I’m in acquisitions - look at entire western USA. We own a lot in AZ. 80s product in C location is going for $300k per door. You can buy new product in Austin for that price, or new in DFW for cheaper. I’m assuming it costs similar to build in Phoenix and Dallas.
I am trying to wrap my head around something - it might be a bit abstract and hard for me to explain, but I’m hoping someone else has some insight.
Investors are just solving to a certain yield. There is no yield difference between Phoenix, DFW, Austin, denver, salt lake, Portland etc.
Arizona has lower property tax than texas, therefor they get a higher NOI and are able to get to a higher price per unit when applying the same cap rate. From a replacement cost perspective, the price deals in AZ are going for makes no sense.
Does anyone one have any insight into this? Is this the sign of an extremely frothy market? Are developers going to flock to AZ because they can sell a deal for $100k per unit higher for the same cost as building in TX?
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