Hot Market Or Stable Market?
I'm an investor in Phoenix and Las Vegas and am going to start doing subject-to deals. I was wondering if you guys thought it is better to do these kind of deals in markets that have appreciated greatly over the past few years (i.e. the two cities mentioned above) or in slow, stable markets? I was thinking that stable markets were better because there are a lot more people who are upside down on their houses (after realtor fees, closing costs, etc). In hot markets everyone has so much equity in their house they don't have any problem selling it through traditional channels.. thoughts?
First off, the Phoenix market hasn't appreciated greatly over the last few years. It has grown consistently, but very similar to several other areas in the country, consistently between 7 and 12% annually. Las Vagas has appreciated at an exaggerated rate over the last couple of years. Sometimes as much as 40% or more per year. Both areas have grown greatly, but growth doesn't necessarily equal hyper-appreciation. If you buy, I'd recommend buying properties that cash-flow. Especially in areas that have appreciated as quickly as Las Vegas. It is distinctly possible that there will be a correction in housing prices there, and possibly even depreciation will be experienced as this happens. If your property will cash flow, even if the value decreases, it will likely remain a good buy.
Sub2 works when people are willing to let you use this method to purchase their property. Sub is not only for people that are upside down on their houses. Anyone that believes that they need to sell their property, and are open minded enough to listen to what you have to say are potential Sub2 sellers. I 'm sure that external factors do have some impact, but probably not as much as you think.
Good luck,
Jeff
THG:
Have you heard about a town called Surprise? How about that town. How are things looking thier?
Surpise is good but Gilbert and Chandler are better right now.. Surprise is a bit more stable (not as speculative).
Most of the growth over the last 10 years or so has been in the east valley. Now that the area is full within some natural barriers, there is little room left for expansion (At least comparitively with the past. Prices are going up in the east valley.
Currently the west valley is the new growth center, and towns like Surprise, Avondale, Goodyear, and Buckeye is where the majority of the growth will now occur. The west valley is probably about 10 years behind the east valley relative to area available to develop. There is not currently quite the premium on Real estate over here.