THE MISTAKE THAT COULD BURN ANY FLIPPER OR DEVELOPER NEAR SOUTH MOUNTAIN

Most operators who lose money on a flip in Phoenix did not make a bad deal. They made a good deal

with a blind spot. This week I want to talk about one of the most common blind spots I am seeing right now, and why it is about to get a lot more expensive for anyone working near South Mountain.

WHAT IS COMING TO AHWATUKEE

Upper Canyon is coming online. It is the largest housing project in Ahwatukee this century. Roughly 1,050 single-family homes plus multifamily across 373 acres between 19th and 27th avenues, three builders (Blandford, D.R. Horton, and Pulte), models opening mid-2026, and single-family pricing projected in the $600K to $900K range. It releases in phases over several years, not one opening day.

Here is what that does to a flip in that corridor.

When a buyer can walk into brand new, with a warranty, a modern floorplan, a builder rate buydown, and design-center credits, your renovated 1990s home is suddenly competing against new construction a few minutes away. If your ARV assumed you would be the nicest house on the block, that assumption just broke.

THE PART THAT QUIETLY KILLS YOUR EXIT

Builder incentives are what most operators miss. Builders rarely cut sticker price. They buy down the rate, cover closing costs, throw in upgrades. Your buyer is not comparing list prices. They are comparing monthly payment and cash to close.

You cannot match a builder's 5.99% buydown out of your flip margin. If you do not underwrite knowing your buyer has that option down the street, you will sit on the home and watch holding costs eat the deal.

The flippers and builders who get hurt near Upper Canyon will not be the ones who bought there. They will be the ones who underwrote it with stale comps and a blind spot. Pulling values from six months ago, assuming today's ARV holds through a six-month rehab, and never once touring the builder models to see exactly what their buyer's alternative looks like.

THE PRINCIPLE, BECAUSE THIS IS BIGGER THAN ONE COMMUNITY

Phoenix is dotted with new-build communities going up all over the Valley right now. Buckeye, Queen Creek, Laveen, North Phoenix, the West Valley. Every one of them does the same thing to nearby resales.

The lesson is not to avoid Ahwatukee. It is a habit that protects every deal you do in this market.

Underwrite the competition at exit, not just the property. Almost every flip or spec build that loses money in Phoenix loses for the same reason. The operator analyzed the house perfectly and ignored what it would be competing against when it hit the market. Value is not set in a vacuum. It is set relative to what else your buyer can choose the day you list.

BEFORE YOU TAKE DOWN A DEAL NEAR NEW CONSTRUCTION, RUN THESE

Pull current comps that already reflect new-build competition, not last spring's numbers from before the models opened.

Find out the builder's real out-the-door cost, base price plus incentives and buydowns, because that is your buyer's actual alternative, not the MLS sticker.

Target the price point the builders are not serving. The renovated home under the builder's entry price, for the buyer who has been priced out of new, that is an open lane.

Sell what new construction cannot. Mature lots, established trees, larger parcels, no HOA, real neighborhoods, character, and a move-in date that beats a build timeline.

Drive the models before you write the offer. If you cannot say out loud why a buyer picks your home over new construction at a similar payment, you do not have a deal yet.

For the developers on this list, the same logic runs in reverse. If you are putting up spec near a big builder community, you are competing head-to-head with national builders on cost and incentives. Your edge has to be lot quality, design, speed to market, or a niche they are too big to chase.

That single discipline, pricing the competition and not just the asset, is what separates the operators who keep winning as this market shifts from the ones who get caught holding inventory they bought for last year's comps.

If you have a project near Upper Canyon, or anywhere new builds are reshaping your exit, reply to this email. I am always glad to be a second set of eyes on the ARV and exit assumptions, even when the timing is not right for us to fund it today.

Devon

Newsletter Edition #25