Home ownership down in the Valley, rental rates up

PHOENIX - The real estate market has taken a stomach churning plunge that has left many people without their homes.

Those former owners are now renters, and as a result the rental market is booming in the Valley. Home values in the valley have dropped nearly 56% from their peak in 2006.

We spoke with Mike Berg, an owner and manager of Ranch Realty in Scottsdale , and he answered our questions about the rental market.

SF: Home ownership has dropped in the valley from about 69% in 2004 to 66.4% at the end of March, which is the lowest it has been in 13 years. What has that plunge done to the rental market?

Mike Berg: "10% increase in rates and a 10% increase in leases over 2010."

SF: So from an investment stand point is it a good time to buy if you are investing in rentals?

Mike Berg: "The current prices make it a great time to buy an investment property. When purchase prices are down interest rates are low & rental rates are up because of high demand. This will allow you to maximize your profits."

SF: Ideally what does that purchase look like?

Mike Berg: "There are varying price ranges of investment properties. Currently, there is a high demand for rentals in all price ranges. Many of those loosing their homes to foreclosure are accustomed to living in higher value homes. They may be looking to downsize but in most cases not drastically. With that said, location is the most important factor followed by upgraded features, garages & private or community pools."

SF: If you are planning on renting out your property, what do you need to know?

Mike Berg: "You need to be financially capable of making such a large investment. There are repairs, taxes, insurance and vacancy factors to worry about. Emotions need to be put aside to look at the big picture which is what is the return on my investment currently & down the road. If you choose not to use a professional company like Ranch Realty, educate yourself as much as possible. Also, become familiar with the Residential Landlord Tenant Act and the laws & rules you need to abide by. Check with your accountant on tax consequences and property related tax deductions."

SF: If you are looking to rent, are there things we need to know to ensure we get the best deal?

Mike Berg: "Do your homework or use a realtor. Don't be afraid to negotiate the rental price. Many owners are willing to accept a lesser rental rate for a tenant with good credit or one proposing a longer term lease. Ask if the owners are current on their mortgage payments. Check prior utility averages for the home by calling the utility companies. Investigate the crime statistics of the location or neighborhood."