Phoenix rental properties
If you’re thinking about investing in a rental property in the Phoenix, Arizona area, there are some things you should consider before you begin looking at properties.
First if all, Phoenix is a great place for real estate investing. Housing market prices are competitive, and the West Valley is growing steadily thanks to a strong economy and plenty of job opportunities. New residents in every demographic—from millennials to baby boomers—come to Phoenix each year, and they all need a place to live.
As with all investments, finding rental properties that offer the best opportunities to develop a steady income stream requires some serious homework. especially if you’re looking to buy in a specific region. In fact, investing in rental property can be risky if you’re new at property investing.
Below is some insight regarding what you need to know before investing in an income property in Phoenix to make sure becoming a landlord is the right choice for you.
4 things you should know before investing in an income property:
1: Where do your finances stand?
Before you begin looking at rental properties for sale, your finances need to be in order to know how much you can afford to invest, including down payment, insurance, and other startup costs.
Purchasing a rental property is a major investment and a long-term commitment. There may be times when the rental property needs repairs or you have vacant units for longer than you expect, which means money will be tight.
Before you decide to invest in a rental property, it’s important to address the following:
• Make sure you have an existing income stream that can cover costs associated with investing in a property, making repairs, and paying for unexpected expenses.
• Have your down payment saved and ready, and determine how long you can cover the mortgage before you place tenants in the property.
• Lower any high-interest debt you have such as credit card debt, car loans, school loans, etc.
• Enlist a reliable financial planner and tax specialist to guide you through making this major investment.
• Determine what your goals are; do you plan to quit your full-time job? Create a passive income stream? Fund your retirement? Establishing the state of your finances and distinguishing your goals will help you make good investment decisions from the start.
2: Become familiar with local landlord-tenant laws
Each state has its own landlord-tenant laws that differ from other states. These laws can be confusing, especially since many of them seem to be in a constant state of change. Unfortunately, there’s no leeway for landlords who inadvertently break the law because they’re not familiar with the latest rules and regulations. They face stiff fines and penalties.
Some common concepts rental property investors should be familiar with include:
• Security deposits, which are collected from tenants at the time the lease is signed, cannot exceed one and a half month’s rent and must be returned within 14 days after a tenant vacates the property.
• Rules are in place governing the how much advance notice landlords must give tenants before raising rent prices.
• Tenants have the right to withhold rent or “rent and deduct” when a landlord fails to handle important maintenance and repair issues.
• There are strict rules in place for evictions.
• Landlords must be careful not to the Fair Housing Act or Fair Credit Reporting Act.
Rental property investors who plan to self-manage their units should understand all laws in place to protect both landlords and tenants, and follow them religiously.
3: How much rental income you can realistically expect to earn
One common mistake first-time rental property investors make is purchasing properties in down-and-out communities for a good price believing they can invest time and money to make repairs and improvements to the units that will attract good tenants. Good tenants—those who pay their rent on time and take care of the property while they live in it—aren’t willing to move into properties in blighted neighborhoods. Safety and convenience are high on the list of tenant must-haves, so the location of the property you purchase can make or break your chance of success.
Additionally, if you need to make repairs and upgrades to a property, you’re going to need to charge higher rental rates to recoup your expenses, and renters in lower economic neighborhoods can’t afford to pay higher rent rates—if they could, they’d move to a safer community. Your expectations must be realistic when entering into rental property ownership to make it work.
Phoenix is one of the most affordable areas in the country for finding affordable real estate properties in desirable neighborhoods. This is reassuring to new rental property investors for a few reasons:
• It means you’re more likely to find an income property that meets your financial expectations.
• Neighborhoods that offer rental housing properties are likely to have high-quality tenants (as opposed to vacancies and foreclosures that bring the value of the neighborhood, and rent rates, down).
• Potential tenants will be able to afford your rental rates, and in turn, you can cover your mortgage, maintenance, and repairs on the property while making a profit.
• Buying an overvalued rental property defeats the purpose if you can’t attract good tenants
4: Being a landlord is a lot of work
Self-managing your rental property may seem like a great idea, and for some, it is. But for the uninitiated, especially those with other obligations, it can become overwhelming real fast. When establishing your financial situation, consider adding the cost of hiring an experienced property manager to handle the day-to-day tasks associated with rental property ownership, and avoid problems such as:
• Running out of time for everything else
• Targeting the wrong tenant audience with your marketing and advertising efforts
• Legal issues related to landlord-tenant laws
• Time and effort necessary to inspect and maintain your property on a regular basis
• Handling all maintenance and repair issues yourself whether or not you have the time and experience
• Dealing with problem tenants who damage your property or don’t pay their rent on time
• Handling high turnover rates because you lack the skills needed to secure lease renewals
Investing in a rental property in Phoenix can be a great decision, from both a personal and financial perspective. The first step toward success in knowing exactly what you’re getting into.
Phoenix rental properties