If you are lucky enough to have a home in Flagstaff, good for you!
Although the Phoenix real estate sales prices have increased by 27% from this time last year, and Flagstaff has kept in step at 26%, there is still opportunity for investors. Yes, Flagstaff real estate sales prices are at an all-time high, but they were also at an “all-time high” each year since the third quarter of 2018. Bank rate forecasters predict this trend will continue well into 2025. Demand for housing in Arizona is fueled by migration to the Southwest for job opportunities, our comparatively attractive property and sales tax base, weather and lifestyle. Rentals fees are also increasing and hard to come by, as buyers with jobs in Flagstaff wait out escrows, or try again to submit an offer that is acceptable to sellers.
If you are lucky enough to have a home in Flagstaff, good for you! You may have been checking with your realtor or the many sites to see how much your property has appreciated in value/equity, even if you purchased three months ago. Have you ever considered an investment in Flagstaff real estate besides your primary home? True, it would have been more advantageous to purchase real estate in 2011, when the market was flat after our infamous “bubble” because of liar loans, but as we all know, we can’t go back in time!
What options today exist for your investment funds? Stocks, ETFs, Mutual Funds, Net Funds – inside or outside of your IRA or 401K. Watching what may be the end of our long “bull market” may be disconcerting to many investors, but long-term rate per financial advisors is a conservative 3% to 5% per year. Stashing funds in ultra-low interest bank accounts, CDs and other fixed instruments, like under your mattress, may seem like the safest place, but is it the wisest choice in today’s economic climate?
Now that our inflation rates have creeped up from 2% to 4% and now to 7%, do you have a plan to make your assets keep up with increasing inflation? Buying Flagstaff real estate now may have a couple of advantages. First, sales prices are increasing and forecasters predict this trend will continue at least until 2025. Second, if you need financing to purchase your investment property, Flagstaff’s Chris Hallows with Wallick and Volk Mortgage says, “Most people are risk-averse, but mortgage interest rates, even with the predicted upticks, are still at historically low rates.” Third, if you are paying cash for your investment property, if the forecasters are correct, you may hopefully get a rate higher than your average stock market portfolio, and get the added benefit of top rental income while you enjoy watching your property’s increasing equity over the next years. And fourth, consider your tax consequences of write-offs of repairs and expenses, property tax and mortgage fees, as well as depreciation schedules over the years.
Another option may be to use your existing IRA or 401K to fund your Flagstaff real estate investment. As with any plan, work with professionals you trust. Your realtor can help you with strategizing a plan to get your purchase offer accepted in this wildly competitive market, and educate you on how the market has changed for both buyers and sellers. Talk to your tax and financial advisor to explore the pros and cons of all your investing options and to determine what options are best for you. Once you set your course, be brave and don’t look back! FBN
By Paula Mack
Paula Mack, SRES, is a REALTOR with Russ Lyon Sotheby’s International Realty. She can be reached at 928-699-6837 or paula.mack@russlyon.com.
