Help me evaluate the exit options for an underwater Tempe investment property

Tempe, Arizona
Out of State Investing
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Help me evaluate the exit options for an underwater Tempe investment property

Stephen Brieloff
Chicago, IL · Member since 2017 · 23 posts · 8 votes

I would appreciate a fresh set of eyes on an investment property in central Tempe, Arizona.

I purchased a renovated 5-bedroom, 3-bath, approximately 2,014-square-foot single-family home for about $680,000 near the top of the market. I never occupied it and operated it as a rental for roughly three years. In hindsight, I lost on the acquisition. I accept that; my objective is now to make the best decision from today forward rather than anchoring on my purchase price.

Current numbers:

  • Current asking price: $625,000

  • Mortgage payoff: $483,062.74

  • Monthly carrying costs while vacant/listed: $3,707.62

  • Located in central Tempe near ASU

  • Five bedrooms (though one is an Arizona room with a closet), three bathrooms, no HOA

  • Listed on and off since May without selling

  • Owner is out of state

I need a plan because I'm holding the property right now and we've gotten almost 0 showings and 0 offers.

    Options I am evaluating:

    1. - Replace the listing agent and relaunch at a true price-to-sell number.

    2. - Offer a seller-funded rate buydown or closing-cost concession instead of an equivalent price reduction.

    3. - Target multigenerational buyers, large households, ASU parents and house-hacking buyers more deliberately.

    4. - Explore a lease-option or carefully structured seller-financing component.

    5. - Return it to the long-term or mid-term rental market if the sale economics remain unattractive.

    6. - Convert the layout into a 3/2 main residence and a 2/1 attached ADU, although preliminary estimates suggest a legal conversion could cost $90,000–$160,000.

    What exit paths am I overlooking? How would you compare a decisive price reduction with concessions, seller financing or returning it to service as a rental? I’m especially interested in feedback from investors and agents who actively work in Tempe rather than general national-market advice.

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    Damon Amato
    Investor · Northborough, MA · Member since 2017 · 12 posts · 3 votes
    1w

    If you'd take that big a loss on selling it, you may have to rent it out and ride out the next few years in the market. If you can rent it for even $2000/month, the loss over 4 years is about equal to the loss of you sell it at around $600k. With that as a break even, I would think 4 years from now it'll appreciate enough to break even or close to it. Obviously there are variables here, but what you need to ask yourself is what is most important to you, and operate under that assumption. 

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    • Shiloh LundahlPro Member
      Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
      1w

      Hi @Stephen Brieloff. I live in Gilbert and I invest heavily in Arizona. But I don't invest in Tempe because generally Tempe doesn't cash flow. However I am still willing to help you analyze an exit strategy. But I will need more context.

      1. What was your investing strategy when you purchasing the home?

      2. What is your current interest rate?

      3. What was your experience with operating it as a rental?

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    • Ken M.
      Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
      1w
      Quote from @Stephen Brieloff:

      I would appreciate a fresh set of eyes on an investment property in central Tempe, Arizona.

      I purchased a renovated 5-bedroom, 3-bath, approximately 2,014-square-foot single-family home for about $680,000 near the top of the market. I never occupied it and operated it as a rental for roughly three years. In hindsight, I lost on the acquisition. I accept that; my objective is now to make the best decision from today forward rather than anchoring on my purchase price.

      Current numbers:

      • Current asking price: $625,000

      • Mortgage payoff: $483,062.74

      • Monthly carrying costs while vacant/listed: $3,707.62

      • Located in central Tempe near ASU

      • Five bedrooms (though one is an Arizona room with a closet), three bathrooms, no HOA

      • Listed on and off since May without selling

      • Owner is out of state

      I need a plan because I'm holding the property right now and we've gotten almost 0 showings and 0 offers.

        Options I am evaluating:

        1. - Replace the listing agent and relaunch at a true price-to-sell number.

        2. - Offer a seller-funded rate buydown or closing-cost concession instead of an equivalent price reduction.

        3. - Target multigenerational buyers, large households, ASU parents and house-hacking buyers more deliberately.

        4. - Explore a lease-option or carefully structured seller-financing component.

        5. - Return it to the long-term or mid-term rental market if the sale economics remain unattractive.

        6. - Convert the layout into a 3/2 main residence and a 2/1 attached ADU, although preliminary estimates suggest a legal conversion could cost $90,000–$160,000.

        What exit paths am I overlooking? How would you compare a decisive price reduction with concessions, seller financing or returning it to service as a rental? I’m especially interested in feedback from investors and agents who actively work in Tempe rather than general national-market advice.

        Well, some options include 1) selling it on owner financing, 2) selling on lease option, 3) selling on a WRAP, 4) turn it into a Medium Term Rental for nurses, 5) Turning it into "co-living" and so on. It depends on your goal, your tax situation, your cash availability and a couple of other things, but it almost certainly means selling or renting it without a realtor if you want to be profitable. My Deal Maker™ software can figure the money side, but you have to decide what's the best fit for what you want to accomplish.

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      • Damon Amato
        Investor · Northborough, MA · Member since 2017 · 12 posts · 3 votes
        1w

        If you'd take that big a loss on selling it, you may have to rent it out and ride out the next few years in the market. If you can rent it for even $2000/month, the loss over 4 years is about equal to the loss of you sell it at around $600k. With that as a break even, I would think 4 years from now it'll appreciate enough to break even or close to it. Obviously there are variables here, but what you need to ask yourself is what is most important to you, and operate under that assumption. 

        1Reply
      • Divin KanyamaBusiness Member
        Accountant · Seattle, WA · Member since 2025 · 136 posts · 36 votes
        1w

        I think you’re looking at this the right way—the purchase price is behind you, @Stephen Brieloff . The question now is which option gives you the best result from today forward.

        With almost no showings since May, this is probably a pricing, positioning, or presentation issue. I’d interview two or three agents who actively sell central Tempe and ask for a candid review of the recent sold, pending, expired, and withdrawn comps—including whether buyers will truly view the Arizona room as a fifth bedroom. If the home is overpriced, I’d favor one meaningful reduction and a clean relaunch with better photos and marketing. A rate buydown or closing-cost credit can help convert interested buyers, but it usually won’t fix a listing that isn’t getting traffic.

        Seller financing or a lease-option could expand the buyer pool, but I’d only consider it after speaking with your lender and an Arizona real-estate attorney. Renting it again may be the better bridge if realistic rent covers most of the mortgage, management, maintenance, vacancy, taxes, and insurance. Get actual rent opinions from local property managers rather than relying on online estimates.

        I'd treat the ADU conversion as a separate investment. At $90,000–$160,000, it only makes sense if permits, construction bids, added rent, and resale value clearly support it. I'd also price out a direct investor sale, a furnished 30-day-plus rental, and renting by the room if local rules allow it.

        My next step would be a simple 12-month comparison: sell now, relaunch at a true price-to-sell number, or rent it again. Include commissions, concessions, carrying costs, repairs, management, and vacancy. Then choose the option with the best expected outcome—not the one that best protects the old purchase price.

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      • Noah CorwickPro Member
        Realtor · Phoenix, AZ · Member since 2021 · 271 posts · 115 votes
        1w

        Tough situation to be in Stephen.

        Honestly sounds like a listing price issue. I'm assuming you started too high. A listing that is priced properly should get around 2 showings a week. A creative financing option would certainly help as well.

        It likely makes sense to do a refresh on the marketing as well, including the property description to drive more keyword searches.

        Another thing that your agent can do is call the agents of recently sold similar properties to see if they have any clients looking for properties.

        Lastly, a huge differentiator could be to stage it if it's not already. For example, I had a listing in Mesa that had sat for a little. Once we did a small price adjustment and added staging, it went under contract within a week and a half.

        Best of luck!

        [email protected]602-834-4617
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      • Aristotle Kumpis
        Specialist · Long Beach, CA · Member since 2011 · 873 posts · 393 votes
        1w
        Definitely sounds like it’s overpriced with it sitting on the market for 5 months. You are entering into a slower market towards the end of the year. It’s better to rent it out for 6-8 months to help with your monthly costs. And then try to sell in the spring or summer of 2027. Either way, it looks like you will be selling at a loss. We could be in for another 2-3 years of a flat market in most metro cities. So you either pull the bandaid now and it over with and drop the price. Or you rent it for the next several years. I guess it depends on what your long term goal is.
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      • Doug McVinuaPro Member
        Property Manager · Queen Creek, AZ · Member since 2016 · 608 posts · 426 votes
        1w

        @Stephen Brieloff, sorry to read about your upside-down property. Everything sells at the right price and on the right terms. Your lack of showings would strongly indicate a pricing issue; it could be marketing, but frankly, it's more likely the price.

        The Arizona room doesn't sound like a bedroom, so you could be marketing it to the wrong buyers. If you are pushing it as a 5-bedroom and most people see it as a 4-bedroom, you are missing opportunities. 4-5 bedrooms is typically not that big of a deal. Market properties for what they are to find the right buyer. Market it as extra rooms/space, etc.; buyers will decide what they want to do with the space.

        Tempe is a decent market, great location in the valley, ASU and lots of good employment, 10-15 minutes to the airport.

        The house is rentable and will sell; the choice is yours.

        [email protected]602-751-7577
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      • Stephen Brieloff
        OP
        Chicago, IL · Member since 2017 · 23 posts · 8 votes
        1w

        Thanks, all, for the perspective.

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