Nov. 30, 2007: What do Canadian real estate investors know about the market in Phoenix that you don't know?
The Canadians are coming! All over the Valley, Realtors are hearing from monied Canadians in search of real estate bargains.
Say what? Aren't homes in the Phoenix area terribly over-priced? Isn't that what we hear in the news?
First, homes in many areas of the Valley have been slowly losing value since December of 2005. And second, after the most recent Federal Reserve interest rate cut, the Canadian dollar -- the loonie -- is at parity with the U.S. dollar. Canadians buying real property in American can get a lot more bang for the loonie than they ever could before.
What are our Canadian friends buying? Retirement homes, winter getaway homes -- and rental homes.
Say what? Aren't rental homes in the Phoenix area a bad investment?
Yet again, things have changed. A newer suburban home -- three bedrooms, two baths, two-car garage, tile roof -- is cash-flow positive at around $160,000. Right now, there are 73 homes in the MLS at $160,000 or under, with hundreds more in negotiating distance.
Other products -- such as zero-maintenance condominiums in North Scottsdale -- are also selling at prices low enough for them to cash-flow.
What this means is that many properties for sale in the Valley could self-amortize as rentals, covering all of their anticipated costs from the rents. When the market turns, any appreciation is essentially free money.
Have our housing prices stopped falling? Probably not, and no one can say for sure when values will begin to rise again. But on the other hand, the recent tightening of loan underwriting guidelines will have the effect of enlarging the more-prosperous end of the tenant pool in the long run. This may not be the ultimate best time to shop for rental homes in the Phoenix market, but it is a very good time, nevertheless.
So here's the interesting question for me: What do our Canadian friends know that you don't? My take is that Valley rental homes are once again a good investment for any investor, even those who don't have to catch a plane to oversee their investments.
Greg Swann is the designated broker for BloodhoundRealty.com, a full-service Metropolitan Phoenix real estate brokerage. This article originally appeared in the West Valley regional sections of the Arizona Republic.
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