Senators agreed on a $15 billion bipartisan plan to help alleviate some issues the real estate markets across the nation — including Tucson AZ — are currently facing. The plan is intended to help the real estate market regain its footing. The first piece of the plan would permanently increase the amount of loans backed by the FHA to $550,000. The down payment would increase to 3.5% from its current requirement of 3%. A second boost for the market is that it will give a $6.1 billion tax break to homebuilders and other troubled firms. These companies can apply operating losses from this year and next year to past tax bills, giving homebuilders a little back to assist them in keeping their companies from dissolving over the next 2 years. Also part of this major bill is the availability of $10 billion of mortgage revenue bonds that states can issue for refinancing and first time homebuyers. The facet of the plan that will help the average person the most is the offering of incentives for the purchase of foreclosure properties rather than other available homes. To accomplish this, the federal government is offering a two-year $7,000 tax credit if the property the buyer is purchasing is facing foreclosure. This should have the effect of greatly reducing the number of foreclosed homes on the books. It will be a great help to banks and neighborhoods.

Arizona is a major hotbed for what’s called “foreign nationals” — persons from another country residing in the United States. Most foreign nationals who come to Arizona to invest or purchase second homes are from either Canada or Mexico. However, I have also seen buyers from the United Kingdom, Europe, Latin America, and South America. Many foreign nationals would like to purchase property in the United States but find the process confusing. It does not have to be complex. In fact, it is simple, and I will walk you through it.

High-end foreclosures are starting to show up in the Tucson marketplace. Homes above $1 million are coming up as REO (Real Estate Owned Properties). The reasons for this are many, and I predict that these high-end foreclosures will continue to escalate in number. One reason that this is happening is that many would-be developers decided real estate was doing so well in 2005 that they were going to buy a parcel of land and develop a million dollar or multi-million dollar property. From point of decision to completion, development time is 9-18 months. Now in 2008, the market is severely depressed and the amount the developers thought they could sell the property for is not even possible, and the cost to build is more than the market value of the home. This leaves the developer in a tough situation unless they have major reserves to hold the property or pay out of pocket to get it sold. Many of these would-be high-end developers do not have reserves or did not anticipate cost overruns that pushed the costs up on their home, making them too expensive to sell and netting them a foreclosed property.

Building a sizable real estate portfolio takes time, patience, and the ability to manage your holdings in a competent manner. If you can do this, the money is there to be made in large quantities. By holding for long periods of time, you allow others to pay off your mortgages and eventually this will equate to your outright ownership of the property once the mortgage has been paid in full. This does not even account for all the appreciation, tax benefits, and stability that real estate typically offers its owners. Investors who are interested in making profits must understand one thing: you need to purchase in areas of the country that are experiencing growth. Growth puts upward pressure on prices.

Areas of Continental Ranch and Continental Reserve (located on the northwest side of Tucson at Silverbell and Cortaro Rd) are being developed for commercial purposes and have been for the past 3 years. All along Cortaro, just west of I-10, properties have been continuously developed and now offer residents extreme convenience, and most residents never have to cross I-10 to get anything they are in search of. In the past few years, a Super Wal-Mart, Kohls, Checker, Autozone (automotive stores), Chili’s, Ace Hardware, Fry’s, Chase, Bank of America, Movie Theater Complex, several restaurants, and service providers have made Continental Ranch and Continental Reserve home to their businesses. Just a few years ago, an urgent care center was built, providing medical care.

National homebuilder Standard Pacific has left the Tucson marketplace, selling their business to local Arizona real estate executives Chris Kemmerly and Steve Quinlan. Standard Pacific entered the Tucson market in 2004 when they purchased Chris Kemmerly’s Kemmerly Homes which owned and built the Miramonte brand, which was very successful and well known in Tucson. I believe the reasons for their departure are self-evident. Standard Pacific was taking significant losses. Their stock price indicated serious trouble at the company. Standard Pacific is selling their Tucson operations to raise cash and prevent future losses. Standard Pacific sold about 700 lots ready for homes to be built and about 70 homes that are all currently in some phase of construction. The new company says they will be also be looking to purchase more land and subdivisions later in the year for additional building.

I have been helping several investors acquire these types of properties in recent months and cannot believe what some of these properties are being listed and ultimately sold for. Right now, I was just looking at a property in Rancho Sahuarita — a home over 2300 square feet — listed at $195k, and it was in amazing condition. The same home 24 months ago would have easily sold fast at $250k and maybe more. This market decline has obvious causes: less availability of loans for buyers, excess inventory levels, and, in my opinion, a major psychological shift. People are running away from real estate, and the market is starting to show it. While amazing deals are still difficult to come by, they are starting to show up.

Most people who currently live in Tucson already understand why it is a high growth area. A world-class climate, low housing costs, an amazingly diverse and strong economy, and very scenic and varied natural surroundings make Tucson, Arizona, a destination spot for many. Retirees come here in droves to escape the cold weather of northern cities. The University of Arizona brings in a large number of students annually, many of whom decide to stay and live in Tucson indefinitely. The University of Arizona also attracts local and national investment dollars for research and development businesses that spring from it.

I decided to write a post for beginning landlords or people looking to buy their first investment property. This is a very basic and simple post to help people with the job of property management.

With that being said, the first thing that comes to my mind — as should come to yours if you’re looking to attract those first tenants to your property — is deciding how, where, and who to allow to rent your property. Obviously Fair Housing laws should always be followed (and that goes without saying), but other than that, once you have a potential tenant you should do the following:

Buying investment properties in Tucson, Arizona (AZ) makes sense today because the market is in a serious temporary downturn. Thirty-six to forty-eight months from now, I think there will be many people saying, “Wow, three years ago was the time I should have bought that first or tenth rental property.” Here’s the reason I think it makes sense currently.