Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
7y
To give you an idea of how conservative we underwrite, even with the $300 increase in rents:
We met with the new manager at the property this morning, and she says our post-renovation rents need to go up another $50 on the 1x1s. We knew that going in, but it provides an additional $700K of upside to help us outperform.
Don't be too aggressive with your underwriting; give yourself some cushion.
Investor 路 Phoenix, AZ 路 Member since 2017 路 583 posts 路 919 votes
7y
To give you an idea of how conservative we underwrite, even with the $300 increase in rents:
We met with the new manager at the property this morning, and she says our post-renovation rents need to go up another $50 on the 1x1s. We knew that going in, but it provides an additional $700K of upside to help us outperform.
Don't be too aggressive with your underwriting; give yourself some cushion.
God forbid he should say anything nice to me when we saw each other last weekend in CA at @J. Martin 's event. It was like he'd never seen me before... but at least I got a Like.
God forbid he should say anything nice to me when we saw each other last weekend in CA at @J. Martin 's event. It was like he'd never seen me before... but at least I got a Like.
Maybe he'll give you his phone number one day. (I'm just kidding, Brian. I don't wish that on you)
And this is our competitive advantage in Phoenix. If you go a mile West, yes, it's a rougher area. However, this property is half a mile from brand new class A retail. Surrounded by homes priced well above the metro average.
In the last two years, this area has been completely transformed. After looking at the property for the first time, Ben and I had lunch one light down. The area felt like we were in Chandler or Gilbert.
Anthony, all of us need to have an unfair advantage. Yes, 5 years ago this wasn't a great area. Today, the city is deploying major capital behind the Baseline Corridor. Lots of Class A "Starbucks" infrastructure has and continuing to come in. There are two gated communities, one next door and one across the street, with housing starting in the $250,000 and going north of $600,000, which for Phoenix is serious.
But, if you're not here, you wouldn't know, thusly defining our competitive advantage. We are here and we focus on Phoenix.
Rental Property Investor 路 Glenwood Springs, CO 路 Member since 2018 路 46 posts 路 24 votes
7y
@Sam Grooms I tried to buy a triplex in that area a few months ago for the same reasons. I'm a new investor and you guys just made me feel really intelligent for attempting that purchase. Haven't seen anything else we liked down there, but will keep looking with increased confidence now. Only a few miles from a crazy tempe market too.
I'm bullish on South Phoenix as well after I helped a client buy an investment just up the road from you at 24th and Southern. It really has some nice areas that will surprise people that haven't explored down there after writing off "South Phoenix" for so many years. It's a truly massive area that is ripe for new infill and development!
@Sam Grooms I tried to buy a triplex in that area a few months ago for the same reasons. I'm a new investor and you guys just made me feel really intelligent for attempting that purchase. Haven't seen anything else we liked down there, but will keep looking with increased confidence now. Only a few miles from a crazy tempe market too.
I'm bullish on South Phoenix as well after I helped a client buy an investment just up the road from you at 24th and Southern. It really has some nice areas that will surprise people that haven't explored down there after writing off "South Phoenix" for so many years. It's a truly massive area that is ripe for new infill and development!
Absolutely, Ryan. And the thing is - this late in the cycle you have to look into the future, specifically growth.
Congrats! What sort of rehabs are you going to do with that $1.5M?
- How many units are you going to be upgrading?
- What sorts of finishes are you going to be putting into the units?
- Do you see an equal amount of upside in increasing income as you do in lowering expenses?
Thanks!
Brendan
Brendan,
Our scope on this is about $7500 per unit on the interior, and the rest on the common areas. On the interior, we do cabinets, quartz/granite tops, underhung sinks, flooring, paint, fixtures.
The business plan calls for remodeling all units.
The last comment is interesting. We are actually underwriting higher expenses by a good clip than the seller. Their expenses are not sustainable. This is why we need that $300 per door bump, some of which is to compensate for higher operating costs.
Rental Property Investor 路 Fort Wayne, IN 路 Member since 2014 路 251 posts 路 129 votes
7y
Super exciting project! It's a impressive opportunity, and I think @Sam Grooms and @Ben Leybovich have done a KILLER job, very specifically with their underwriting process on this. I was hesitant to jump in the previous AZ deal, because I personally wasn't ready, but I couldn't pass on this one. Glad that I've been able to be a part of this one! It will be fun to watch it play out!