Analyzing a Deal in Tucson, AZ- Advice from Local Investors

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Analyzing a Deal in Tucson, AZ- Advice from Local Investors

Mike Imbriglio
Investor · San Diego, CA · Member since 2020 · 55 posts · 8 votes

Hi BP Tucson,

I hope all is well, and that you are staying safe out there. I'm somewhat of a newbie in the REI game and the strategies I've focused on are wholesaling to find deals and network, and buy and hold. Anyway, I'm an out-of-state investor and I super interested in the Arizona market as I'm only one state over.

Last night I had in seller from Tucson reach out to me via one of my ads. He seems motivated, and owns the house free and clear. He has renters in there but they move out at the end of April and he's looking to sell fast. This would be a wholesale deal for me, and I wanted to get your input on if you think. I crossed referenced his info on PropStream as well and he is in fact the owner of the property. Here are the property stats:

1) 2082 sq ft, zillow says 3 bedrooms, 2 bathrooms (he didn't give me the amount of bedrooms and prop stream didn't have it either). He stated there is a 500 sq ft addition but it wasn't permitted. Is that going to be a problem?

2) Estimated value is $220,000-$230,000. He said he's willing to take considerably less for a fast cash offer. 

3) From what I gathered, rent in the area is about $1,400-$1,600.

4) Still need to run my comps

5) He said it only needs a little work, and the pictures on Zillow look like the house is in pretty good shape.

My business partner and I have boots on the ground in Tucson which is good. We obviously need to analyze the deal a little more and see what we can do for an offer. Do you guys have any feedback on a deal like this? Do you think it's worth pursuing? Any good title companies you can recommend in the Tucson area? Any and all advice is greatly appreciated. Thanks all!

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Marc Martinez
Realtor · Tucson, AZ · Member since 2015 · 4 posts · 5 votes
6y

Michael, 

It clearly sounds like the repair work is more extensive than what the seller is reporting (very common). If the ARV is between 220-240K, you wiII need to lock up this property between 130-140K in my opinion if your exit strategy is to wholesale it. If you are planning on taking it down yourself, you can possibly pay more. There are plenty of fix/flip investors in town who would pay 140-150K for this property if the ARV is 220-240K and the rehab cost is between 35-45K.
It sounds like you possibly have a very motivated seller, especially if he contacted you via an online AD. I would try and lock it up at 130-140K and explain to the seller that the property needs around 45K. Obviously, this is the art of the game. Trying to get sellers to understand the true value of their distressed property. 
Good luck. 

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  • Wes Blackwell
    Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
    6y

    @Mike Imbriglio

    Here are a few things you may want to consider:

    1) Do you have any current pictures of the interior of the property? If it's newer construction (less than 20 years old) it'll probably look decent on the outside, but tenants may have wrecked the inside.

    2) What's the seller's motivation for selling? If he waits one month and cleans up the property he'll get far more than selling it now for a huge discount. So why sell it now for less?

    3) Ask to see a copy of the lease, so that way you can confirm it ends in April.

    4) The addition may or may not be an issue. Really depends on quality of construction and its current condition. Also, is the property in an area that has an HOA? As they may have something to say about it if they find out.

    Other than that, the current value, ARV and your offer price are the biggest considerations. It'll probably be pretty easy to find an end buyer to wholesale to once you've got it under contract for the right price.

    0Reply
  • Mike Imbriglio
    OP
    Investor · San Diego, CA · Member since 2020 · 55 posts · 8 votes
    6y

    @Wes Blackwell thanks for your insight. All good things to consider. I'm working on hard on analyzing deals. I'm a little new so it's a process but the only way you learn is through experience and failing forward. 

    0Reply
  • Marc Martinez
    Realtor · Tucson, AZ · Member since 2015 · 4 posts · 5 votes
    6y

    Michael, 

    As already mentioned, if you can get access to some interior pictures, this wiII allow you to make a better determination of what your max offer wiII be. Are you looking at at 10-20K renovation or 30-46K renovation. I live here in Tucson and do some traditional and non traditional real estate. I can assure you that this seller is more than likely talking to numerous investors. During my last two seller appointments, the sellers actually advised me that they were speaking to five different homebuyers here in Tucson and getting multiple offers before making a final decision. 
    There are currently a large volume of investors buying here in Tucson. Many of them are local investors, but of late I have noticed that many wholesalers out of the Phoenix area are marketing and putting properties under contract here in Tucson. 
    In terms of a local title company, I have used Title Security Agency out of the River and Campbell office. They handled my last two assignments. I’m a newer investor myself, but feel free to reach out to me if you have any other questions. 

    1Reply
  • Mike Imbriglio
    OP
    Investor · San Diego, CA · Member since 2020 · 55 posts · 8 votes
    6y

    @Marc Martinez Thanks for the insight Marc. I spoke to the seller this afternoon and here is what I found out:

    1) The un-permitted area that was built was actually done by one of the project managers of the original homebuilders, and is done very well and would have passed the permitting process but he never pulled a permit, according to the home owner. Obviously I'd want to have someone check this out.

    2) I've seen some pictures on Zillow and it looks in good shape inside but they were taking about 3 years ago. He did have an investor before and they were supposed to close May 31, but the investor backed out. The client sent me the home inspection report that the previous investor got. I am working on going through the today. 

    3) The house has the ability to add an extra room or bathroom for someone who may want to flip it.

    4) Everything is set up with the title company and he even gave me the contact at the title company. 

    5) He is getting older and is motivated to sell. Doesn't want to deal with managing the property or any of the fix up.

    He said he wants to get $170,000-$180,000, and the comps in the area are $220,000- $240,000. Could be a good rental opportunity for an investor, and maybe minimum fix up. We are going to try and get one of our connections to go take a look at it as soon as we analyze it. 

    Any further thoughts or advice would be appreciated. Thanks. 

    1Reply
  • Wes Blackwell
    Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
    6y

    @Mike Imbriglio

    Sounds like the main consideration for this property in Tucson is going to be the repairs. He's told you what he wants to get out of it (although he may take less) and the home inspection report should give you a good idea of the condition of the property (although it also depends on the quality of the home inspector).

    If they already had one home inspection, the tenants likely know the property is for sale and you might be able to secure a brief appointment to view and inspect some of the items on the inspection report with a contractor or handyman to get more accurate bids.

    The big issues you'll want to look for is plumbing, electrical, HVAC and the roof as those are mostly the big ticket items. 

    Look for comps / recent sales in the area that were flips or completely renovated, as that will give you a better idea of the ARV. But be conservative if you're new to this. Don't overestimate.

    1Reply
  • Mike Imbriglio
    OP
    Investor · San Diego, CA · Member since 2020 · 55 posts · 8 votes
    6y

    @Wes Blackwell thanks for your follow up. Here's what I found from the home inspection report the previous investor had done:

    1) Plumbing outside seems to be ok

    2) Inspection says Arch Fault Circuit Interrupters need to be added around the house. Was not required by code when the house was built but is now required for safety of inhabitants.

    3) There's various cracks in the stucco and the inspector recommended sealing them up.

    4) It looks like facia around the house is pretty deteriorated from weather and should probably be replaced

    5) Some electrical and breaker box outside around patio area are not done well and may need to be re-done. Light on exterior of the house needs to be fixed, that's minor.

    6) Recommends anti-siphon valves be added to the hoses, hose valve damaged

    7) Locking mechanism on exterior door is missing and needs to be fixed

    8) One window has frame missing the bottom section of the frame. Some window and door screens need to be replaced

    9) Substantial damage to the tile on the back patio

    10) Detected mold-like substance in laundry room and bathrooms. Should be evaluated by specialist.

    11) Water staining present on the ceiling in family room in main house where the roof seam meets between the main house, and un-permitted area

    12) A few closet doors have been damaged and need to be replaced.

    13) Another window needs to be serviced because it won't shut

    14) Need to add fire alarms to bring up to code

    15) Looks like the kitchen needs to be re-done

    16) Bathroom repair- fix some slight leaks, a couple toilets, re-do caulking in tubs, re-do flooring and base moulding

    17) Recommends replacing water heater, and HVAC. Think they are the original units from when the house was first built

    18) Mice Feces present

    19) Roof inspection- recommends to cap sheet the roof. According to roof inspection, the shingle roof over this home is not a serviceable roof. There are exposed fibers and granule loss throughout the shingle roof. Roof is in poor condition. 

    Long story short, it seems like the house is in need of a lot work and could be a nice flip project for a Tucson investor. Any thoughts?

    0Reply
  • Marc Martinez
    Realtor · Tucson, AZ · Member since 2015 · 4 posts · 5 votes
    6y

    Michael, 

    It clearly sounds like the repair work is more extensive than what the seller is reporting (very common). If the ARV is between 220-240K, you wiII need to lock up this property between 130-140K in my opinion if your exit strategy is to wholesale it. If you are planning on taking it down yourself, you can possibly pay more. There are plenty of fix/flip investors in town who would pay 140-150K for this property if the ARV is 220-240K and the rehab cost is between 35-45K.
    It sounds like you possibly have a very motivated seller, especially if he contacted you via an online AD. I would try and lock it up at 130-140K and explain to the seller that the property needs around 45K. Obviously, this is the art of the game. Trying to get sellers to understand the true value of their distressed property. 
    Good luck. 

    3Reply
  • Mike Imbriglio
    OP
    Investor · San Diego, CA · Member since 2020 · 55 posts · 8 votes
    6y

    @Marc Martinez yes totally agree with all of that. My plan is to continue talking with the seller and build that trust while also bringing up our concerns with the property. Thanks, for all of your insight. 

    1Reply
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