Phoenix

Phoenix

 

In this desert paradise … demand for rentals is heating up!

 

In the heart of the Sonoran Desert sits the “Valley of the Sun” … and this valley is golden for so many reasons. 

Phoenix consistently ranks as one of the most affordable areas of the United States …

So naturally rents have outpaced national growth since 2016

In 2018, rent growth in the greater Phoenix area was more than double the national average … but overall rent prices remained significantly lower than the rest of the country. 

The 2017 tax law changes had far-reaching impacts for Phoenix and the other Sun Belt  states. 

People living in high-tax states on the East and West Coasts used to mitigate tax costs by deducting state and local taxes from their federal income tax. 

With that option removed, those same people are moving to low-tax jurisdictions like Phoenix instead. 

The resulting steady population growth has made Phoenix one of the most popular markets for multifamily investments. 

Demand for rentals is strong and supply is low … so there’s nowhere to go but up!

And since the ‘08 market crash, Phoenix demand and pricing has been doing just that … steadily going up and up. 

Industrial space in the metro area fills up fast, rents are rising in the office sector, vacancy numbers are healthy, and the retail market is BOOMING. 

In 2018, major retailers Costco, Lowe’s, Sprouts, TJ Maxx, and Nordstrom Rack announced plans to build new stores in the metro area. 

The following year, Phoenix saw employment gains at nearly five times the national rate.  Major industries in the area include finance, biomedical, and software development. 

The western part of the valley is a popular location for warehouse and distribution space. Major distribution centers for Dick’s Sporting Goods, SubZero, and REI, Inc. operate from the region. 

The surge in population since 2017 has jumpstarted the revitalization of downtown Phoenix, with revamped buildings housing expansions of University of Arizona and Arizona State University.

When it comes to recreation and entertainment, Phoenix has something for everyone … professional sports teams, national parks, and all-around wonderful weather.

Explore the resources below to discover what opportunities await in this one-of-a-kind desert paradise …

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Reports & Articles

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Boots-on-the-Ground Teams

Clues in The News

Equity happens …

We’re taking a break from our relentless preparation for the upcoming Future of Money and Wealth conference to focus on one our favorite subjects …

Equity.

According to a recent report by CoreLogic, last year’s increase in America’s home equity wealth was the largest in four years.

In 2017, the national CoreLogic Home Price Index rose by more than six percent, the largest annual increase since 2013.

We call this “passive equity” because the market just handed it to homeowners simply for buying and holding their property over that time.

Good job.

Of course, national averages are interesting, but not useful for practical investing.  Real estate is local right down to the neighborhood and property … and no two are exactly the same.

Think of it this way …

If you have one foot in a bucket of snow at 20 degrees and another in a bucket of 170 degree steaming hot water, on average you’re enjoying a nice soak in a warm bath …

… but in the real world, you’re scalding one foot while you get frostbite on the other.  National averages have limited utility.

Fortunately, CoreLogic provides a nifty color-coded map which compares equity growth at the state level:

 

 

Unsurprisingly, coastal states with strong technology business … California and Washington … lead the pack for equity growth.

But we’re guessing closer analysis would show equity rich markets are expensive relative to rents, so income investors can’t just go to dark green and buy.

So how’s an investor to use this kind of data?

Here are some ideas for your consideration …

First, you can do a deeper dive into the states with strong equity growth, and look for common factors.  Right away, we saw coastal and tech.

But that’s just a start.

Look at supply and demand, nominal and real incomes, job growth, population growth, and migration patterns.

Then talk to street level people who live and work in those markets.  Find out what they’re seeing right now.

Once you have your mind around what makes equity happen in one market, you can look for similar conditions in other “emerging” markets.

Then (hopefully) you can make your move and get in early … while the rent ratios still make sense … and ride a wave up.

Of course, if you’re a typical busy person with a small portfolio, that’s a lot of work relative to the size of the investment … especially if you plan to travel to check out markets, build teams, and inspect properties.

Plus, you might not even like doing all that, even if you had the time and a big enough portfolio to justify it.

That’s why we’re HUGE fans of syndication.

Syndication is where a syndicator aggregates funds from a group of investors through a private placement, and then does all the busy work of running the deal … for a fee and a piece of the action.

As long as there’s enough profit in the deals to split equitably, it’s a win-win.

The “passive” investors win because they gain access to opportunities they wouldn’t otherwise have.  They effectively leverage the effort, expertise, and relationships of the syndicator.

The syndicator wins because the passive investors’ capital facilitates economies of scale and access to bigger deals the syndicator might not have on his own.

And for both parties, two major sources of investable capital are paper assets in brokerage and retirement accounts, and equity in existing properties that can be re-positioned.

For example, real estate equity in an “appreciated” state might be accessed through a cash-out mortgage for about 5 percent interest at today’s rates.

The loan proceeds can be used to acquire property in an “emerging growth” state that cash-flows at maybe 10 percent cash-on-cash.

The property-owner gets a positive spread on the equity, picks up some valuable tax-breaks, and has additional “top-line” real estate income streams which can grow over time.  Same equity, but more future opportunity.

As for stock market equity …

If history is any indicator, the recent turmoil in the paper asset markets is likely to create even more interest in real estate.

That’s because speculating on asset prices, whether it’s stocks or crypto-currencies, is a lot of fun when they’re spiking.

But when the tide turns on speculation … and it always does … real estate’s reputation as a reliable wealth builder is once again revealed and appreciated.

In fact, the CoreLogic article affirms the stability of real estate:

“… since 1970 home-equity wealth has been one-third less variable than corporate equity values …” 

And another recently released report from The National Bureau of Economic Research, The Rate of Return of Everything, 1870-2015, says …

“… returns in housing markets tend to be smoother than those in stock markets …”

“… housing has been as a good a long-run investment as equities, and possibly better.”

“… equities do not outperform housing in simple risk-adjusted terms.”

 “Housing provides a higher return per unit of risk …” 

“… housing returns … are more stable … housing portfolios have had comparable real returns to … equity portfolios, but with only half the volatility.”

The report concludes (remember, to them, “equity” means stocks) …

“… the most surprising result of our study is that long term returns on housing and equity look remarkably similar.  Yet while returns are comparable, residential real estate is less volatile …” 

“Returns are comparable”, BUT… they didn’t include leverage …

“… the estimates … constitute only un-levered housing returns …”

When you add in 4:1 leverage (25 percent down), you take a 6 percent real estate equity growth rate to 24 percent!

Of course, we’re probably preaching to the choir.  But think about this …

Maybe YOU already know real estate is a powerful, predictable, and demonstrably more stable wealth-building vehicle than stocks over the long haul.

But paper asset investors have been riding an easy money wave up to record-levels … and now stock markets are starting to get REALLY jittery.

What once was a fun ride is now becoming scary.  And  if you’re a syndicator, this is MUSIC to your ears.

That’s because paper asset investors are probably looking at their brokerage accounts and retirement plans, and are growing much more open to getting involved in real estate when it’s presented properly.

And if you’re a Main Street real estate investor limited by only your own funds, maybe it’s time to consider leveraging your skills to get in on the syndication action.

We think syndication is arguably the best opportunity in real estate today.

We realize there are some people who think real estate might slow down because of rising interest rates. But history disagrees.

Rising rates just makes it hard for home buyers.  And when it’s harder to buy, more people rent for longer, which is good for landlords.

Look what happened when the mortgage markets imploded in 2008 …

… no one could get a mortgage, millions had to rent, and even though there was a financial crisis … rents went up and up and up.

So all this stock market volatility is actually a gift to real estate investors.

Until next time … good investing!


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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.

Why Now May Be a Great Time To Invest in Dallas Real Estate

Finding a strong market to invest in is as simple as looking for population growth, job growth, and a diverse economy. That’s why some of the smartest minds in real estate are focused on the long term strength of Dallas, TX.

POPULATION GROWTH: The Dallas-Fort Worth area’s population has grown by nearly 1.3 million from 2000 -2009.  That is more than any other metropolitan area in the United States.  The Dallas–Fort Worth–Arlington MSA is the largest metropolitan area in Texas, the largest in the South, the fourth-largest in the United States (SOURCE: Wikipedia on DFW).

The Dallas, TX metro is forecasted to add 4 million new people from 2010 – 2040 according to the Texas Data Center  and the North Texas Water Board.   That’s one new person every 4 minutes!!! In 2009, the population of Texas grew by 231,539.  That is more growth than Florida, Arizona, California, Nevada and Colorado, combined.

A demographer at the Brookings Institution attributes the population growth to a more diversified economy in Texas and more conservative lending practices during the real estate boom. When combined with the state’s steady growth earlier in the decade, Texas is projected to receive three new seats in Congress.  (SOURCE: Recession Cuts Migration to Sun Belt, New Figures Show 
New York Times).

JOB GROWTH: “Diversified industry and relatively stable housing fundamentals have provided local residents with comparatively secure standards of living. Cities where home prices don’t fluctuate wildly are particularly well-positioned to ride out this recession, because they were spared the domino effect of foreclosures, lost jobs and lost productivity. Rather than chasing rising home prices or apparently plentiful jobs in one-industry towns, families looking for long-term economic stability should seek spots where industry is diverse and housing price shifts are benign.”  (America’s Fastest Recovering Cities
 – Forbes Magazine)  According to the US Bureau of Labor & Statistics, Dallas job growth is twice the national average.  An educated populace and a cost of living below the national average, make Dallas enticing to companies seeking a lower cost but highly qualified workforce.

DIVERSE ECONOMY: The Dallas economy is primarily based on banking, commerce, telecommunications, computer technology, energy, and transportation.  North Texas has 28% of the state’s workforce, employing more than 350,000 in healthcare, 225,000 in high-tech and 68,000 aviation-related jobs.  North Texas has 20 colleges and universities, 17 graduate schools, 3 medical/dental schools, 2 law schools and 20 community college campuses (SOURCE: North Texas Commission).  The Dallas/Fort Worth Metroplex is home to over 10,000 corporate headquarters making it the largest concentration of corporate headquarters in the United States.  The Dallas metro area is home to 25 FORTUNE 500 company headquarters and 7 FORTUNE Global 500 companies which bring more than $819 billion in revenue to North Texas. (Source: Fortune Magazine 2009)

  • WORLD CENTER OF AVIATION
    • DFW International Airport is the third busiest airport in the world
    • There are more than 850 aviation-related businesses in North Texas – more than any other area of its size in the world
    • There are more than 68,000 documented aviation-related jobs in the region
  • LOGISTICS HUB
    • DFW is a major logistics hub and has the lowest distribution costs to the top 50 U.S. consumer markets of any region
    • Since the passage of NAFTA, DFW trade to Mexico and Canada has more than doubled – in large part due to the proximity of Interstate 35 – the NAFTA Superhighway
  • FINANCIAL AND BANKING CENTER
    • North Texas is a major financial center and is home to one of 12 regional Federal Reserve Banks, as well as several regional bank offices and corporate headquarters to Comerica
  • HIGH TECHNOLOGY CENTER
    • North Texas is a national and global leader in the high-tech sector, and 8.3% of the region’s total 2.7 million labor force is employed in high-tech fields, according to the Metroplex Technology Business Council
    • North Texas’ 225,000 high-tech workers account for 52% of Texas’ total technology workforce, and North Texas boasts 6,215 high-tech firms
    • Although the high-tech industry employs 8.3% of the North Texas workforce, the high-tech sector accounts for nearly 13% of wages paid to North Texas workers – indicating the relatively high-paying nature of these sophisticated jobs
  • RETAIL CENTER
    • North Texas is the 10th largest retail market in the country. Dallas Market Center, the world’s most complete wholesale marketplace, hosts approximately 50 markets each year attended by more than 200,000 retail buyers from all 50 states and 84 countries, and conducts more than $8 billion in wholesale sales annually
  • HEALTH CARE EXCELLENCE
    • North Texas is known for its extensive state-of-the-art health care facilities with more than 90 major hospitals and two major medical schools
    • Health care is one of the largest and fastest growing industries in the Dallas-Fort Worth region with more than 350,000 health care jobs

LOW TAXES:

  • No personal or corporate state income tax
  • Maximum state and city sales tax of 8.25%

QUALITY OF LIFE:

  • North Texas features world-class athletes, teams and sports facilities, including the new Cowboys Stadium, host of the 2010 NBA All Star Game, 2010 World Series, 2011 Super Bowl XLV, and the NCAA Men’s Final Four in 2014
  • The region is growing as an arts hub with 7.9 million people attending arts and culture events annually
  • Low cost of living
  • Affordable housing
  • Plentiful water
  • Public transportation and excellent highway system
  • Strong k-12 schools and universities
  • Centrally located
    (SOURCE: North Texas Commission)

For more information about Dallas, visit our Dallas Market page or find a local market expert in our Resource Network.