My wife, Andrea, and I, both Scottsdale Realtors, have been investing in Scottsdale real estate in the form of condos in Old Town for a couple of years now. Why do we choose such an avenue to invest in? We see real estate as a pretty safe bet. As markets shift, real estate has always maintained an upward trend. Due to this long-term upward trend we see the following benefits:
1. Long-term gain due to appreciation
2. Long-term gain due to equity created from paying off the mortgage
3. Positive cash flow
4. Tax benefits
While there are lots of numbers floating out there, they all generally agree that at least 80% of millionaires own investment real estate.
At times you hear the horror stories of real estate about people losing money when the economy shifts. The answer to this is simple, if history is going to repeat itself (as history generally does) the market always comes back. What does this mean for the investor? It means that the conservative investor is focused on long-term rental income and isn’t going to go broke by having an extended vacancy. More simply put, invest within your means, make sure that if you have to pay the mortgage out of your pocket for 6 months that it isn’t going to break you.
The 5 Pillars of How We Invest in Scottsdale Real Estate
- Stick With What We Know – Andrea and I know Old Town Scottsdale very well. Not only do we live in Old Town and own multiple condos in the area, but we also help lots of buyers purchase Old Town Scottsdale AZ condos and lots of sellers sell them. We are constantly walking the neighborhoods and reviewing listings on MLS. After reading this post you can use our website to search Scottsdale condos for sale.
- Nothing New – We don’t purchase brand new luxury condos for investment purposes. We consider these condos to be speculative investments as the price can waiver quite a bit and are likely to depreciate. Purchasing one to live in is fine as long as you understand what you’re buying and don’t have aspirations for building equity through appreciation. Remember what they say about what happens when you drive a new car off the lot? The same generally goes for brand new condos.
- Price Range – In Old Town Scottsdale we’ve found that the sweet spot for purchasing condos as investment properties is approximately $175,000. A year ago it was closer to $160,000. We look for condos around this price point. As you start going up from $200,000 you begin to see diminishing returns on your investment. If you’re looking for something more expensive, you might consider purchasing a house instead.
- Furnished – We do all of our condos as furnished rentals. This demands a much higher price point, especially if you’re going to be investing in areas such as Scottsdale where there are going to be snowbirds visiting and looking for places to stay. Furniture, decorations, and supplies (think kitchen) combined generally cost around $7,500 per condo to get it up and going. It’s not at all uncommon to realize an additional $500 to $1,000 per month per condo in Scottsdale just for having the condo furnished, and that doesn’t necessarily mean a short term lease. If you do those numbers, you’ll see that you often get a return on your furnishing investment in less than a year.
- 15 Year Mortgages – This is definitely part of our strategy that I don’t personally recommend for everyone, especially when interest rates are this low. This strategy does, however, work for us because we have personal goals, and those goals include getting these properties paid off. It’s much much easier to chip away at a 15-year mortgage vs. a 30 year and the payment difference is surprisingly similar. You of course also have the option when investing in condos or other properties to write a longer mortgage but pay it off at a faster rate. With recent interest rate increases, the 15-year mortgage doesn't always make sense. It's easy, however, to write a 30-year mortgage and pay it off as a 15-year or quicker. We can put together the amortization tables for you so you know exactly how you should be paying off your condo investment.
The Basics of Condo Investing
This, of course, is our personal condo investing strategy. Lots of people make good money investing in all sorts of real estate. At the end of the day what rental real estate has in common is that it works this way:
- The investor puts down a fraction of the cost of the real estate they’re purchasing. This is usually a 20% down payment
- A tenant pays the majority or all of the mortgage, sometimes with a surplus which we call “positive cash flow”
- The real estate investor gets all the equity
It’s really hard to find flaws in this logic, especially when interest rates are as low as they currently are. (Update: interst rates are climbing but they're still low enough that you should be buying now before they climb higher).
If you’re interested in purchasing real estate but don’t have a down payment, you might consider purchasing a house or condo to live in for a year or two and then renting it out. This allows you to put down 5% for conventional financing vs. the 20% as an investment property. If you qualify for programs such as a VA loan or the Home in Five Program this may be as little as 0%. There are also programs for professionals such as doctors, lawyers, and certified public accountants.
Let Us Educate You on Real Estate Investing Scottsdale
Andrea and I absolutely love to educate all levels of investors on how to make your money work for you through real estate investing. If you’re interested in discussing more, please contact us at by calling or texting 480-387-3990 or send us an e-mail. We absolutely want to talk to you!
Remember, you can use our website to search all Scottsdale real estate. Our website has direct access to the Arizona Regional MLS and lists all Scottsdale homes for sale which much more accurate data than you'll find with the Arizona Zillow site.
It should also be noted that not all of the properties we assist investors with buying or selling are on MLS or ever even get listed on MLS In fact, a large portion of the condos we assist investors with never touch MLS, generally because we have investors that are ready to purchase a property when the right one comes along. We also have a list of individuals ready to sell when the right condo investor comes along. For this reason, if you have any interest in purchasing or selling an investment property the best first step is to contact us now.