Michel Brisebois

Thank you all, but we did go to Phoenix last August for two weeks to do some serious house hunting.

We came back with some good ideas, and we have 2 agents with property managers.

Problem: My wife likes a condo in Scottsdale and I like a stand alone house in Sun Lakes. We have an agent for each specific areas. It now comes down to deciding who will win the battle... and most likely my wife will.

In mean time, the financial world has collapsed and so has the CAD... to a low of .77 USD earlier this week. Today bounced up to .82, but right now our plans are on hold until the world comes back to its senses. Markets behaving in an insane manner.

Long term our plans are still on track. Short term, wait and see....

I don't think there's any rush to buy property in Phoenix. Recession and big lay-offs just starting.... - Wed Oct 29 2008, 11:26

Hi Randy,

From what I've been finding out, you are absolutely right.

You will get more money on a seasonal basis, but like you, I won't be there to clean up and rent it back out again. The turn-over is a problem, and to get someone to do it for will cost money.

Most of the advice I've been getting is better to rent it out year long to quality tenants. Fewer problems.

Big issue right now is the massive competition from the huge inventory of unsold homes. People can't sell, and can't even rent their properties out. My neighbour is from San Diego and has that exact same problem. He has to cover 2 mortgages monthly, his home up here in Richmond BC and his old one in CA which he can't sell or rent.

IMO, don't expect capital appreciation in Phoenix for several years. That won't happen with the current US financial issues. With Freddie and Fannie nearly going broke, the US financial system has some MAJOR systemic problems that won't be fixed in 6 months. It'll take several years to work out the kinks. This is a very serious situation that may get worse before it gets better.

But I will be in Scottsdale tomorrow morning... to start sniffing around.

I am by definition, a value investor.

Good luck. - Fri Aug 1 2008, 20:46

Hi Gillian,

Thanks. I looked at your site and one of your listings looks most attractive... #2016. As you say close to airport, but for me even better: very close but not under the flight path. It looks large enough, price is good, furnished, gated, gas fireplace, newer building, golf is an attraction for seasonal renters, etc. I downloaded the sheet on it. When we are down next month, we'll drive around the area and if it looks fine, I'll give you a call. - Thu Jul 10 2008, 10:26

Thanks Carla, those are the kind of numbers I'm looking for. Very useful.

I do have agents already... what I don't have is a property management service company yet. - Mon Jul 7 2008, 21:11

Thanks David, good point about gas. People will be looking at living closer into town... especially renters.

However, up here it's way more expensive. We're now paying $1.52 CAD a liter, after our new 2.5 cent "carbon" tax came into effect July 1st.

At 3.785 liters to a US gallon, and assuming .9815 the CAD/USD (today's rate), that's about $5.64 USD a US gallon. You think you guys have it bad? The ironic thing is, Canada supplies 25% of all US oil needs... we're your largest single oil supplier.... most of it from Alberta, right next door.

Of course since you're from the UK, you know all about high petrol prices.

Thanks for the management services... I haven't found one yet... will be chooosing one as soon as I find a place. - Mon Jul 7 2008, 21:09

Thanks Steve.... I am aware of inventory issues as I get the MLS listings daily, hence the dilema. I will be looking at condos/townhouses in South Scottsdale anyway... don't want to spent the bucks for a regular house there.... we are not moving there... it is just a second home, and an investment for the next few years until ready to use it.... so I have to keep it low.

I still have to upkeep our principal residence up here.... and have no intention of curtailing our regular spending or travel/vacation plans. We do have a pre-approved mortgage from a US bank, if needed.... now waiting for US bank account to get set-up. All this planning takes time...

We will also be looking at North Scottsdale when we come down in August, we looked at a couple of places there last Xmas, but did not have enough time.

We are focussing on Scottsdale, Tempe, Chandler and Sun Lakes. I would prefer a little house on a nice desert style landscaped lot, but my wife has other ideas... she wants a condo with no upkeep. We will see what happens when we come down and look at property more seriously. We will be there 2 weeks, plenty of time.

I agree, Scottsdale and Tempe, #1a and #1b. With nearby tourist attractions, high density, big University, a central location close to the downtown core and airport, it is hard to go wrong.

If I can get something decent around 1500 sq ft with a rental rate of about a buck a square, with low HOA/taxes, under 250k, I'd be happy. - Mon Jul 7 2008, 15:25

Thanks, but we're city folks. - Wed Jul 2 2008, 16:17

Thanks Ed, but Rio Verde is too far... I'm sure its nice, but can't see taking a cab there from airport. - Sat Jun 14 2008, 10:27

Sunnyaz, we did go to Casa Grande last xmas.... cool...and what you say is exactly what I told my friend... you don't drive in traffic here as you don't go to work here, the same thing in Phoenix... once there, you're not going anywhere...in any case traffic does not bother me... unless we're talking LA traffic... lol...Yes wives do have a lot to say about it... and I don't have a problem with a 55+ community... my younger brother lives in one in Florida and I go there every year and think it's just great. My wife doesn't really get it, so I have to spend more time convincing her. She just hasn't spent enough time in one.

In any case we will be there 2 weeks, so plenty of time to look around. - Fri Jun 13 2008, 22:34

Sunnyaz, yes I am doing my homework. I am aware of location, and a one time fee... and further fees... but you got pay something for anything.

No free lunch in America you know:-) or Canada for that matter.

We also checked out Goodyear last Xams... kinda far, and out of the way. Everything nice and new, but... isolated.

I may end up owning more than one property, because I'm looking for cash flow for living income while I'm doing my 6 months there every winter. I want to start a real estate business. Otherwise I have to keep converting CAD to USD all the time, and that gets expensive for nothing over time. In addition, every time I use my Canadian credit card for cash, they charge me 5 bucks "international" fee, in additon to the 2.5% on the currency conversion. Can't be doing that for 6 months of the year. Ridiculous.

In August, we will be looking at condos in Scottsdale, houses in Sun Lakes, Chandler and Tempe, AND will drive down to Yuma and Tuscon. Yuma we've been before, but about 30 years ago, so I think it's grown (wink). Tuscon never been to, but both place harder to get at as we have to take another flight connection. A friend of mine from Delta is looking in Tuscon... he likes it better than Phoenix, less traffic. But he's used to driving 10 minutes to work while he was working... he always worked and stayed in same neighbourhood.

I drive 2.5 hours in heavy traffic everyday, so it doesn't bother me. Every year I go to Montreal, and it's even worse there... doesn't bother me. One thing I have to say about Phoenix, terrific freeways and highways. Best roads anywhere for getting around. Love it.

As long as we are within 30 min. from the airport, we will be fine... since we have to take a cab to get there. Once there, I intend to keep a car at the house.

Personally, I'd rather have a small house on a desert landscaped lot... with a nice yard with citrus trees, palms, cactus. I'd be very happy to sip my morning coffee looking at my yard. But, I guess my wife has other ideas. haha - Fri Jun 13 2008, 17:19

Hi Ron,

Yes, I'm aware... I have an agent who specializes in the Sun Lakes area. I have never been, but will be there in August. I'm plugged into the MLS and see all the new daily listings and reduced listings as well.

I like the looks of the place from online pictures... very nice homes with good size lots, inexpensive (as compared to Vancouver- we're in Richmond), low taxes comparable to Vancouver, etc. Looks attractive. I'd favor a desert landscape as we get enough grass and trees up here... low maintenance is what I'm after.

We looked at Florida, but taxes too high (2%), Palm Springs CA (1.25% and very high HOAs of 400 Mo. and up). AZ has the best operating costs anywhere in the sun belt.... and close at 2.40 hr flight time. My wife is originally from Winnipeg, so she's a Western girl anyway.... Phoenix is very similar to Calgary in character.

In addition, I go to Florida every year on Spring Break and in rains a lot. Get enough of that here. I don't want to see another rain drop of it or another overcast, gloomy day. Not bad when one is working, too busy to care, but once retired.... too depressing. I want dry and sunny.

I checked their website, looks good. The only issue is my wife is scared it's like an old folks home... so I have to drag her there to see it first hand. Even though I have never been to Sun Lakes, I'm sold on the place... tons of listings below 200k, and nice looking homes on good lots.... low operating costs. As far as I'm concerned, it's perfect for me. I just have to convince my wife... she likes Scottsdale.... and wants a condo... I'm not too keen on that. Always been a land owner.

But again, we haven't been to Sun Lakes yet.... I am excited about it though. - Fri Jun 13 2008, 13:40

Thanks Donna, you are right, most likely I will have to raise my purchase price... it all depends on the possible rental issue. In this market it might be difficult to rent, if it isn't already rented. So I'll be looking at the cap rate closely... for now, more a busines move than anything else.

I already have Rick Dobbles for the general Scottsdale area. Thanks anyway. - Fri Jun 13 2008, 07:42

Thanks Sunnyaz, I'll get in touch with you via e-mail if I have time when we get there. We have not spent time in Peoria. We'll have to explore.

Jeff,

Thanks but Queen Creek is just too far... not expensive, but really for young families starting out.... we went to check it out last Xmas. west Mesa might be a possibility. Yes Bellingham flights are inexpensive, but it takes longer just to get through the border line-ups than it takes to fly to Phoenix from Vancouver. I don't care about the cost of the flight, I want expediency and proximity.

I'm a 15 min. cab ride to the Vancouver airport, door to door. Very practical. - Fri Jun 13 2008, 06:43

No golf, not important... not yet anyway. We are planning to rent it out for the next few years before we retire, so rental potential very important as we simply do not have the time yet to take full advantage of the US property... too busy in our working lives. We may eventually buy more than one property, to generate US income and tax effectiveness later on.

We have an agent for Scottsdale and another one for Sun Lakes/Chandler areas. Both specialize in their respective markets. We do have another one in Yuma to get another perspective.

We now have a US accountant and I have picked out a lawyer.

I expect however, that the metro Phoenix area will offer best rental potential rather than the outer areas.

We are looking at properties under 300k max.... but there are plenty at or under 200k that meet our requirements.

We would like to be relatively close to airport (but not under flight path), close to shopping, restaurants, etc. that is what is really important. Over 1,000 SF and under 2,000 SF.... probably 1300-1700 SF would be ideal.... otherwise too much work to upkeep. Minimum 2 bd/2 bath.... and covered parking as we will eventually leave a car there permanently. - Wed Jun 4 2008, 09:00

Hi Nick,

I am planning to come down to Phoenix first 2 weeks of August, and am planning 2 side trips: Yuma and Tuscon.

Yuma I haven't been to in 20 years... small town but it is close to San Diego/LA California, Baja, and Mexican coast. That's an attraction.

Tuscon we have never been to, so I may just take you up on your offer. We are planning to visit the area.... the usual western tourist traps, like Tombstone/Bisbee. A friend told me Green Valley and Tubac are a must, plus the Tubac Golf and Country Club Inn.

I will check your website and get back to you. - Wed Jun 4 2008, 07:34

Thanks John, but I think there's plenty of inventory under 300k in the greater dowtown Phoenix area.... inventory of the type I'm looking for...I don't need to go higher. In fact, these days, lots in the 200k range or under.

I'm concentrating in Scottsdale and Sun Lakes/Chandler. Scottsdale I have to pay a bit more but I feel easy to rent. I don't want anything too big, 2,000 SF max. , even that is too large for what I need, 1,500 would be better. I also have to be within 1/2 hour from Sky Harbor airport, no more. At this end I live a 15 min. cab ride to YVR, and there are 2 direct flights a day to Phoenix, year round (unlike PS CA in season only), at 2.40 hrs fight time. I want easy and quick access to the second home...

And I do plan to be renting it out for the first few years. - Fri May 23 2008, 14:28

Thanks John... the condo you describe sounds just about right for us and easy to rent. Of course, long distance ownership means proximity to airport is paramount.... I certainly can't be going there every week-end to look after things, it would cost me a fortune flying there. I'll try the site you suggested. - Sat May 3 2008, 16:01

Thanks Gene. I agree 100% as I am quite aware... I do a fair bit of stock investing, and have for several decades, so I know money.

However for me, I may rent out the US property for a while until I am ready to make use of it.... 5 to 10 years max., so then I will have a US income tax problem in the US from the rental cash-flow, so a US mortgage to cover the expenses maybe the best solution. I have found a US accountant and US mortgage broker to help me (thru Trulia). I may get a US investment mortgage as it is faster and easier, but one needs a minimum of 30% down today... so I will most likely put down a bit more, but only as much as necessary to make the property cash-flow positive. Probably 40%, but I'm still crunching the numbers vis-à-vis the various property types.

I had friends in the early 80s who bought US property with a US mortgage as both were lower at the time than here Vancouver, then when the commodities tanked, so did the Loony... but they still had to cover their US mortgage with a depreciating CAD. Nightmare scenario... they were forced to sell to get out from under it..... So I'm very well aware of the pitfalls.

In Vancouver property prices are still appreciating, up 10% this year. Last year, I sold-off my stock margin portfolios, paid-off all my non-deductible debts, was 100% debt free with cash in the bank, then reset my Secured Line of Credit against my properties to max. (90%) as they had appreciated a great deal since I last did this a few years back. So now, I am debt free, have cash in the bank and have access to large amounts of SLoC cash, without having to go begging to the bank with my hat in my hands. First thing I did early this year is re-invested (borrowing from my SLoC ) and bought back my portfolios at lower prices... needless to say, I'm in the black now, and doing well (so far, LOL).

As I have been researching Phoenix RE, I am coming to the conclusion that Scottsdale would be the best bang for my buck, as I can most likely, easily rent out the property in any economic climate. But I will have to spend more than I originally figured... between 250 to 300k. However, when I am ready, I can either use that property, or then sell it and buy something else.

I have been accumulating USD in a USD savings account in Canada, but should eventually open one up in the US for when I relocated sometime in the future. I also looked at Yuma, been there before... too far to get at. Phoenix easier, 2 direct flights a day from Vancouver.

Not finished doing my homework yet, so I may change my mind on some things moving forward. But anyway I look at it, I'm not planning on spending 6 months a year of my retirement, looking at Vancouver rain. - Mon Apr 28 2008, 13:52

Thanks for all the replies... we went down to Phoenix to have a look around for holidays early in the new year 2008 and checked out a few neighbourhoods... Gold Canyon is very nice but far from town... very scenic.... Goodyear and Queens Creek is far and inexpensive.... but there are more tumbleweeds and sand there than anything else.... Scottsdale is very nice, especially Old Scottsdale and the Waterfront area.... but expensive. Perhaps a condo might do in Scottsadle... still looking. After all, we want a second retirement home... and are not willing to spend a great deal as our home base is Vancouver B.C., expensive enough as it is. - Mon Jan 14 2008, 12:05

Sorry, I'm not planning to rent something, I'm planning to buy something to rent out until I need it.

Been to Phoenix many times before and am familiar with the area. I'm concentrating in only certain areas of interest to us: Scottsdale, Tempe, Chandler and Sun lakes. Got to be less than 1/2 drive from Sky Harbor airport. That's it.

Thanks anyway. - Sun Jun 29 2008, 10:33

We will be in Phoenix the first 2 weeks of August looking at properties in the Phoenix area. So far looking at the daily MLS, I've seen many reductions and prices are still soft.

I'm hoping we can find something of interest, suitable for renting until we are ready to retire and use the property.

Up here prices are still firm, up from last year, but the inventory is up by 20% over last year. Properties are not selling as fast as last year, but RE market still viable. Commodity prices are holding up real estate out West as more people move in for availability of jobs. Lots of jobs available up here, I can't get trades to do work on my house... and they price bids ridiculously high. Got two bids to install a new patio door, each wanted 2,500K... I don't think so. Still shopping for a better price.... I'm not paying 2k labor costs for a 4 hour job (if that).

Thanks for all the answers. It helps me a lot to get an idea on the Phoenix RE market. I see that the seasonal trend is not much different than up here in Vancouver B.C. Looking foreward to our visit. - Sun Jun 29 2008, 09:08

Thanks for the answers. As I suspected... winter tourist season is still good and you still have the school season issue like us. I know that Palm Springs CA does well in January as it is a tourist resort town.

In Vancouver, the biggest inventory choice is right now... by the end of summer the inventory gets quite picked over, only the unpopular homes are left, for whatever the reason. Few put up their homes in fall and winter as the weather is miserable and it rains a lot, so unless they have absolutely no choice... like career move, divorce, death, etc. Of course around Xmas is sheer desperation, and the low-ball vultures come out.

I just wanted to get an idea of the seasonal trends... I have time this summer, but I thought that perhaps the hot weather might curtail the market.... fewer owners there to show, fewer agents around, etc. - Tue Apr 29 2008, 20:49

As a Canadian from Vancouver looking at PS and Phoenix properties and thinking the same thing, it all depends what you want to do.

If you plan to live as "Snow Birds" immediately, then I would bleed the equity in your Canadian properties through a Secured Line of Credit or conventional mortgage and pay cash for your US property. Then the USD/CAD currency issue is no longer a problem as you are financing the property in CAD. I would also put USD savings in a US bank for later use, IF the CAD were to drop precipitously.... buying and accumulating USD as the CAD gets over par, my preference is at around 1.02, as that covers the bank charges for the USD purchase rendering into a straight across swap. A couple of pennies may look insignificant, but on 300-400K purchase, it's a lot of money to pay just to get some bank clerk to shuffle a few papers across a desk. I have a USD account in Canada where I accumulate USD on weakness.

On the other hand, if you plan to buy in the US and rent the property out, I suspect the best plan of action would be to get a US mortgage. For an investment property, US mortgages are easily available to Canadians but you need 30% down (you can get from a SLoC on CAN prop.), and I've only found 30 year fixed US mortgages, and at much higher rates, but it requires very little paperwork. I've been thinking if I buy a US property for rental (until I need it), it might be a good idea to incorporate... for liability protection. You will have to pay US income tax on the rental income, so US deductions are helpful in mitigating the US tax bill. There is a "free-trade" agreement between CAN and US that help mitigate double taxation, when repatriating currency. I would keep my US investments in US; and keep CAN investments in CAN; both in separate pots.

I’ve seen this kind of market before up here in the early 80s during the last commodity bust, and it takes several years to work out the problems… most people pay mortgages monthly, so it takes a while before trouble sets in. So there is no rush in buying anything. Take your time and do your homework. That’s what I’m doing. - Thu Apr 24 2008, 07:58

Thanks again Steve. Great info... helps a lot... and I'm sure there are others reading thinking the same thing....

I agree 100% about consulting a lawyer, I have one up here and I intend to get one in Phoenix. I do have an accountant for my investments in Canada and I intend to get one for any real estate investments in the US. LLC makes a lot of sense if I intend to rent out the property. I was even think of buying two, one for eventual living in seasonally, the other as a rental for investment.

I have to pay close attention to the tax angle as I am learning the US real estate market.

Normally I use a lot of leverage in my investment portfolios.... especially in a declining interest rate environment.... so tax efficiency makes a great deal of difference as to what I buy, when I sell, etc. I balance the the yield, the margin costs, etc. all this has to be worked out, like in any business.

PS. We loved Scottsdale and Phoenix when were there last Xmas... we stayed at the Royal Palms and had a blast. We haven't been in Phoenix for many years.... and we particularly loved the Boyce Thompson Arboretum... I'd love to have a desert garden... it would be great. Very different from Vancouver. - Wed Apr 23 2008, 16:55

Thanks Steve, the details help a lot. It's the details that'll kill you if one is not careful. In this kind of market, easy to get in, hard to get out if one makes a mistake.... it has to be a long term commitment. Got to do my homework first.

Taxes: I would expect that US interest paid for an investment in the US would be deductible against the US income and US expenses. That's the way it would be up here. The problems come with any cross-border financing or repatriation of gains... or loss claims. However there is a "free-trade agreement" that is in place to mitigate double taxation.

I wonder if there is any advantage to start up a US limited corporation for the investment? - Wed Apr 23 2008, 08:07

Thanks Jon.

I know I need a US accountant. I have one up here for my investments....as I'm not familar with US taxes as per investment loans and property, especially as it involves foreign nationals. Very different than in Canada where I know my way around very well... so I need to get that set-up BEFORE I invest. Current and future taxes play a big part in any investment.

I do know I can get a US mortgage easy for an investment property, and need 30% down. - Sun Apr 20 2008, 15:43