Phoenix properties are high on my list of potential investments lately. Especially for Canadians… With direct flights from western Canada to the Phoenix area, affordable prices, and lower costs of living pheonix properties look attractive from north of the border. The reasons to look at the States in general are many and I will share a few with you in the coming paragraphs, yet before I do that it is important to note how the Canadian dollar is trading against the US dollar.

For the last 6 months, I have been watching the Canadian dollar very closely in order to see how it responds to changing market conditions and the policies of the central bankers located in the US and Canada. And, living in both the US and Canada personally has provided a unique view on the situation.

Phoenix properties: Now is the perfect time to invest for cash flow!

Over the last 6 months, the Canadian dollar has fluctuated in value between $0.95 and parity. And during this time we have seen a couple Federal Open Market Committee (FOMC) meetings and several reports from the Bank of Canada in which the central bankers from both countries have decided to leave interest rates largely unchanged.

Why would they do this when the threat of inflation looms, you ask… Because Bernanke, head of the US Federal Reserve Bank, has a troublesome future ahead of him with record deficits, low production, and the consumer suffering from a credit crisis who’s effects have been felt around the world. He can not raise interest rates now and is currently looking into more quantitative easing… The result of these actions is a cheaper US dollar which may make US exports more competitive.

On the other side of the border, the Bank of Canada is in a touchy spot as well. 80% of Canadian exports go to the US! Yes, I said 80%! (Talk about the need to diversify an income stream) Canada basically has all their economic eggs in one basket despite recent efforts by the Prime Minister to build new trade relationships. These things take time. So, for now Canada remains dependent on the US consumer, who is over leveraged already. Canada dare not push the loonie to0 high versus the dollar for fear the US will not purchase Canada’s goods.

What does any of this have to do with US properties or Phoenix properties specifically? Timing. Let me explain… From a macro US economic standpoint with Canada dependent on the US, the Bank of Canada can only allow the loonie to appreciate so much before it has to reign it in. Currently, the Canadian dollar and the US dollar are near parity. Which means that a Canadian can purchase Phoenix properties with very little loss of purchasing power, and without worry that the Canadian dollar will appreciate a extreme amount against the US dollar and wipe out the potential capital gains or cash flow the investor may otherwise seek!

 
Ok, that makes sense you say… But why Phoenix properties specifically? Again, timing. Phoenix properties have been beaten up badly by the effects of the credit crisis. In some areas, homes can be purchased at 50% discounts off their peak valuations. As an example, in Calgary it costs about 300k or more to get into an investment property. When you compare that to the the prices of Phoenix properties you realize that for about 100k you can buy a larger single family home and rent it for a double digit return! So why buy only one property in Calgary when you can buy 3 in Phoenix which can provide a greater return on invested cash?

Now consider this: the State of Arizona has not experienced a negative growth rate in terms of population ever! And Phoenix being the most populous area in the State is experiencing the majority of the population growth. That gives an investor a nice margin of safety when looking into a good solid rental market for tenants. When compared to other areas of the States which have been hurt badly by the downturn, this stat sets Phoenix properties apart for an investor. What good is an investment property with no tenant?

Lastly, the Phoenix properties offer a greater possibility for capital appreciation. When you consider the fact that the Arizona population continues to grow, Phoenix properties are currently selling at a discount, and that Phoenix is a destination travel location complete with anything you may want in a resort or spa or shopping area, it is little wonder why people continue to visit.

With Phoenix properties, the value is tipped toward the Canadian investor.

Visitation creates a bustling service sector and boosts the economy. Job seekers flock to these types of areas looking for a fresh start in tough times. Those who can buy will; however, most will seek quality rentals as the settle in and ultimately decide either to stay or move on.

In addition to all that, the appreciation could be furthered by items like this: Phoenix Arizona was voted, by Yahoo Real Estate in an article titled “7  Cities With Great Real Estate Deals”, the #1 city for real estate deals. Several good reasons are quoted below:

“Good universities in the [Phoenix] 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 health care/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.

As an investor myself, I am always looking for multiple ways to win. So based on what I have discovered thus far I believe Phoenix properties to be capable of providing a good entry price, strong cash flows on invested cash, and the potential for appreciation. Anytime an investor can get that, its worth a hard look.

Learn more about Phoenix properties and decide for yourself if it makes sense.