Would you buy this property?

[Bryce Deeney]

Although I've been looking for SFHs in the AZ market, this town home caught my eye because of the stability of the property and how long this particular unit has sat on the market. The townhome is in a community of 100 units that are all independently owned. It's right across the street from an elementary school. It's been on the market for 100+ days, however after calling the HOA company, all units are currently rented (100%!). The property is a 2 bd 1.5 bath, with a current tenant paying $860 + utilities, however their lease ends in a few months, and all the other comps are renting at $960.

I showed the unit's online posting to a coworker who rents in the area, and she said she's paying $1,050 for a 1 bd 1 bth and the unit I'm looking at looks nicer and has a better floorplan. I also know in this area there is a shortage of apartments to rent, as we've hired 200+ employees who have transitioned to our AZ office from out of state in the last year and they always are complaining at how hard it was to find an apartment.

I think I can get the property for 100k, and will do a 20% down traditional. The property is in a B area, but the city has plans to build the lightrail that will extend nearby in a few years. 

Here's the numbers:

100k purchase price ($20,000 down)

$860 current rent, $960 expected rent after April 2020. 

Monthly costs: $62 taxes, $38 insurance, $185 HOA

Expected cash flow after raising rent in April: $300/mo.

I want to pull the trigger, but I don't know much about townhomes, so I'm in uncharted territory! If you need additional information I'm not providing, please let me know! 

[Melanie Johnston]

Bryce, I wouldn't let townhomes scare me away if your strategy agrees with their minimum rental length (12 months?), which it sounds like it does. There will always be demand in our market for townhomes and condos, just as your coworkers and your company expansion both indicate.

One thing to investigate is if there are any special assessments or other expenses planned for the community. Will they be dinging all residents for a planned blacktop redo? Are there roof repairs in the budget, again with a special assessment planned. Or is there any litigation they are in the midst of that could lead to money out of owners' pockets?

In South Scottsdale there is a condo neighborhood that's in the news for a battle between residents and the HOA over sewer replacement. Here's the article: https://www.scottsdale.org/city_news/co-op-members-question-board-s-big-spending/article_82bda4a2-afe7-11e9-b7c3-c3e26a85c56f.html

Getting out and talking to the owners in the townhome complex might reveal things that a phone call to the HOA or reading HOA documents might not.

Hope this helps!

Melanie