Market Comparison January to August 2013 to 2015

On the last post, we took a look at the city of Peoria,AZ and the Fletcher Heights subdivision's 2013 to 2015 pertinent rental market figures.

This week we will take a look at the Surprise rental market and the subdivision in our focus will be Roseview. 

Roseview is a Surprise,AZ subdivision located east of Dysart Rd., west of 135th Ave, south of Greenway Rd. and north of Waddell Rd.

The neighboring subdivisions of Rosewood are Litchfield Manor to the west, Surprise Point to the south and West Point Town Center to the North.

All figures are taken from closed rental data from the MLS from 2013-2015.

New to our rental market stat presentation this week is dollars per square ft - $PSF.

We will focus on the rental homes that rented between January and August and break down the resulting rental data by year.The rental property data we look at from Surprise and Rosewood focuses on closed, unfurnished rental properties.

The rental market numbers in Surprise and Rosewood shown in this study show decent gains as detailed below.

Overall, average rental property prices in both Surprise and Roseview have increased during this 2013-2015 time period.  The average rental home price gains in Surprise, AZ and the Roseview subdivision are about 8% over these three years. 

Rental property inventory has decreased in both spots as well. The rental property inventory decrease on the ARMLS has been a substantial 36% in Surprise, AZ from 2013-2015 and an even more drastic 54% in Roseview.

Peoria, AZ and Fletcher Heights Subdivision Rental Property Market Comparison January to August 2013 to 2015

On the last post, we took a look at the city of Avondale, AZ and the Cambridge Heights subdivision's 2013 to 2015 pertinent rental market figures.

This week we will take a look at the Peoria rental market and the subdivision in our focus will be Fletcher Heights. 

Fletcher Heights is a subdivision located roughly north and south of Deer valley road and east and west of 83rd avenue

All figures are taken from closed rental data from the MLS from 2013-2015.

We will focus on the rental homes that rented between January and August and break down the resulting rental data by year.The rental property data we look at from Peoria and Fletcher Heights focuses on closed, unfurnished rental properties.

The rental market numbers Peoria and Fletcher Heights shown in this study show decent gains as detailed below.

Overall, average rental property prices in both Peoria and Fletcher Heights have increased during this 2013-2015 time period. However, the average rental home price gains in Peoria, AZ has gone only gone up about 5% in three years. In Fletcher Heights, the increase in rent in this time frame has been 7%. 

Rental property inventory has decreased here as well but "only" by 25% which under performs the Phoenix market in general by market inventory reduction standards over the last 3 years. 

It is interesting to note that although the Peoria and Fletcher Heights rental markets have show gains over the last three years, the gains have fallen short of the rental market gains we have seen in other Phoenix West Valley cities.