Arizona market is too much expensive

[Sarah Latif]

I’m in Tucson and the market here is chock full of houses for sale..but they’re all priced about 20% over their value. And rent isn’t in line with value. For example:

Multi family unit with three units renting for $600 each. Property is 2000sqft and has never been renovated. The owner is selling for 285k.

To be more realistic I plugged in a sale price of $225k. Doing a cash flow analysis mortgage is $1200 and after taxes, improvements, water, turnover and repairs we’re left with almost nothing. Can someone explain what’s going on in Tucson? Or am I looking in the wrong place?

[Aaron K.]

@Sarah Latif nothing is wrong with Tucson or any other expensive market for that matter, your expectations are just too high for that area.  In this particular case it could be that rents could be raised almost immediately to improve returns, or they are expected to rise in the future as the city grows.  When people come on here and talk about crazy high cash flow numbers, most of the time that is with pretty cheap properties in markets that aren't really growing that much.