It is important to keep any real estate market discussion regional, though there are some national headwinds affecting every market. For the Greater Phoenix area, there is still a supply and demand economics problem. There are not enough homes to support all the incoming residents following job growth, retirement relocations, and new household formations. The Federal Reserve is the main driver of what happens next. Any positive inflationary news and slowing rate increases are going to positively affect mortgage rates and open up the floodgates to the next leg up in the Phoenix market. I predict this will coincide with our spring buying season as we return to a more cyclical market in 2023. HOUSING SHORTAGE TO CONTINUE
LOCATION WILL BE KEY
CASHFLOW WILL BE KING
A sound investment strategy weathers any market, and our strategy of buying for cash flow remains as valid in 2023 as ever before. As short-term rental (STR) owners, we will try to add more units to our portfolio in 2023 despite the inventory of attractive Airbnb properties being at an all-time low and pricing near its all-time high. In the past, we’ve paid down debt aggressively, but we’ve tabled this approach in the last nine months in favor of building a strong cash position to ensure our next purchase will not require much financing. This will help us compete against financed borrowers, avoid today’s high interest rates, and ensure immediate positive cash flow despite high market prices and lower STR demand.
2023’s real estate market outlook depends on one simple truth, location! In the regions where we invest, home values and rents were terribly undervalued for decades. The 30-40% real estate market “correction” over the past two years increased local rents closer to those of similarly sized markets. Demand for rentals remains strong and the real estate market in our area has stabilized moving into 2023. Bottom line, the market correction was a very welcome boost for local landlords. While some real estate investors in this area are lamenting that the good ole days of cheap money and bargains galore are gone, the new, closer-to-national average, home prices still offer great opportunity for cash or creative financing buyers.
OUR STRATEGY OF BUYING FOR CASH FLOW REMAINS AS VALID IN 2023 AS EVER BEFORE.
THE MARKET CORRECTION WAS A VERY WELCOME BOOST FOR LOCAL LANDLORDS.
THERE ARE NOT ENOUGH HOMES TO SUPPORT ALL THE INCOMING RESIDENTS.
Dave Mencel Real Estate Investor Author of The Vacation Rental Bible Read Dave’s Book
Norm Spivey Real Estate Investor Author of Collect Rent, Don’t Pay It! Read Norm’s Book
Ryan Hoover Ryan Hoover Real Estate Phoenix, AZ Connect with Ryan
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