This is one of our most lucrative projects in Old Town. We purchased this 2 story townhome, built in 1969, for $160,000 from Fannie Mae. While the home had great bones, it was difficult for most to see the potential for this fixer upper. We knocked down a few walls, restored the classic saltillo tile, gave the kitchen a facelift, and leased it for 2 years. The market value of the home is now (approximately 14 months after acquisition) about $300,000 (based on recent comps) and we anticipate selling for a hefty profit upon the next lease vacancy. The project will likely net about $100,000 over an anticipated 2-3 year holding period.

Here are some “before” pics of the townhome in Old Town.  A prime example of listing agents and/or owners not willing to put a little time, effort, and investment into properly listing a property for sale.  Poor marketing literally costs owners thousands of dollars in reduced sale prices, additional time on market, and reduced competition

We just closed on this home in Old Town Scottsdale on February 7th, 2013.
It was a Fannie Mae REO that we had been tracking for several weeks.
Fannie Mae predictably reduces their listing prices approximately every 30
days and we track Fannie Mae homes in areas that we like. The initial
listing prices on Fannie Mae REOs are usually well above what anyone will
pay for them - which in a way gives us plenty of time to check them out and
patiently wait for price decreases. When Fannie Mae reduces the list
price, they usually do so by a significant amount, such as $10-$20K. So
the best way to buy Fannie Mae REOs is to be patient and wait for a price
drop to an amount where others may start submitting offers. When that
price drop comes, it’s extremely important to get an offer in asap through
the website - you want to avoid the multiple offer scenario with them as
many investors are more than willing to bid over list price. We’ve also
learned some interesting things about Fannie Mae over the last few years,
for instance, unless you provide them a full price offer, they usually
always counter your offer with a counter offer near full list price and
they usually are willing to provide closing cost concessions. We’ve found
that it’s important to be patient and not accept their counter, but counter
their counter and this is where they commonly “give-in” and work with you.

Here’s how the transaction went for this particular property. We were
tracking the property when the list price was $245,500 - which we thought
was still too much, so we waited. They then reduced the price to $230,000
- which we still felt was a bit steep, but we also thought that other
interested parties would either submit an offer at that price or if another
$15K reduction occurred, investors would be bidding above the list price.
So we quickly submitted an offer for $215,000 and asked for 2% toward
closing. Predictably, we got a counter back in 2 days for $230,000 and
they would provide 2% toward closing costs. We countered that offer with
an offer of $216,000 and again asked for 2% toward closing. Then, instead
of a counter, we got the dreaded “multiple offer”. We really didn’t want
to spend more than $220K on this place, so we submitted our highest and
best offer ($219,000 & asked for 2% toward closing) and basically thought
there was no way we would win a multiple offer with 2 other parties
competing against us. But we did somehow, even the listing agent was
surprised - apparently our offer was not the highest, but since we intended
to utilize Fannie Mae’s Homepath financing, this somehow made our offer
more attractive to Fannie Mae.

So we got the property for $219K and we got 2% toward closing costs. We
began trying to lease the home even before we closed and signed a lease for
$1,550 per month 5 days after closing. We painted & installed new
appliances, but that was pretty much the scope of improvements required.
Our PITI payment on the place is just shy of $1,100 - so we’re pretty
happy with about $450 in positive cash flow per month (after debt
financing). Here are the “after” pics….

We helped a client acquire this highly efficient, 759 SF, 2 bed / 1 bath
patio home in South Scottsdale in October 2012. While there are still
condos in Scottsdale on the market for less than $100K, it’s tough to find
a decent looking condo under $100K. Our client paid $90K for this place,
which included all the furnishings. We pre-leased the condo for $1,100 per
month (furnished) and moved in the tenant the day our client closed escrow.
At those numbers, the place is definitely a great income property and we
squeezed every penny we could get out of it.

If there was an All-Star game for income properties, this property would be
in it. We acquired this property during the dark days of early 2011 when
there seemed to be no end to foreclosures / short sales and prices couldn’t
seem to find a bottom. It’s a solid 3 bed, 2 bath home in an area referred
to as Arrowhead in NW Glendale, AZ. It’s a great area, the home had a nice
layout, a great backyard, and most of the detracting items about the home
could be fixed through inexpensive cosmetic improvements. We paid $96,000
for the home. After about 4 weeks and $20,000 in primarily cosmetic
improvements, we leased the home for $1300 per month (3 year lease) to a
great family. The home generates $691 per month in positive cash flow
(after debt financing).

Fast forward to today, we still own the home, still have the same great
tenants, and annual repairs/expenses have been negligible. The market
value of the home is currently about $175,000 and will likely be pushing
$200,000 by next spring. If the tenants renew next spring - awesome! If
not, we’ll likely put the home up for sale and net about $75,000 (just on
the sale).

Here are some “before” pics from the sale listing. Seriously, I have no
idea why any real estate agent worth their salt would upload listing photos
that are this terrible! If there was an award for the “worst listing of
the year”, this one would have been in the running.

One of the most difficult places in metro Phoenix to find a strong
performing income property is North Scottsdale. It’s a highly desirable
area with high class resorts, world class shopping, great restaurants, and
comparatively to the rest of Phoenix - significantly higher home prices.
These higher prices, combined with a less than proportional increase in
rental rates in the area, are the primary reasons why Measures of
Investment Performance (MIP) tend to be less on income properties in North
Scottsdale as compared to many other areas in Phoenix. That said, in our
humble opinion, the high desirability factor of North Scottsdale tends to
more than offset decreased MOI through potential price appreciation. Now
to be clear, we’re not speculators, we would never recommend buying real
estate solely in the hope of appreciation. We just think that smart real
estate investors should weigh the potential for price
appreciation/depreciation as part of their financial model in identifying a
great real estate investment.

At the very bottom of the Phoenix market, August 2011, we came across a
great looking foreclosure in North Scottsdale, near Kierland. It had new
carpet, fresh paint, and the roof and HVAC had been replaced in the last
two years. The master bath needed a complete renovation and we can’t
stand fluorescent lighting in kitchen, but rehab costs were nominal
compared to your average foreclosure. We paid $165,000 for the 1,823 SF,
single family home, with 3 beds / 2 baths & a 2-car garage. The master
bathroom renovation, kitchen facelift, landscaping, and replacement of the
garage door cost approximately $15,000. The work was done in four weeks
and we leased the property within a week after the improvements were
completed. We pulled $1,550 per month for a 12 month lease, providing us
with a positive cash flow after debt financing of roughly $550 / month. We
did have some tenant payment issues 5 months into the lease, but we worked
things out amicably with the tenant and after $1,200 in turnover costs and
3 weeks of vacancy, we leased the home to a new tenant for $1,580 per month
on a 24 month lease.

To get back to our long-winded discourse on potential appreciation in North
Scottsdale, (you didn’t think we wrote all of that for nothing did you?)
comps in the neighborhood of this property would peg the market value of
this home at approximately $280,000, as of today - Feb 22, 2013. The
current lease expires next spring, but with a favorable interest rate on
our 30 yr, fixed rate financing, and estimating few repairs / expenses at
the property in the near time, we intend to either renew the tenants or
make some flooring upgrades to the property, raise the rent, and land a new
tenant. With a big expansion at the Mayo Clinic underway and additional
development in the area, we are bullish about long term appreciation and
the ability to raise rents in the interim.