All Forum Posts by: Bill Haley

Would love to hear your feedback on this: whether it is worthwhile, how to measure it, and any other sage advice:

We a 450+ sq. ft. garage in the back yard that we almost never use. You had to drive 1/4 mile down the alley to access it. I think it would make a great studio, as we live in a desirable part of Phoenix, lower Arcadia. What do you think about converting it into a studio?

I have tried to analyze the deal on the BP calculators, but it does not fit the templates, and I am not sure how to find rental comps for an add-on studio. So I have two questions, maybe three:

1) I get stuck on the purchase price portion of the deal, as there is no purchase price. I am estimating it will take $20-25K to refurbish it. We have to add a kitchenette, bathroom, A/C, sewer, bedroom, insulation, and more. How do I figure out the ARV and the Cash return?

2) Which flows into my next question: where is the best place to find rental comps for an additional room?

I really appreciate your help with this!

@Alain Labrada

Hi!

1031 exchanges are quite common. The benefit, as I am guessing you have learned, is the tax advantage in that you do not have to pay capital gains if you exchange like-asset for like-asset, meaning real estate for real estate or stocks for stocks, not one for the other.

In December of 2017, I helped an investor who had a multi-million dollar rental in Paradise Valley sell that one and purchase several single-family homes and condos in the Greater Phoenix Area. There was a little trick in the completion of the sale, which, I am not sure why, can be a common occurrence with 1031 exchanges. I know this because many of the agents who were selling the homes we were going to buy would ask if the sale had been completed.

Escrow was a little different in that we had both a title company and another company that specialized in 1031 exchanges to work with. They did great work and collaborated well together, but it was one more person in the conversation — just something to be aware of. 

That other company who oversaw the 1031 exchange needed all the properties we identified listed, and tied up in escrow. We identified properties that were up to 180% of the sales price, and I think we could have identified up to 200%, but we wanted to be conservative.

We put 12 homes under contract and backed out of 5 to close on 7. The offers were very attractive, as it was cash, and the process from the seller's end was simple overall. The most challenging part was waiting for the proof of funds, which, again, I forget exactly what caused that delay. 

I believe the money that is not used is available right after closing, but I may be wrong on that one.

Welcome to BP 

@Stephen Hilton ! Phoenix is an awesome market, and there are plenty of MF's around. @Ryan Swan is spot on with his analysis of the Camelback Corridor, as it is also called, and his knowledge of Tempe is awesome. 

The area on Camelback Road, between 32nd Street and 68th Street is also called Arcadia. Phoenix has these neighborhoods that are not defined municipalities, but people want to live in them. So, Arcadia has been so popular that the areas around Arcadia are now called Arcadia Lite and Lower Arcadia. I live and work in this part of town. I love it.

As Ryan said, Tempe is right by ASU, so the housing is often filled with students, and you will want to consider if that is the right groove for your lifestyle. It definitely can carry higher rents.

If it isn't the ideal place, or students are not your ideal tenants, there are plenty of other places to get into MF's that will meet your needs and price point. It all depends on what you want to look for.

Hope this helps. Happy to chat further if you would like.

@David Hanson While the prices in the Scottsdale / Tempe / Arcadia area are higher, @Ryan Swan has very valid points. It is a booming side of town. 

Also, If you stay near the 101, even down to the Chandler area, you can find some good places.

@Stanley Bronstein has an equally valid point. Do the research.