Is this SFH a deal for rental properties in Tempe, AZ???

6 Replies

Hi Everyone, 

I just joined BP about a month ago and started researching REI around the same time. I'm 21 years old and so far BP, some books and youtube have been my main resources for information. I've decided to place my focus on Rental properties and now I'm at my first Deal, and i need some help.

Im Purchasing a 4 bed 2 bath 1376 sqft SFH in the heart of Tempe,AZ less than 2 miles away from Arizona State(college town) for 195K. The median Sales price in Tempe is 242k and I'm getting the house at a 20% discount. So i feel like I'm getting a deal but on realtor.com & Zillow it says the home is worth 171k.

I haven't got the appraisal or inspection done yet as the offer was just accepted today. But i ran the comps and the pricing is fair but the zestimate & Realtor estimate on the house is psyching me out and I'm nervous about the deal. I feel like i shouldn't be worried about the estimate because my main priority is cash flow. Im getting a 25% cash on cash ROI. So my question is... is it still a deal even though they say the house is worth 171k? Also do you have any tips or advice as i go through this 10 day inspection process?

Thanks

Daniela

Congratulations on your first deal! Zillow and other online estimates are usually not accurate. Get your agent to pull comps for you to get an accurate value. If your main goal  is cash flow and you  are sure you can rent it out to get a 25% return, it's in an appreciating area AND you are buying 20% under value....then it's an awesome deal!

@Daniela Craig congrats on getting into real estate investing! The only way to truly know if the house is priced appropriately is to run the nearby sales comps for similar homes (sqFt, features, updates, etc). Don't base your decision on the "median sales price in Tempe", or what Zillow or Realtor.com is telling you. 

Make sure to get your home inspection scheduled as early as possible in the 10 day inspection period. That way, if anything major is discovered, you'll have time to assess the situation and obtain additional inspections from other specialists as necessary. What year was the home built? If it was built in the 50s/60s (as is very common in Tempe), I'd advise also obtaining a plumbing inspection and have them scope the sewer lines. 

Hey thanks Ryan the comps approved of the deal and i just scheduled my inspection!

Congrats @Daniela Craig on getting into REI! I went to ASU and also invest myself in multi family and know a lot about the Tempe/ASU SFR market. One thing to keep in mind since you haven't done a deal before is you will need to factor a significant portion of your budget to CAPEX and turnover. Those ASU college kids you're going to be looking to rent for will do damage to your place, and they typically turn over every year, so that will eat into your cash flow. Just something to factor in a lot of investors don't factor that in enough when they invest in the Tempe/ASU market.

Best of luck to you!

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