The Beginner’s Guide to the Two Most Expensive Phoenix Rental Property Repairs

As a phoenix investment property owner, you should budget for two common repairs that are somewhat costly:
The first expensive repair is a water heater replacement. It is pretty common to see water heater leaks due to corrosion at anywhere from 6 to 12 years. Due to Arizona’s hard water, corrosion in water heaters tends to happen faster than in other parts of the country.
When corrosion leaks happen, there is no way to fix except to replace the heater.  The water heater itself can run between $400 and $600 depending on the size and whether it is gas or electric. Then you must also budget for labor to drain, replace and dispose of the old one. A full water heater replacement job usually takes four hours. If you are lucky, the leak will have been recognized by the tenant before any damage to the stand or surrounding walls/rooms occurs. Common stand and drywall damage usually is contained to the stand and immediate drywall and runs less than $200 to fix. However, in cases where the water heater leak is rapid and/or poor draining issues in the garage, the damage could run $1000 + depending on the severity.
The next potential large repair to consider is with the A/C unit due to the summer temperatures in Arizona causing the unit to work at a level it isn’t designed for. Unfortunately the A/C manufacturers do not make specific “Desert Tough” A/C units rather the units are manufactured in mass for more temperate climates. Because of this many of these units will fail inside of 10 years. It is not uncommon for outdoor condenser a/c units to last only eight years and we have seen them fail after only five. The compressor failing is the main reason for the a/c unit going bad. When this happens, the compressor or outdoor unit must be replaced. It is almost as expensive to replace the compressor only so the whole condenser unit replacement is a better idea at a cost of anywhere from $2,000 to $3,000. 

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Home Owner Associations (HOA Management)

So you’re thinking of buying an investment property in the phoenix area and have researched rental prices, crime statistics and probably mortgage rates but have you ever considered researching the Home Owners Association (HOA)?  It may be surprising but often HOAs have bylaws when it comes to such things as placing a tenant and advertising a phoenix rental property.  For example, most HOAs have additional fees for rental properties ranging from an initial tenant fee of $150.00 to annual fees of $50.00 when a tenant is living in a property in their community. Additionally, many HOA’s either restrict or don’t allow advertising at the property which negates your chance of getting any kind of drive by rental interest.  Furthermore, several HOA’s in Arizona are facing major financial crisis so they look to charge additional fines to out of state home owner addresses knowing that the owner can’t just drive by the property and confirm if the violation is even accurate.  As you can see, doing research on and about the property HOA prior to closing is a great way to save yourself potential problems and costs down the road. 
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Home Warranties

In our experience servicing rental properties in Phoenix, purchasing a Home Warranty Policy on your rental is a poor idea especially if you are interested in retaining your tenant for longer than the initial 12 month lease term.  Home Warranty companies typically utilize sub par vendors who agree to steep discounts just to get the volume of work.  As a result, the vendors typically schedule home warranty work in the last open time slot so they can fill the earlier slots with customers who are paying full price.  This type of service leads to very frustrated tenants who often have to wait longer than what is really acceptable for service.  Additionally, since the vendors are sub par it is not uncommon for them to need to be dispatched multiple times in an effort to actually complete the repair – this again leads to tenant frustration.  If however you are still set on purchasing a home warranty we have compiled a list of the four major players in Phoenix from poor to horrendous. 
1.  One Guard- They are quick to respond on the phone and have the most competent vendors however frequently vendors have to be sent back out for the same problem multiple times but eventually they do get the repair completed. 

2. Old Republic- This company seems to have improved a bit over the last couple of years and they have a pretty efficient online system.  However vendors have to be called numerous times to actually complete repairs once approval has been received.

3. American Home Shield- If you chose this company plan on always paying more than just the service fee as each repair always has a competent that isn’t covered or needs to be “updated to code”.  They do have a cash option for several repairs so this is the best option BUT again if you are going to use the cash option might as well not get the warranty.

4. First American Home Buyers Protection- The absolute worst! 30-45 minute wait time guarantee on all calls. Unfortunately we have had to use this company for several a/c problems this summer during high heat times (100-115 degrees) and every time, the vendor has not correctly fixed the problem on the first call out. Then when you call them to try to get a new vendor assigned they won’t.  

If you are interested in spending a lot of time on the phone and getting completely aggravated, then a home warranty is the way to go.
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Distressed Property Reports

Overall the percentage of distressed sales through out Maricopa County is down by 45.7% from last year. Short sales are down 55% from last year and lender ROI sales are down 26%.  There are however still some areas such as Goodyear, Buckeye, Maricopa and Queen Creek that still have their share of distressed property.  For example, zip code 85338 in Goodyear in August 2013 had 25% of its’ sales from distressed properties and close by neighboring 85326 in Buckeye saw 24% of its’ sales from distressed properties. This means that if you are a property owner in these areas you may want to consider property management and retaining your home as a rental for a few more years to see if the market continues to rebound.  Many cities in the East Valley of Maricopa County are also still seeing decent numbers of distressed sales.  In 85138 (Maricopa), distressed sales accounted for 21% of the sales in August and close by San Tan Valley and Queen Creek saw similar high numbers.   

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