Written by Mackey Martin
I looked at my son today and asked him a question, “Who is the hottest baseball player in the game right now?” His answer was short and sweet, “That’s easy, Bryce Harper.” I spent many of my summers cheering on my two sons who were chasing their dream of becoming professional baseball players, and let’s face it, what little boy doesn’t at one point or another have this dream? It was different at my house, as two of my kids actually lived out their dream of playing Professional Baseball. They both left the game and unfortunately never made the Major Leagues, but this led them to come join me in Real Estate. I don’t seem to have the same passion for the game like I use to, but still have great memories of bases loaded, three balls and two strikes and participating in great nail biters, remember “It’s not over till the fat lady sings” and that is case in point how the real estate market works. We cycle in and out of bull and bear markets and right now we are in a bull market; as you can see from the “Market Index” above, its running at a solid pace. It doesn’t matter how you slice or dice it, Arizona makes sense as we are still a very affordable state. Arizona has many other reasons for being hot other than the weather. . .trust me I remember today why I own a second home in Northern AZ. When we moved to Arizona in 1991 my husband was an Oil Trader, and I always found him looking at the Weather Channel. Finally one day I asked, “Why are you so tied to watching this channel” and he responded that living in a state that literally had no weather inclement forced him to look for information nationwide that would help him in trading product. We were always sunny and it gave him a false view of the weather. I look at the recent news headlines that Central Texas and parts of Oklahoma are literally floating from the rains that have plagued these states recently, and in Phoenix, AZ we generally get an average rainfall of seven inches a year. When compared to our neighbor to the west, California, one can imagine why so many people leave that state to come to Arizona for our weather, affordable housing, the Sonoran desert, stimulating mountain views, a small town feel in a big place and let’s not forget the burden of taxes that the Californian shoulder. Now that is an experience I can live without, how about you? Let’s just finish by saying how do you rank a state that has the majestic Grand Canyon?
So many times my clients ask me why I feel the AZ Real Estate is a better investment than the stock market. I have studied and been involved in both throughout my adult life. My husband was a Financial Advisor and then there was me that “always” wanted to own dirt, thus becoming a Real Estate Agent (go figure that opposites attract). Let me explain why I have a strong preference for Real Estate over stocks.
Reasons Why AZ Real Estate is better than Stocks
- Owning a Home Gives You More Control – Look at real estate this way, every piece of property you own gives you a chance to be a CEO. You are able to market the property, raise or lower rent, make any necessary improvements and cut costs as you see fit. Being an investor in a public or private company means that you will be a minority investor, who has no say in what will be the correct path for the company. You are required to trust people you have never met. Overall you still have to deal with the economic cycle, but owning a home allows you more room to adjust when making crucial decisions. There is not one person who cares about your home more than you do.
- More Palpable – Real Estate is something you can feel, see and utilize. When everything comes crashing down, you will always have your home. Real Estate provides you with shelter, and theoretically one could presume sustenance like food and water that is tangible in helping one survive the worst Stock Market crashes. Also, if inflation happens, buyer beware, land is where you want to be positioned.
- Tax’s – You are able to deduct interest on up to $1.1 Million in mortgage indebtedness on your primary home; you can also sell your primary home for tax free profits up to $250,000 for singles and $500,000 for married couples if you live in the home for the last two of a five year period. If you are in the 28% or higher tax bracket, it will only help you to own property. All expenses associated with managing your rental properties are also deductible towards your income. Limits do apply however, so think of $166,000 a year total as the magic number.
- Less Volatile – Your home value is constantly cycling, and yes at times you are aware of how the meter is moving be it up or down just due to local or nation news; however there is no daily ticker update like the stock market. You’ve got to live somewhere so decide are you going to pay someone else’s house payments, or are you going to own your own castle to enjoy and create memories. During the crash of 2009, I held on to my main home in Arcadia (an area in Phoenix/Scottsdale with dominance to larger irrigated lots) which is about as centrally located as a homeowner can get. It sits just south of one of our more famous mountain ranges, Camelback Mountain. From the position of my home running east and west along the Camelback Corridor, you will hit every hot button for the consumer from the Biltmore at 24th and Camelback moving east to Camelback Mountain, and then two or three minutes into Scottsdale and the most desired shopping mall in the state, Scottsdale Fashion Square. I raised four kids in this house, heard the snap of the ball from our batting cage, picked citrus from our 15 plus trees, and experienced a son’s wedding in the backyard under our over sized mesquite tree that my husband planted. What is the cardinal rule in real estate, location, location, location? I own location and when the market started its rebound, my property recovered quickly and with great strength. Since the AZ Real Estate Market is primed for success, don’t be a buyer sitting on the sidelines, you’re going to put your money somewhere so why not Real Estate.
- Analyze and Quantify – If you can calculate realistic expenses and rental income that’s all you really need when it comes down to valuing a piece of property. If you can borrow at 4% or less and rent out for a 6% yield, you’ve likely found yourself a solid real estate investment. There’s not only the cash flow component but the underlying equity element that helps investors build their wealth. Stocks require you to trust what the company reports. There are many ways for companies to massage their numbers and make things look better than they really are. You as the consumer have access to all kinds of real estate sites like Zillow, Trulia, Realtor.com that assist one in understanding value. We operate a family practice, the Mackey Martin Group and pride ourselves in being able to help you position your portfolio for success through your fixed asset investments, be it a primary, second, or investment property. You hire all kinds of professionals around yourself, and your real estate agent can be that integral part of helping you establish how you invest.
- More Insulated – Real Estate is local. If you’ve made a good decision to buy in an economically strong region (i.e. Phoenix), you will be more insulated from the national or global economy. A natural disaster in China is not going to affect the rent you charge.
“Historically the largest real home price decrease is on the order of 5% in any given year,” says Jonathan McCarthy, senior economist at the Federal Reserve Bank of New York. “Whereas you talk about a real stock-price decline, you could probably see 20% or even more.”
In closing I thought you might like to see the Great Phoenix – ARMLS (Arizona Regional Multiple Listing Service) Residential Resale chart. I think one would say dramatic!!
Information taken from “The Cromford Report”