To me, this area is in the middle of nowhere.. However, you can see that in ten years it will be built out.. This got my mouth watering because I am looking for my next move in the next 6 months.

I don’t know about rental rates and competition, but this is definitely interesting.

I’m in Tucson, and there’s a community called Redrock that is in the same situation. These communities that half an hour outside of cities sure dropped the prices!

Good investing..

I suggest you get a map and look up places like Queen Creek, Maricopa, Florence and Coolidge. Check the distance and driving routes to employment centers. Then look at the number of foreclosures in the subject and surrounding subdivisions. If you still think you want to buy, get on a plane to Phoenix and drive around your target areas. Drive the commute to the nearest employment center. Look at the landscaping and the cars in the driveways. Call the property management companies listed on the “for rent” signs you see to see how long the properties have been for rent and what the vacancy rate and average lease-up time is. Be sure to ask them if they are taking new clients in these areas (many aren’t). Then decide whether you want to invest in these areas.

If you buy and you have gambled correctly, in 10 years, you may have the next great “outer ring” suburb. Based on what I see today, I’m passing on that bet.

As for buy&hold, I don’t dismiss it. I’m just saying that you can’t buy and forget, which seems to me what some people do. I don’t know if its smart to keep holding during a downturn or to sell and sit on the sidelines. With real estate you’ve got tax implications and selling commissions. For example the condo I bought at $70k went to $180k, it was cashflowing $200/mo. I sold at $175k. It is now at $155k, but it would be cashflowing $500/mo. Selling it cost me $30k in taxes and commission. I still don’t know if that was a good decision or not.

The question, using your Google analogy, is the stock goes down and you lose $100k. How long do you wait before you decide to sell and take the loss?

The most recent comp on this house was a $320,000 sale in July. I heard there are several offers pending, some well below the asking price. My guess is that the bank/servicer wants something close to $300,000 and this one might go to foreclosure.

The problem in Phoenix today is supply and demand. The inventory (supply) is huge. There are simply more homes than there are buyers, now that the speculators have been removed from the market. Very few people can get financing, which further reduces the pool of buyers. The few buyers out there are extremely hesitant to make offers in a market where no one really knows what market value is.

Before you dismiss buy and hold, look at some investors that have been invested for over 20 years. In Phoenix, they have been through two severe downturns. The houses and small multi-units have gone up and down in value, but the net income has grown dramatically. These folks prudently used leverage to get into their properties. They reaped the tax benefits and the equity build-up from paying the mortgages down or off. Now they are sitting back, collecting a nice income every month.

You can diversify your real estate investments and do a little speculation along with the buy and hold. When the market is going up, rehabs and flips can make sense. When the market starts down, prune your portfolio so that your cash flow is well insulated, and look outside real estate for opportunities.