I am curious why you think it could be a “big return” situation. Are you thinking you are buying an undervalued asset? Are the risk and return symmetrical in your analysis?[/quote]
Here is my thinking, let me know if I am not thinking right.
High return:
1) Phoenix valley area is a hot market. Great schools (BASIS), lots of tech companies moving in (Intel, Paypal etc), great infrastructure (101/202 loop).
2) I heard Maricopa county sees around 5,000 people moving in every month from various parts of US (including CA).
3) Affordable market – the price of 2,000 sqft single family (3 to 4 bedroom) house is around mid to upper 300s. We can’t get anything with that money here in SD.
4) Cashflow is great. The rent for such house is running around 2,100 to 2,400 $.
So, if AZ real estate market stays resilient through this covid and possible recession, it’s a great investment for long term.
High risk:
1) AZ market may not be resilient and can still see a dip in price if Covid situation gets worse or recession prolongs. There are studies ranging from “no impact to housing” to up to 30% dip in value. I haven’t seen a lot of studies saying the property value will go up during this tough time. So I may not lose much for waiting (except for the earnest money)
2) AZ has also seen high unemployment rate and renters going default.
3) AZ govt is very similar to CA in supporting rent relief program
4) I believe rents will go down across US as vacation rentals will now move towards long term rentals, no new crowd moving in from outside of USA etc.
