Whether you are a brand new or a more experienced Arizona Real Estate investor, it is important that you understand the basic elements in real estate investing.
If you are the type of person that wants to get rich quick, real estate
is not for you. For that, you should try the Casino. However, if you take the time to learn the basics and slowly start putting them into practice, soon you will understand that real estate is one of the best, if not the best, way to become rich.
The Phoenix real estate market is one of the hottest markets in the country. It will go up and down in cycles. The better and faster you understand those cycles, the faster you will be able to make money in any market cycle. A recent publication by www.trulia.com stated that on average, the Arizona real estate market goes through a cycle every 18 years. There are ways however, to “bubble proof” your investments.
In 1975, the median price range for a house in Phoenix, AZ was $33,500. In 2005, the median price was $197,000. In 50 more years, that price will most likely climb over $400,000. What works today for real estate may not work tomorrow and vice versa. The rental market is strong in today’s market but may not be in the future. Demographics, age, population shifts may affect that. The better you learn the cycles in the Phoenix, AZ market, the better you will be able to take advantage of it.
You have to be able to differentiate all the investment options you have in real estate investing. In 2003, new construction in Arizona was very hot. What happened to those builders in 2008 though? Most of them went out of business. New construction in Maricopa County is gaining serious momentum again in 2016 and will continue to straighten as the Phoenix metro population increases.
What about doing a subject to? It’s a great strategy for many investors but what happens when the lenders exercise their “DUE ON SALE” clause. You will then have to find a way to pay off all existing mortgages on that property. Subject-to worked great in the past but may not work in the future if lenders change their perspectives on it.
Fix and Flip in the Phoenix market has, for the majority of time, been a great strategy for many real estate investors. Many of those investors lost a lot of money in the 2008 downturn. Phoenix was one of the worst hit markets of the real estate bubble. Some investors, however, saw it coming and liquidated most of everything they owned and as a result didn’t suffer any major financial distress.
The BRRRR strategy – Buy, Remodel, Rent, Refinance, and Repeat is a great strategy that many investors have utilized. Many of these Arizona investors will buy a house that is in need of repair, repair it, rent it, refinance it and repeat that same strategy. This leaves them with a long term rental in and around the Phoenix metropolitan area and since they refinanced it at a high ARV (after repair value); they take out most of the money they put into it.
Here are some basic ideas that you can put in place.
1 – Set a plan: figure out which strategy works best for you. Make sure to understand how your own individual skills benefit each strategy. As you become an expert in one of these strategies, you can move on to the next more complex strategy.
2. Determine your Target Market: Are you going to rent your Arizona house via Section 8 or do you want to stay away from that no matter the income. Do you want to go into multifamily rentals where you have one property but many tenants? Do you want to focus on Arizona foreclosures or Short sales? Pick one strategy and stick to it. Once you become an expert in that field, you can expand your business to other areas of real estate.
3. Consistency: One of the biggest mistakes newbie investors make is that they give up after trying for a short period of time. Be consistent and stick to your plan. Adjust if necessary but be persistent. Continue to gain knowledge and don’t give up easy.
4. Analysis-paralysis: Many people I know suffer from this. They are very smart individuals but for whatever reason can’t seem to pull the trigger. They will research a topic for half their lifetime and never seem to be able to do anything about it. Don’t be like this. Doing it and learning as you go is better than not doing anything perfectly.
5: Understand Finance: Real estate is mostly marketing and finance. Understand the numbers because without that component, you will never be successful in real estate. Use finance for your benefit and understand how to negotiate better deals through your understanding of finance.
Solve problems: Don’t let your problems pile up. Solve them as they appear. The more you wait, the worse it will get over time. You will always have problems that show up. Solve them fast and effectively.
Education: Most importantly, you must continue to further your education. Without it, you will never succeed. The Arizona real estate market is extremely competitive and will continue to be this way. The more tools you have in your toolbox, the better off you will be. You can’t acquire those tools, however, without education.