Rental Property Investor · Tempe, AZ · Member since 2018 · 22 posts · 6 votes
I am looking at a rental fourplex (4 units of 1bed/1bath) in the Tempe Town Lake area (AZ). This is a very hot area because it is nearby a lake lined up with professional buildings and the Arizona State University campus.
Cap rate is 6.5%. This fourplex was just remodeled and price is average in the area ($975/unit).
However, as I walk around the area, there are 2 lots of luxury condos (30 units) and luxury apartment (40 units) being in construction and might be finished in 2 years.
What will happen to the market once these luxury complexes are completed? Would they bring in more competition?
@Jay Truong Jay, those condos should add value to that unit in the long run. The construction will be a negative just due to the noise and the mess. Once completed they will be competition to your building but most likely at a much higher rate which will actually make your units attractive and allow you to raise the rents some.
Of course as you already know that area is exploding with growth and demand. The ASU demand has increased as has the employment sector along the lake exploding.
Will that land your building on eventually be used other than housing or newer housing? It's possible they could want this parcel in the future.
@Jay Truong Jay, those condos should add value to that unit in the long run. The construction will be a negative just due to the noise and the mess. Once completed they will be competition to your building but most likely at a much higher rate which will actually make your units attractive and allow you to raise the rents some.
Of course as you already know that area is exploding with growth and demand. The ASU demand has increased as has the employment sector along the lake exploding.
Will that land your building on eventually be used other than housing or newer housing? It's possible they could want this parcel in the future.
Thanks for your input. I hope that its value will go up as you said.
The land is only 6000 sq ft and the living space is 2000 sq ft. I do agree with you that some big investors might come in later to acquire it and all the small lots around it.
@Jay Truong developers are building nothing but "luxury" condos in Tempe right now - not even just Tempe, that seems to be a trend across the whole Valley! What they're not building are small, affordable fourplexes like what were predominantly built in the 50s/60s all over town.
The vast majority of people can't afford to buy or even rent "luxury" condos, which means there is increasing demand for your unit class.
@Jay Truong developers are building nothing but "luxury" condos in Tempe right now - not even just Tempe, that seems to be a trend across the whole Valley! What they're not building are small, affordable fourplexes like what were predominantly built in the 50s/60s all over town.
The vast majority of people can't afford to buy or even rent "luxury" condos, which means there is increasing demand for your unit class.
Thanks for your input. It sounds very positive. I will start the contract tomorrow.
The luxury condos and apartments are good for our value and rents (I own/ manage a 4-plex on 3rd st just behind Rio Salado Pkwy) My 1 bedrooms rent for $775 a unit fully remodeled granite, SS appliance, laminate but this is with shared laundry and uncovered parking 600 sq/ft.
I never have a problem finding renters, put up an ad and they will show up. Half of my renters are on there 2nd lease renewal. The other half moved home or out of town. I could not tell you why but the 1 bedrooms rent almost instantly and the 2 bedroom units sit a little longer.