Arizona investment property has been the source of much news in recent years. First for its rapid rate of appreciation leading up to the credit crunch, and then for its equally dramatic depreciation from the 2006 highs. The most amazing thing about the rise and fall is the number of people who never saw it coming. And even more astounding is the amount of “fortune” destroyed in such a short period of time, ultimately leaving so many people with more loans than homes.
However, for those who have positioned themselves correctly, the next decade presents an unprecedented opportunity to create wealth through real estate! That’s no exaggeration. Never in our country’s history has there been a better time to take a close look at investment real estate, particularly Arizona investment real estate. I know that’s a bold statement, but I’m absolutely confident that I will make it. This confidence comes from knowing that governments around the world are behaving irresponsibly and printing money like never before in history. In addition, the government has taken on debt burdens unprecedented in history! These two factors form nothing but a financial house of cards that is unsustainable.
Do the above factors affect you? Yes… Maybe even more than you know.
Let me explain… You’ve worked hard or you’ve worked smart and you’ve put money in some account for your retirement. I’ll bet you your retirement account is denominated in US dollars. Let’s say you were able to put away $100,000 in cash. How would the government’s ability to print money affect the purchasing power of your cash? Printing money reduces the purchasing power of your cash.
For example, what kind of new car can you buy today for less than $3,000? Can a new car be bought for less than $3,000? Did you know you could buy a brand new 1970 V8 Camaro for $2800.00? While today a new Camaro with a V8 starts at $31,000! How is that possible? Today’s assembly lines are much more efficient and automated with less metal going into today’s vehicles. The answer is simple: inflation.
The creation of paper dollars causes inflation that devalues the cash available. your cash! How much will those 100,000 you saved be able to buy in the future? It will depend a lot on what you do with it today.
The second avenue governments take from you is through taxation. How high will tax rates be in the future as our country’s debt continues to grow? Bigger debts require bigger payments. Since the government doesn’t produce or sell anything, their money comes from you in the form of taxes. In the last 4 decades, the US has gone from being the world’s largest creditor nation to the largest debtor nation in history! Now is the time to protect yourself from future taxation.
Investment property can protect you from both inflation and taxation. Furthermore, there is the added benefit of cash flow. Places like Arizona, hit so hard by the change in market direction, have drawn investors and real estate seekers to make investments at incredibly low prices.
Let’s examine the effect that Arizona Investment Property cash flow can have on inflation, taxation, and cash flow:
Inflation: The price of “real things” increases in an inflationary environment. Look at the price of gold, silver, copper, sugar and cocoa to name a few. Real estate is a real thing. It is tangible and will always have intrinsic value because people have to live somewhere. Plants must be grown somewhere. Real estate will generally keep pace with inflation.
When the credit crunch is worked out, you will see (and we are seeing it now) that prices will stabilize and then resume a gradual or perhaps drastic increase depending on how much inflation is injected into the system by the Fed and Treasury . That doesn’t mean house prices won’t fall further; However, real estate should not be purchased with the sole intention of speculating on price. Investment property, when properly purchased, will generate cash flow. Those who look ahead understand that investment real estate in Arizona, for example, has achieved tremendous success and presents a buying opportunity at incredibly low prices… These price levels present more opportunity for appreciation for those who choose to buy now and hold the property as rent. With many properties selling for less than $100,000, the opportunity for the average person to buy their first investment property in Arizona, or for foreigners, like our Canadian neighbors to the north, to buy their own Arizona vacation home is at an all-time high !
Taxation: Buying and owning an investment property can offer major tax advantages. Depending on how you hold or own the property, you may be able to write off expenses and depreciation with other income from your work! Seriously ask your accountant.
Cash Flow: This really is the hidden gem of the benefits. Let’s say you invested your $100,000 in a property in Arizona. And this property pays or accrues to you $1000 a month in rental income. You have now earned a 12% annual return on your invested money! You too have potential for appreciation! And you earn that income tax-deferred, which means you keep more of what you earn! You also own the property which gives you the control to sell or hold the property depending on market conditions.
When was the last time you earned 12% on your money in a mutual fund or bond?
So why specifically in Arizona as an investment property? It seems these arguments would apply to most investment property, right? However, perhaps when investing, one should look for the greatest possible degree of opportunity for a profitable investment. And of the states hardest hit by the market troubles, Arizona offers statistical factors not found in places like Florida or Nevada, which also suffered from the downturn.
At this point, Arizona has not had a negative population growth year in the last 40 years! Even during the recession, Arizona’s population has been growing, which of course needs or demands housing.
Arizona also offers new business growth:
“Good universities in the area have provided a skilled and educated workforce that has positioned Phoenix as a competitive force in the economy,” said Bill Humphrey, senior vice president and managing director of XONEX Relocation, which provides global employee relocation services .
“Phoenix is expected to see even more growth, especially as the technology, green energy and health/life sciences industries have started to gain a foothold in the region.” Humphrey says homes that sold for $500,000 before the recession are now in the $300,000 range.
This equates to more jobs, which will draw even more attention to Arizona in this economy as more people struggle to find employment. These people need housing.
As the saying goes, retail “follows the rooftops,” meaning business will thrive where there are supporting populations. This influx of people will enable Arizona to recover faster and have a robust economy.
When you consider the above facts along with the fact that Arizona investment property prices are at their lowest in more than a decade, it’s easy to see that those investing in Arizona real estate now are benefiting from higher cash flows and more stable rents Appreciation in property values due to demand and inflation and a more robust local economy in which to operate.
All of this gives an investor an edge over other areas when considering investment property.