Friday, February 27, 2009

Prime Properties Scheduled to Open in Phoenix on April 1!

Update on Phoenix:

For the past year we have been putting the pieces in place and we are now scheduled to open our Phoenix office on April 1. We are anxious to get going in this new market as it presents many opportunities and challenges, especially in the current real estate climate. We were asked by many of our current clients to assist them with their Phoenix investments, but the process of starting from scratch in Arizona proved to be more lengthy then when we crossed state lines and expanded into Louisiana and Oklahoma. Thanks for your patience while we have diligently worked to get this going.

The last step before we open is an interview with the Arizona Department of Real Estate (ADRE) so we can finalize the process and activate our brokerage license. In addition to the red tape issues to overcome we have been working with local Realtors and NARPM members for over a year to better understand the Phoenix market. This task has been like trying to read the labels on a NASCAR racer right in front of your face at 200 mph. The Phoenix market has had one of the most severe years as it has come to grips with the extraordinary overbuilding and the collapse of the job growth. Certain micro-markets in Phoenix have gone from good to bad over the past year and many of these bad markets do not yet show any light at the end of the tunnel.

The good news is it appears the Phoenix price adjustments are enough to again make rent/value ratios attractive for investors who want to enter the market. The balancing fear is the lack of new jobs means your rental home could sit vacant for an extended period of time due to oversupply. Please do your research before buying! A vacant house will kill the ROI on any investment since the rent/value equation only matters if you actually have a paying tenant in the home. We are concerned there could be a lack of tenants at any price point in certain neighborhoods so you should re-renter the Phoenix market with caution. Explore Phoenix opportunities and be prepared to act on the proper situation, but please use caution.

Our experience with the oversupply in Dallas from 2003-2006 provides us with a unique set of tools to deal with the extreme vacancies now seen in Phoenix. Back in 2004 we struggled in DFW and came up with many creative solutions to solve the problem of marketing into an oversupply. This was going on at the same time as Phoenix was shooting off the charts and everyone was making money there without even trying. We are poised to tackle Phoenix with the same fervor and skills with which we conquered the DFW challenges, however, since the Phoenix market is more depressed then DFW was at it's worse you should re-enter Phoenix with caution.

If you have properties in Phoenix you would like us to manage or you know of someone who does, please contact Jamie Hampshire in Dallas (JHampshire@PrimeProp.com) and she will collect your information and get your paperwork ready so we can start taking care of you as soon as we can officially open our doors.

Update on Our Other Markets:

In the markets where we already serve clients, the vacancy rates are still at all time lows. Baton Rouge now has a less then 5% vacancy rate for the homes we manage. So, if you are a client and we suggest you raise rents, please follow our recommendations. Early on in this business I was told "Nobody ever moved over $20.00", and though you may be tempted to skip a small increase when we recommend it, please take the extra $240.00 for the next year. There are up years and down years, and it is important to take the up years when they are here.

Remember that Dallas, Tulsa, Oklahoma City and Austin were not hit by the frenzy of overbuilding that happened in California, Arizona and Florida. What you currently experience in those frenzy markets is not what is happening in our other markets. Our current inventory of unsold homes on market are within historical norms of a 3-6 month supply. Our markets significantly curtailed building two years ago. This was in spite of the fact that the DFW area added a net of over 90,000 jobs in 2008 so these two issues created a scarcity of nice rental homes as compared with the demand. Also, if you have any deferred maintenance, do it now when times are good, take advantage of the cash flow which is available.

Last item, after over 20 years in business we have adopted an official slogan for Prime Properties. Our new slogan, "We do it better!", encapsulates what we have always focused on. "We" means we are a team of experts working for you, the "it" is whatever we do and "better" is measured not only against our competitors, but also against how we did our job the years past and individual landlords who manage their own homes. We constantly review and revise our processes in order to be the best at whatever we do.

Thanks to all of our clients who have trusted us over the years, and if you ever feel we fail in our efforts to do things better please bring the issues directly to my attention.

Kevin Martin
KMartin@PrimeProp.com
Prime Properties - We do it better!

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