Independent real estate advisers, such as Vancouver blogger, investor and consultant Ozzie Jurock and Phoenix-based Transition Financial Advisors Group founder Brian Wruk, stress that investors should do their homework before investing in a real estate fund or making independent real estate purchases.
Both believe the Arizona real estate market is close to or has already bottomed out, even though a report from the W.P. Carey School of Business at Arizona State University noted that foreclosure-related sales in Phoenix are increasing. The study found that foreclosures accounted for 29% of home transactions in the Phoenix area in November, up from 26% in October.
Wruk told BIV that Phoenix has recently been flooded with investors attempting to exploit the Phoenix real estate market.
“It’s getting to be bubble-like with everybody doing real estate. I mean everybody, everybody is into it,” he stressed. “People are quitting jobs, fixing homes and then flipping them. There’s a lot of supply and inventory, but a lot of people are taking up that supply.”
Jurock, who has bought many properties in the area, said investment landmines await those who are not careful.
He warned that U.S. banks will often lend only to buyers who want to own a second home.
Another quirk: Canadians must file a U.S. tax return if they spend more than six months south of the border.
A law is working its way through Congress that could allow Canadians older than 55 to stay 10 months and for those who have invested $500,000 to stay all year. But that bill has yet to become law.
Jurock described one particularly risky phenomenon called “short sales.”
Those transactions, peculiar to the U.S., take place when realtors offer an ultra-low price for a property that is in foreclosure and owned by a bank that has not agreed to sell for that low price.
The realtor attempts first to attract a bidder at a rock-bottom price and then convince the bank to agree to the sale. Jurock said that securing that consent can take months and could attract a counter-offer. He added that the short-sale approach is unsuccessful about 80% of the time.
The impact of failed short-sales on nearby property can also be severe.
Someone may be attempting to buy a unit in a building for $100,000 that listed several years ago for $200,000. If a realtor attempts to short-sell a unit in the same building for $50,000, Jurock said the $100,000 transaction could be jeopardized and drive down all prices in the building.
But he added that Phoenix currently has some of the world’s best investment real estate opportunities, partly because of the city’s stable and growing rental pool and higher capitalization rates on investment properties stemming from high rents compared with property values.
“If you’re looking for a cash flow while waiting for the market to return, there’s no better place than the U.S.,” he said. •
