Arizona Investment Property – It Can Protect Your Purchasing Power

Arizona investment property has been the source of much news in recent years. First for its rapid appreciation rate right up to the credit crisis, and then for its equally dramatic depreciation from the highs of 2006. The most amazing thing about the rise and fall is the number of people who never saw it coming. And even more astounding is the amount of “wealth” that was destroyed in such a short time period, ultimately resulting in so many people having more loan than house.

However, for those who have positioned themselves properly, the next decade will hold unprecedented opportunity to create wealth using real estate! This is no exaggeration. Never before in our nation’s history has there been a more perfect to time to take a hard look at investment property, especially Arizona investment property. I know that’s a bold statement, yet I am completely confident making it. That confidence comes from knowing that governments around the world are behaving irresponsibly and are printing money like never before in history. In addition, government has taken on debt loads never before seen in history! These two factors form nothing but a financial house of cards that is unsustainable.

Do the factors mentioned above affect you? Yes… Maybe even more than you know.

Let me explain…You have worked hard or smart and set aside money for retirement in some form of account. I would bet you that your retirement account is denominated in US dollars. Lets say you have been able to set aside $100,000 in cash. How would the government’s ability to print money impact the purchasing power of your cash? The printing of money causes the purchasing power of your cash to diminish.

For example, what kind of new car can you buy today for less than $3,000? Can a new car be bought for less than $3,000? Did you know that in 1970 $2800.00 would buy a brand new Camaro with a V8? Whereas today, a new Camaro with a V8 starts at $31,000! How is that possible? Today’s assembly lines are much more efficient and automated with less metal going into today’s vehicles. The answer is simple: Inflation.

The creation of paper dollars causes inflation which devalues the existing cash. Your cash! How much will that 100k you saved be able to purchase in the future? It will depend greatly on what you do with it today.

The second way governments take from you is taxation. How much will the tax rates be in the future with ever expanding debts owed by our country? Bigger debt requires bigger payments. Since the government does not produce and sell anything, it’s cash comes from you in the form of taxation. In the last 4 decades the US has gone from being the world’s largest creditor nation to the greatest debtor nation in history! Now is the time to protect yourself from future taxation.

Investment property can protect you from both inflation and taxation. In addition, there is the added benefit of cash flow. Places like Arizona which have been hit so hard by the change in market direction have investors and property hunters taking on investments at unbelievably low prices.

Let’s examine the effect cash flow Arizona Investment Property can have on inflation, taxation, and cash flow:

Inflation: The price of “real things” rises in an inflationary environment. Look at the price of gold, silver, copper, sugar, and cocoa to name a few. Real estate is a real thing. It’s tangible and will always have an intrinsic value because people have to live somewhere. Crops have to be grown somewhere. Real property will in general keep pace with inflation.

As the credit crisis is worked out you will see (and we are seeing now) prices stabilize and then resume a gradual or perhaps a drastic rise depending on how much inflation is put into the system by the Fed and Treasury. That doesn’t mean that property prices will not fall further; however, property should not be purchased with the sole intent of speculating on price. Investment property will produce cash flow when purchased properly. Those who have the foresight to understand that investment property in Arizona, for example, has taken a tremendous hit offering a buying opportunity at incredibly low prices… These price levels provide more opportunity for appreciation for those who choose to buy now and hold the property as a rental. With many properties selling for less than $100,000, the opportunity for the average person to purchase their first Arizona investment property, or foreigners such as our Canadian neighbors to the north to purchase their very own Arizona vacation property is at all time highs!

Taxation: Buying and holding an investment property may provide great tax advantages. Depending on how you hold or own the property you may be able to write off expenses and depreciation against other earned income from your job! Seriously, ask your accountant.

Cash flow: This is really the hidden gem of advantages. Say you have your $100,000 invested in a property in Arizona. And, that property pays you or cash flows $1000 per month to you in rental income. You have now created a 12{bc1e42e53d8565163e9cec719c82f5e0892e054fb5d628f08363879e07731a2f} annual return on your invested cash! You also have the potential for appreciation! And, you earn this income in a tax advantaged way which means you keep more of what you earn! You also own the property which give you control to sell or hold the property depending on market conditions.

When is the last time you earned 12{bc1e42e53d8565163e9cec719c82f5e0892e054fb5d628f08363879e07731a2f} on your cash in a mutual fund or bond?

So why Arizona investment property specifically? It seems that these arguments would apply to most any investment property, right? Perhaps, however, when investing one should look for the highest degree of possibility for a winning investment. And, of the states that have been most beat up by the trouble in the markets, Arizona offers statistical factors that are not found in places like Florida or Nevada who also suffered from the downturn.

That that point, Arizona has not had a negative year of population growth in the last 40 years! Even during the recession the population of Arizona has grown, which of course will require or demand housing.

Arizona also offers new business growth:

“Good universities in the area have provided a skilled and educated workforce, which has positioned Phoenix as a competitive force in business,” says Bill Humphrey, senior vice president and managing director of XONEX Relocation, which provides global relocation services for transferring employees.

“Phoenix is projected to see more growth, especially since the technology, green energy and healthcare/life sciences industries have started to put down roots in the area.” Humphrey says houses that were selling for $500,000 before the recession are now in the $300,000 range.

This equates to more jobs which will draw even more attention to Arizona in this economy as more and more people struggle to find employment. These people will require housing.

Further, as the saying goes, “retail follows rooftops”, meaning business will flourish where populations exist to support it. This influx of people will provide Arizona a quicker recovery and a robust economy.

When you take the facts mentioned above together with the fact that Arizona investment property prices are at their lowest levels in more than a decade, its easy to see that those who invest in Arizona property now will benefit from higher cash flows and steadier rents, greater property appreciation due to both demand and inflation, and a more robust local economy in which to operate.

All of this gives an investor an edge over other areas when considering investment property.