Over the weekend I was in Phoenix exploring the Real Estate market and looking for an investment or two out there. It was a great trip and I was assisted by my cousin who lives there and Matthew Coates, a premier Realtor in Chandler, AZ (@realtormatthew, LivingChandler.com). While, as of this post, I have yet to put anything under contract, I am finalizing some research and I have a good idea of what I am looking for. One thing I learned is that it is much harder to purchase a property out of my area of expertise than I thought it would be. Here are some of the valuable lessons I learned this weekend:
1. Choose an area expert to help you!
Thankfully I had that one down. Matthew really knows his area and the surrounding communities and we were able to quickly view nearly 30 properties narrowing the field down to just four in one day. He also had great contacts for property management which has aided the research.
2. Make sure you can get the information you need when you need it.
This one I did not do right. It hurt the efficiency of my trip and is most likely why I still don’t have a property under contract. I did not make sure the property manager would be available while I was there and I did not have figures for rental comparables and property management fees until right before I was supposed to leave. Had I properly confirmed the availability of this information, I could have retooled my search and went back at it on Saturday or Sunday. This would have greatly increased the chances that a purchase could be made as a result of this trip.
3. Plan a follow up search day.
The next time I do this it will be one day of viewing properties, one day of research followed by another day of viewing properties. Had I done this, I would be much more informed and comfortable than I am right now.
4. Check Multiple Sources for Rental Rates.
Bright and shiny homes that look really awesome to me don’t rent in Phoenix for anything near what they do in Chicago. I initially ran all of my numbers based on my own opinion of comparable rents which built up my excitement only to let me down in the end. I used Craig’s List and Realtor.com, but it still gave me falsely high hopes on the rental rates for the properties. This is why point number two in this is so important.
5. Learning an area takes time.
Even accompanied by a local and being advised by an expert, it still takes time to get your head around an area. I drove the properties multiple times to get a real feel of location. Google earth just doesn’t give you the true feel of how long it takes to get from point A to point B or what the surroundings really look like. Plan to drive to each property a couple or three times in order to solidify the location in your mind.
6. Take time for entertainment.
Checking out the value of a community is more than looking at the houses. Plan time for dining, exploring, sight seeing and shopping. Step into the lifestyle for a day or two. This will allow you to see the benefits that your renters will enjoy, and if there isn’t much to be excited about, your renters probably won’t pay very much.
7. Understand the employment picture.
The job centers in Phoenix are much different that in Chicago. In Chicago suburbs, I look to the proximity to the city as a critically important factor. In Phoenix, much of the employment and culture is not in the downtown, so proximity to other micro-economies and employment clusters is much more important.
8. Start at Home.
If this is your first step into Real Estate Investing, I say start local. You may hear stories of cities with easy return and great opportunities, but investing in Real Estate is not for everyone, and it is best that you get your feet wet in your own backyard. If you don’t develop a success track record locally, chances are this profession isn’t for you, and you don’t want to make a mistake thousands of miles away.
I’m sure I will end up with a rental unit or two in Phoenix, but as a first-time out of state purchaser, the trip was beneficial for far more than just that. I learned things that will make me far more effective and productive as a Realtor® working to increase the investment portfolio of my clients.
Silver Crown Real Estate are experts in residential rental investment real estate and would be happy to share our expertise with you in your investment property search. We have developed extensive financial modeling to help you identify profitable rental units. We offer full service Real Estate brokerage and property management for investor clients in Barrington, IL and the surrounding areas.
Jeffrey Kershner (@jeff_kershner) is the Managing Broker of Silver Crown Real Estate. He has a background in architecture and draws upon that experience in developing and brokering homes and investment real estate in the Barrington area. Jeff has been a leader in design, development and real estate for over 10 years and manages a $1.6 million real estate portfolio.