Tips & Trends for the Flagstaff Real Estate Market:
Past Articles [January 2007]
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Buying Investment Real Estate in 2007
With the New Year upon us, many investors are considering various strategies on where best to put their money. We all know that real estate prices have increased significantly in Northern Arizona and throughout many parts of the state the past couple of years; however that doesn’t mean that real estate shouldn’t be high on your list of potential investments.
There are many things to consider before buying investment real estate. Are you interested in commercial property, land, or residential property? Land is generally a growth investment while residential and commercial rentals are considered growth and income. Each of these investment types has its own pitfalls and rewards. However if you plan accordingly you can still see a decent return on your dollar. First consider the kind of real estate that you would like to have and the impact ownership may have on your life. Once you have decided on the type you are ready to begin looking. The old saying location, location, location is as true today as it has ever been.
After you have found a few properties that may suit your need you can then conduct a quick financial analysis to see if it is a worthy investment. First calculate the capitalization rate or CAP rate. The CAP rate is the rate of return or yield from a property that you expect as an investor. The rate is determined by dividing a property’s net income by its sales price. You should also consider the rate of return on your down payment. Comparing these rates to your return from a bank, stocks or other investments will give you a good idea if you want to continue with the purchase of that particular property.
Real Estate investing is not for the faint of heart or the short term investor. It takes time for real estate values to appreciate. As with any investment you must consider the risks. If you purchase rental property be prepared to react to maintenance problems on short notice.
With the recent news that Arizona is the fastest growing state in the nation, I have no reason to think that real estate values are poised to decline. Talk to your realtor and accountant before making a purchase. Your realtor will have a good feel for the market and your accountant can advise you on the tax implications of owning investment real property.
Mary Monday is an Associate at RE/MAX Peak Properties. She can becontacted at
(928) 779-9090 or Mary@MaryMonday.com.
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