Building a 4,000-square-foot, three-story duplex with a 1,000-square-foot ADU could cost about $1.83 million, including construction and permits (excluding land).

And that can cost you time and money.

Here are a few to watch out for:Property Condition: Most distressed properties need extensive repairs or renovations, which add to your initial investment.Competitive Market: With Phoenix's popularity among investors, competition for the best deals can be intense.Complex Deals: Foreclosures, auctions, or short sales are much more complicated compared to regular real estate transactions and usually require specialized knowledge.Tips to Successfully Navigate the MarketDo Your Research: Understand the local market conditions, including neighborhood trends, property values, and potential rental income.Build a Strong Network: Work with professionals who specialize in distressed properties-such as brokers, contractors, and legal experts-to make the best decisions.Assess Costs Carefully: Factor in the cost of repairs, holding costs, and any potential financing issues when evaluating a property’s profitability.Be Patient: Finding the right distressed property takes time.

Having a vacancy costs money!

This can often be cost-prohibitive. 

Given that the property was worth $390K in its current condition, I saw an opportunity to make the numbers work while keeping my upfront costs low.Instead of increasing my cash offer, I negotiated a $25K down payment with the seller carrying the balance for two years through owner financing.

Quote from @Anthony Sigala: We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost.

FlooringScope of Work:Replace carpet in bedrooms with engineered hardwoodRefinish existing hardwood floors in common areasInstall durable tile in wet areas (bathrooms, laundry room)Estimated Cost: $20,0004.

Once application is finished you can run credit, background and eviction report for $15 your cost, or charge tenant I think it's $35.

However, in California, each LLC incurs an $800 annual franchise tax plus gross receipts fees if revenue exceeds $250,000, and property insurance may cost more.