Tuesday, June 19, 2007

Multi-Family Housing in Phoenix

One of the questions that I get asked frequently from out-of-town investors is to find them a small, multi-family property (such as a tri-plex, 4-plex, or even a 12-unit apartment) in a "good part of town" or a newer part of town. This is easier said than done, since there aren't too many newer developments featuring these types of properties. In fact, I can't think of any newer, higher-end developments with multi-family zoning, with the exception of the "stacked flats" at Vistancia. (I'll write more about these another time.)

Then I start to think about zoning, and some of the areas that have a good amount of multi-family housing.

Multi-family housing allows a builder to build multiple units while sharing some of the costs between them - the cost of land, some common walls, plumbing & electrical - they build with economies of scale. This makes each unit cost less compared with building multiple houses. But since the units all share the same deed, they can only have one owner. This means that they are built exclusively to be rented. And I think it's safe to say that a neighborhood with mostly rented units isn't usually as desirable as one with mostly owned units, at least in the general Phoenix area.

Think about this: have you ever driven up Central Ave, from downtown up to Dunlap? As you cross Camelback heading north, you'll enter some of the most desirable neighborhoods in all of Phoenix. Between Glendale & Northern there are multi-million dollar homes all around you. Then as you cross Northern the zoning changes, and you start seeing multi-family housing. By the time you get to Dunlap, one mile further north, you don't even feel like you're in the same city!

Back to my original question - can you find a newer, multi-family property in a good part of town? I haven't seen it, and I'm not sure it exists. If anyone out there knows of a property I'm missing, please let me know.

- Chris Butterworth