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Absorption rate is defined as the number of homes sold in a certain time period divided by the total number of homes available. The rate is determined by dividing the number of homes sold in a certain time period by the total number of available homes. The output is then identified as percentage or a # of months. In other words, what absorption rate shows, is the amount of inventory on the market. For instance if the absorption rate is 3 months, that means if no other homes come on the market, all the homes would be sold (absorbed) by the end of 3 months, and there would be 0 homes on the market. Industry experts vary on what they consider to be a seller's market, a buyer's market or a balanced market but one example uses an absorption rate of 6 months. A 6 month absorption rate would spell a balanced market. Less than 6 months would be a seller’s market and a rate above 6 months would be a buyers market. What does that mean for Phoenix Metro - At the end of June we were at a 1.5 month absorption rate. That is an extremely low number! It displays just how limited the inventory is - 14,382 active listings for all of Phoenix Metro. Even through the COVID-19 pandemic we have seen the Phoenix stay a seller’s market because of the lack of new inventory that has come online. There are many reasons that could be causing less listings going live; some would be sellers are worried if now is the right time to sell, some would be sellers don’t want to move during the pandemic, some would be sellers are re-financing at historically low interest rates and are happy to stay in their current homes, there are countless other reasons. So if you have been waiting for the right time to sell, this could be a great opportunity for you, but of course, every situation is unique! So in your next zoom meeting go ahead and drop in a line about the absorption rate in the Phoenix Metro area and do it with confidence! As always we are here to help answer any questions and make sure you have all the knowledge you need for your real estate journey!

Out with the old [tenants] in with the new! How do we prepare tenants and owners for the turn of a property When looking at property management, typically what comes to mind first is often finding a tenant or handling the daily maintenance requests. But in reality, the crux of the tenant and owner experience is often how the turn of the home goes. There are several aspects that come into play. Overall we want to make sure the outgoing tenants leave the home in good condition (or are held responsible for not leaving in good condition), we want to make sure the incoming tenants are moving into to a well cared for home that is prepared for them, and of course we want to make sure we are good stewards of our homeowners property(s). What makes this a hard needle to thread is that each of these parties have different expectations and perspectives. At E&G we work very hard at setting proper expectations all the way around. For the outgoing tenant: We visit the home 45 days before their move-out and we prepare them with lists of preferred vendors for carpet cleaning and professional house cleaning, we also review if there are any major items that should or can be addressed before move-out. We remind them of lease language in regards to how the home should be left. We then provide them with all of the move-out documentation and make sure they know if they were charged, why they were charged and what they were charged. For the incoming tenant: It is always important that we minimize vacancy, but we want to have enough time to get the home prepared for the new tenant. We set the expectations that a few minimum criteria will be met for the home at move-in. This includes: Professionally Cleaned Carpets Cleaned (and/or replaced when deemed necessary) Touch Up paint completed Landscape cleaned up If the incoming tenants have additional requests before move-in we present that to the owner during the application process. After move-in we then give the tenant 7 days to report anything we missed so that we can have everything taken care of in just one handyman visit where appropriate. For the owners: After visiting the property the first time, usually 45 days before the tenant vacates, we will reach out to the owner if there are any larger ticket items that need to be prepared for. In addition when the leasing agent is preparing to list the home, one HUGE thing we do is provide our homeowner multiple options with appropriate suggested rental rates. So if we see an opportunity to increase rental rates by doing certain repairs or upgrades we will lay out the specifics and better prepare the owner for the turn. We always keep in mind and remind owners of the expectations we set for our tenants that the home will be: Professionally Cleaned Carpets Cleaned (and/or replaced when deemed necessary) Touch Up paint completed Landscape cleaned up We are transparent and have all videos, photos and invoices available for review for the entire turn process! Overview We have created some unique practices and procedures to set up the Turn Process and to make it fair and equitable for all. The most important thing for us is to make sure expectations are set and that all parties involved are equally prepared for the process so that all come out feeling like they had a great experience. In the end we want to make sure we are leaving people AND properties better than we found.

How did one made up word become so important to millions of people? One made up word has encouraged people to buy, sell, cancel contracts, disagree with Realtors and so much more. I first want to take a moment and appreciate that Zillow and other online algorithms have put in countless hours of work to get their calculations to where they are at today - a great accomplishment in its own right and kudos to them! But when it comes down to it, a local expert, a real life agent, a trusted advisor will consistently be more accurate and be able to truly assess the home in its current condition. After all, an algorithm can’t visit your home in person, an algorithm hasn’t sold 100’s of homes in the area, and an algorithm hasn’t lived down the street for years. Zillow does actually publish their estimate accuracy and it’s actually fairly decent in the Phoenix Area, the large amount of homogenized developments certainly helps. For instance in the Phoenix Area over 92% of the homes sold are within 5% of the estimated sales price (not bad!). But in San Francisco, where there is a large variety of homes and many years of highly competitive offers, Zestimates are within 5% of sale price only 63% of the time. There are some factors that affect the algorithm and can throw off the Zestimate as well. Some can be edited and then updated through Zillow, and some can’t. Inaccurate Basic Information Sq. Footage Beds Baths Upgrades since you’ve owned it New Kitchen New Flooring New Pool Limited data points (if there aren’t many sales in your neighborhood, Zillow will have less data to use and this can throw off some numbers) Now, even with all of that being said, me and every other Realtor would be lying if we said we never looked at the Zestimate in helping us get a value of the home. But it is important to remember that the Zestimate should be a starting point or simply a data point to help you determine the value of a home. An experienced real estate agent and/or an appraiser will always be a better more sure fire way to get a true assessment of your home.

For decades we have been encouraged to invest in real estate. Nearly 90% of all millionaires have been created by investing in real estate, so it’s a no brainer right? But some of us need that extra security before investing - whether that be more examples of actual results or a helpful hand to guide you in the right direction. In an upcoming blog (stay tuned!) we will talk about how to pave the way to how you can invest in real estate, but today I want to share one of our most profitable secrets that has been consistently successful for us. Whenever we talk about investment opportunities we always seem to mention the city of Tempe. Over 25% of our rental properties are within the Tempe area and we even moved our office to Tempe in Spring of 2019. It has been a repeatable and successful avenue for real estate investment that we can’t get enough of! Due to COVID-19, we saw some atypical results this year and while we are keeping an eye on it to see if any of those effects linger, we are still aggressively pursuing Tempe rental properties for our investors. In the example below, we break down the costs and income for one of our clients. In July of 2016 we helped him purchase a home for $307,000. It was a 4 bedroom 3.5 bathroom home with a pool and easy access to the ASU Tempe campus, making it the perfect home to use as a student rental. We immediately leased it out for $2,650 a month & increased to rent to $2,750 a month the next school year. (That’s an easy additional $1,200 a year!) As a full 45 months went by, the owner collected $128,843 in rental income with only around $17,200 worth of expenses — In that time, he earned $111,643 in net rental income! In May 2020 we helped the owner sell the property for an appraised value of $395,000. After escrow costs and fees, the owner's proceeds were $372,140. When you remove the initial investment amount, you are left with a net return on the sale of the house of $65,140. Now combine the net rental income with the net return on the sale of the home and the owner made a total of $176,783 in just 45 months. (That equals out to almost $4,000 a month!) He made an annual return on his cash of 14.4%! Over the life of the asset (45 months) he made a profit of over 57%! There aren’t many investment opportunities where you can see that type of return on your money. If you’re interested in learning more, stay tuned for more posts on how to get into real estate investing!

Both, right? Of course! We always love to purchase properties below market that will appreciate in value but also bring in some great cash flow in the meantime. It doesn’t end there though. Sometimes there are decisions to be made, and that depends on your short and long term goals. When we discuss equity in this context, we are talking about under market value homes as well as properties expected to appreciate quickly with little more than routine maintenance. As discussed in another article here, let’s break it down below. When Cash Flow Matters More: Cash Flow is a focus for investors who are truly relying on or desire to have “mailbox money.” For investors that want to pocket cash on a monthly basis. For small investment property owners, this could be for short-term planning, “I want some additional money in my pocket to supplement my day job!” or long-term planning, “I’m not worried about what this house will sell for in 3-5 years, I won’t be selling for the foreseeable future, I just want to make sure I’m making money each month!” This is typically the focus of Institutional investors. For them, cash flow is the name of the game. They are constantly talking about gross yield (annual rent divided by the price of the properties) and what their “buy box” is (what range they’ll accept for the gross yield of a portfolio). These firms need to hit a certain return for their investors. For example, a fund might estimate an 8% return for its investors or an insurance company may estimate it needs a 9% yield to cover their expected losses. When Equity Matters More: Equity, especially built-in or instant equity, can be a huge factor for most of our short term investors. A home that hits certain criteria can allow for money in and money out more quickly and possibly the ability to invest more or on a grander scale. “The market is soaring right now, and this home is below market, let’s buy it cheap and sell it when the market tops!” It’s not always a super short term play though, an investor could be willing to take a lower cash flow monthly if they anticipate to sell during another peak. “I need some cash flow now to help, but I really want to max out my equity and sell the property when I retire in 10-12 years.” While in the Phoenix Metro area, there are still a myriad of opportunities for a property that has built in equity and cash flow there are other markets where cash flow just isn’t possible, but equity can still be found if you can buy below market; I.E. in the Bay Area, Austin, or NYC. Bottom Line E&G Real Estate is here to help you understand the differences between Equity and Cash Flow and we want to make sure your decisions are setting you up for success for your future goals! Call us today and one of our Real Estate Investment Advisors will walk you through it all!

Mortgage Relief • Fannie Mae - https://www.knowyouroptions.com/covid19assistance • Freddie Mac - https://myhome.freddiemac.com/own/getting-help-disaster.html • Save Our Home AZ - https://housing.az.gov/save-our-home Check back for more!