Big Win in the Tucson Market

[Benjamin Riehle]

Ten months ago, I purchased an investment property in an area of Tucson that I believed was going to appreciate very rapidly.Lately, I have been focusing on expanding my investment portfolio into new markets such as Kansas City, MO. I have seen good returns in Kansas City, but it’s always nice to have a big win in my “home” market of Tucson, Arizona. While doing research on the Tucson market, I realized that a specific neighborhood was going to start appreciating rapidly; Barrio Hollywood. This area is close to down town Tucson, the University of Arizona, and Pima Community College. The location is nice, but a new development was going to cause homes to appreciate rapidly. Caterpillar Manufacturing broke ground on their new headquarters a few blocks away. Its estimated that this addition will bring more than 600 jobs to Tucson over the next 5 years!

With that knowledge, I was able to confidently invest in a SFH that only needed minor repairs to become rentable, to gain immediate cash flow, as I waited for the market to appreciate.The goal was to buy and sell within one year.

Breakdown:
Purchase date: 6/30/2017
Listed: $60,000
Under Contract (as the Buyer): $55,000
Acquisition Price: $46,250
Renovation Cost: $1,955
Total investment: $48,205

Ten months after the purchase, we are under contract on the selling side at $65,000.

Breakdown:

Sale date: 4/4/2018
Under contract (as the Seller): $65,000
Closing Cost 7%: $4,500
Net income at sale: $60,450
ROI: 31%
Annualized ROI: 37%
Total Profit: $14,771

The reason this made sense was the ability we had to use multiple strategies. If the area didn’t appreciate in the way that we expected, we could rent the home for $575mo, with hardly any renovations. Rental comps in this area for remodeled 3-bedroom 1 bath units are at least $800 a month. Any way you cut it, the deal made sense, and the returns were going to be high. The plan was to buy the home and sell it within the first year and reposition the gains into a new property or a new market. I did not do a lot of work on this project, I let my market research and the appreciation do it all for me.