Rental Housing Journal Arizona
January 2014 - Vol. 6 Issue 1
PAGE 2 When a Tenant Can and Cannot Legally Break a Lease PAGE 3 AZREIA -Owning Rental Property is Challenging – There are Ways to Make it Easier! PAGE 4 How Resistant is Rental Property to Market Fluctuation? PAGE 5 Land Lady Katie - Top New Year’s Resolutions for Property Managers
PAGE 6 Dear Maintenance Men: PAGE 7 Property Management Mind Mapping…And Loving It! PAGE 8 Shoptalk Are You Alive After Five?? PAGE 9 Lessons from CT Fair Housing Case PAGE 15 The Top 10 Apartment Resident Complaints
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Metro Phoenix Apartment Market – A “Roller Coaster” Ride with Strong Upside
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ver the past ten years, metro Phoenix has been on a huge “roller coaster” ride – especially for the class “B” and “C” properties. From 2003 to 2008, values climbed steadily with profits made with little improvement to the property necessary. Then in the fall of 2008, in concert with the US economic meltdown, metro Phoenix apartment values fell off the table. For the class “B” and “C” properties, values often plummeted by 70%, accentuated by Arizona’s SB 1070 – which resulted in many ‘undocumented’ tenants leaving the State further increasing vacancies and decreasing cash flow. Short sales and buying properties at Trustee Sales (by the “pound”) became common–place. Cash was “King” as there was no financing (beyond high-interest hard-money loans) available for these assets. New owners often offered huge incentives and discounted rents to lease-up the recently purchased distressed assets – further hurting owners that tried to weather the downturn thus creating more short sales and bank foreclosures. In the fall of 2010, metro Phoenix finally reached the bottom of the roller coaster ride for the “B’ and “C” properties. Class “A” and quality “B” properties were far less affected by the downturn. With banks paying almost no interest on held funds, the large investment funds looked to performing quality assets to provide Professional Publishing, Inc PO Box 30327 Portland, OR 97294-3327
their investment pool with some return. Financing for these assets reappeared quickly with rates often in the 3% range plus a LTV of 75% to 80%. As such, REITs and similar entities drove down cap rates to the mid 5%. Since the fall of 2010, market conditions and values have been steadily improving. Vacancy rates have decreased from a high of 14.2% to 7.4% (50+ units – stabilized). Financing for the “B” and “C” properties has now reappeared –
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initially with 5.5% interest rates and more recently with starter rates below 4% and 70% LTV. With the market stabilizing and the increased ability for financing, values have continued to climb off the bottom – but still far below the values in early 2008. Investors are now seeking real cap rates based on actual numbers – but with vacancy rates firming and rents increasing, values continue to climb.
Where do we go from here? One thing for certain – metro Phoenix is a dynamic apartment market driven by many factors – the most important being “population” which is driven by “job growth”. Unlike a city like Las Vegas, metro Phoenix is highly diversified with technology, manufacturing, health, and corporate centers. The 365-day major airport, the attractive business environment, the affordable home prices and available work force, plus Continued on page 3
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