marke t mar t s with
Jim Malner
Exactly one year ago I wrote the first of a two part series on CSG’s initiative to purchase rental properties in Phoenix, Arizona using many of the same real estate shopping principles we advocate in these columns. I stated then I would print an update one year later to evaluate how things went. If you fast track back then, it was probably the bottom (or very close to it) of the US housing crisis. We began researching and exploring Phoenix in November 2010 to determine if there was a chance of capitalizing on depressed market conditions. Of course it was a lot of hard work and learning but the best investments usually are. We acquired only properties that fit a preferred location based on analysis of the overall market. We reviewed family formation types, population growth, employment growth (that was pretty tough to find at the time), housing quality fundamentals, amenity development and crime statistics. Not much different than how you should be selecting an area in Edmonton to make the best home investment to satisfy your needs. We selected a product that would be great for rental to a large population segment under regular market conditions and our budget parameters. We settled on 3 - 4 year old townhomes with single or double garages from $45,000 to $55,000. (Yes, those were real prices at the time) Again, no different than how you should define a product to fit your lifestyle and budget thresholds. Visit as many show homes and sales centres as possible, so you can evaluate the best home for your needs and compare the value of each in detail. Every seller and situation is different, even in the new home or condo industry. Finally we made four shopping trips and worked hard evaluating each property and their sellers situation. And, we looked at dozens and dozens of properties. Most were unsatisfactory for some reason but a dozen fit our profile. This is key to finding a great investment. Visit as many show homes and sales centres as possible, so you can evaluate the best home for your needs and compare the value of each in detail. Every seller and situation is different, even in the new home or condo industry. Then we made offers – usually about 7% - 15% below list price which we felt guilty for at those prices. But, it’s part of the process. One offer was accepted outright, 4 were countered at less than list, 6 were countered back at list and one was actually countered back at higher than list. The excitement and disappointment of making a good deal had begun and eventually 14 NEW Condo Guide | Volume 15 issue 12 | www.hometrader.ca
There Are Lessons To Be Learned Here
successful closings occurred. It’s important that you find the “right” potential properties and then create leverage for yourself through comparables and try to negotiate price or contents. Fast forward to November 2012 and there have been four straight months of “positive” news on US housing. In fact, Wells Fargo, Goldman Sachs and Citigroup have each announced a housing recovery is underway. Phoenix’s conditions have improved dramatically and we are happy with our purchases. The homework and effort was well worth it, not only today but over the next five to 10 years that we hold these properties. The story is illustrative of a good home shopping approach, regardless of what you’re buying. It needs to be detailed, measured and analytic to find and secure your preferred home and be rewarded with a smart future investment. There’s lots of talk in Canada today about housing markets, corrections, over valuations and so on. We are fortunate to live in Edmonton, the countries second best market next to Calgary (sorry it’s a fact). If most forecasters are right we’re in good and growing market conditions for the next two to three years. So, if you’re looking for the physical and financial comfort of a new home or condo, now may be your best time to do some home work and press forward. Like us in Phoenix, there’s no guarantees for the future. But, do your homework and stick to the parameters that make sense for you. Things can change a lot in just a year so don’t keep sitting on the sidelines. Our purchases have turned out very well and I expect your new home shopping experience – if performed in a similar fashion – will yield the same results. Good luck and go shopping. Follow CSG on Facebook or Twitter for regular real estate opportunities and updates. All of Jim’s columns are posted on CSG’s blog at marketsmarts.net.
Jim Malner is President of Consumer Strategies Group (CSG), Alberta’s longest serving, professional, real estate marketing consultancy with offices in Edmonton, Calgary and Vancouver.