Using Airbnb With Investment Property

Have you thought about using vacation rental services like Airbnb as a property investment? It can offer a great return on your investment, but you need to consider a few important factors first.

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Many real estate investors have taken on a new strategy of using vacation rentals like Airbnb and VRBO to generate returns. If this is a type of investment you're thinking about adding to your portfolio, there are three main points you need to be aware of first:

  1. Location and zoning: For example, Scottsdale is by far the best area for vacation rentals because the demand is high for these properties. You have to be aware of zoning as well since certain subdivisions don't allow short-term rentals. You need to check with your CCNR or HOA to make sure they allow this kind of rental. 
  2. Management companies: This isn't a 'set it and forget it' kind of investment; it's very active. More tenants coming and going means a better return, but it also means more time. A management company can handle the influx of income, the books, cleaning, and other similar things. 
  3. Exit strategy: As with any investment, ask yourself why you're doing it. Have an exit strategy that allows you to rent the property long-term if you decide to change your investment strategy. Also make sure you buy a property that has a good chance at appreciating in value. 

There are plenty of other nuances you'll need to consider for this type of investment. It's a full-time job to have a vacation rental. The upside is quite high though.
This isn't a 'set it and forget it' kind of investment; it's very active.
I recently spoke with a client who bought a property about seven years ago who is now only about a year away from paying off his 30-year mortgage on the property. His strategy was to put every dollar of profit from the vacation rental right back toward the principal and, as a result, he's going to pay off a 30-year mortgage in eight years or so.

You also have to provide full furnishing for the vacation rental from plates, silverware, and dishes to microwaves and furniture. Then there are towels, linens, and toiletries. The list goes on and on. Basically, you can't just consider the cost of acquisition for the house, you must factor in all those furnishings as well. Costs really add up when you start talking about chairs, beds, and couches.

We've helped a lot of clients maximize their investment with this strategy with a great return on their investment. If you have any other questions about this investment strategy, give me a call or send me an email. I'd love to talk with you about it!

An Exciting Update on the Phoenix Real Estate Market

Phoenix is still in a strong seller’s market. However, those days could be coming to an end soon.

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I’d like to cover a few things today about the Phoenix housing market that I think you’ll be interested in hearing. The latest numbers are in, and they show us where our market is at and where it’s headed.

Here in Arizona, only 12% of homeowners are still “under water” on their homes in terms of equity. Most people are either able to sell for a profit or have started to build even more equity than they had before the market crash. There were only about 360 homes that were foreclosed last month. It might sound like a lot, but compared to where we were at 10 years ago, it’s nothing.

We are predicting a strong seller’s market for 2017 with modest appreciation. Realtor.com expects sales to increase by about 1.7% from last year. A steady rise in sales and appreciation are both signs of a healthy market.

Where we go from here is debatable. We are more than 10 years into the current housing cycle, which takes about 10 years to complete from peak to valley. We’re playing with house money right now, so to speak. Keep in mind that the market will look a lot different in the next year or two.
We’re in year 10 of a 10-year cycle.
Affordability in Phoenix right now is high. The salary needed to afford a median-priced home in Phoenix right now is $44,000. For first-time buyers who qualify for specific criteria, homes are even more affordable.

For example, a program in Maricopa County for first-time homebuyers gifts them with up to 3.5% for a down payment. This is a grant and doesn’t need to be repaid. If you also negotiate with the seller to pay for closing costs, you could get into a home for $0 out of pocket. How amazing is that? Keep in mind that there are a few criteria you need to meet, including a 620 credit score and a yearly income under $88,000.

If you have any questions for me about the market or if you’re looking to buy or sell a home, don’t hesitate to give me a call or send me an email. I look forward to hearing from you.

What To Do If Your House Doesn’t Appraise?

Today I’m back with part two of the “Importance of Representation After Contract” to go over why you need to have representation during the appraisal process.

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I’m back for part two of the “Importance of Representation After Contract.” Today I’ll go over the why it’s so important to keep your representation during the appraisal process.

So what is an appraisal?

An appraisal is a valuation done on a property by a professional known as an appraiser.

On the buyer’s side, if the appraisal does not come in at the contract price, you have three options. The first is to walk away from the sale. The second is to ask the seller to come down in price to the appraised value and the third is to meet somewhere in the middle. However, the third option requires the buyer to come up with extra cash out of pocket.

The seller, on the other hand, needs to sell their home first to the buyer and then to the appraiser. We help our sellers by providing an appraiser with anything they might need to see the value in a home that the seller and the buyer have agreed to.
We make sure our clients are taken care of all the way through closing.
A gentleman once came into my office whose home had been on the market for more than 160 days. He finally thought he had it sold, but the appraisal came in $30,000 lower than what he and the buyer had agreed to. He couldn’t reduce the price that low, so the sale fell through. I went through his appraisal and I found a few things that weren’t quite right. Unlike his agent, I would have disputed the appraisal to see if we could get a more accurate value.

I believe this is a great example of why you need to make sure you have representation even after the contract is signed. We work very hard for our clients during the appraisal process and really try to make sure they are taken care of all the way through closing.

If you have any further questions about this topic or you have any other real estate questions, please feel free to give me a call or send me an email. I look forward to hearing from you!