Are rental homes in outlying areas of the Valley good investments?

 

Recently I have seen several proposals from builders and other agents promoting the more inexpensive parts of the valley as the ideal location to buy an investment home.  I have noticed that the home rental rates suggested in these sales flyers are consistently higher than the true market value of homes for rent in Buckeye, Queen Creek, Surprise, and Maricopa.

Buying an investment home in a specific neighborhood primarily because it is promoted as a bargain is a bad long term investment strategy.  Besides having a lower rental rate, the vacancy rate in these areas of the valley that are on the periphery of our metropolitan area, is fairly high.  Because the Phoenix metro area is so large it is very easy to look at the “macro view” of home sales and rental home numbers and draw conclusions about a particular area based the average numbers of all of the Phoenix area.  Instead, an analysis from a “micro view” will give you a much more accurate vantage point of a specific area.  In this case what is the fair market rental value and vacancy rate for these neighborhoods

Owning a rental home is similar to providing any other product. Supply vs Demand will determine price.  The demand to live in Queen Creek, Buckeye, Maricopa, or Surprise is fairly low; transportation, employment, leisure activities, and education are all still in their infancy, nothing is really note worthy or will be for many years.  In reality there is much more quality services offered in most of the other communities in the Phoenix area.  The primary reason we at Front Porch Properties have chosen to recommend buying a rental home in Glendale, Peoria, North Phoenix or Scottsdale – along the northern leg of the Loop 101 corridor – is because of the demand from potential renters. This is due to a strong employment base, great transportation, excellent schools, and a myriad of leisure possibilities that include golf, high end shopping, resorts, sports, hiking trails, etc.

Remember, when you are buying an investment home, location is just as important as it is when you are buying your primary home.