New Multifamily Apartment Investor Guidance: Tucson, AZ

[Colby Wise]

Hi BP Community,

Like many of new previously, I am new MFR property investor! In this post I will share a quick bit on my financial background, investment goals (1y, 5y) plus initial business plan, education thus-far, and most importantly, ask for help/guidance on doing due diligence, evaluating, and financing a few deals I've identified.

Quick Financial Overview:

In short, I work hard and paid well despite living in a high COL area (NY); am curious, constantly learn and learn quickly; and have been fortunate while being an avid saver. I save 75%+ of my after-tax income (50% pre) with a goal of raising that to 80% in 2020. I was homeless at one point in my life and learned the power of money and have been working to improve myself ever since. Educationally, I worked hard and paid my way through an in-state college, landed a few key internships, parlayed those to a nice nyc job, started a company and failed and lost lots of money but learned tons, parlayed that into an ivy league higher education and parlayed that to another nice nyc job - luck + hard work. Now I am a scientist (data) by profession and finally purchased my first property. I am risk adverse by nature but enjoy doing calculations and thus taking calculated risk thus here I am now. 

My Why:

Family: I've done the math and I know through a combination of hard work, time, and hustle, I can replace my income and namely living expense which are relatively low (see above) over the next 5-10yrs. This will give my family back a large chunk of my ~60-80hrs in the office. 

Investment Goals:

In full disclosure I am still formulating these and this week have started putting pen to paper. I have $200k+ of equity to invest, access to additional $50k in 45 days, and an additional $250k from friends/family within 6-9 mths. I was recently approved by several banks for up $2M in conventional financing @ 10% down on a single family home - see question below on MFR financing. Currently I am building my network of local agents and property managers.

1yr - 2020:  Buy & Hold | 10-20 doors | $30-$60k/unit | Class B - C | Phoenix/Tucson, AZ | Multifamily apartments (would opportunistically consider mobile home parks with adjustments to above)

5yr - 2025: Buy & Hold | 500+ doors (~$10-15M mrkt val) | varied | Class A - C | multiple locations | MFR, mobile home parks, self-storage

MFR Education:

I currently listen to 2-3 BP MFR podcasts per day (2x speed!). And read 5 blog posts per day.

Questions:

I am currently evaluating a second deal I found after my last found deal went under contract with another buy yesterday: https://www.loopnet.com/Listing/2432-N-Balboa-Ave-Tucson-AZ/17451195/. My goal is to purchase my first deal by June hence I want to ramp up the knowledge curve fast. Below are my known unknowns:

Q: Utilities on apartments - In Tucson I've noticed utilities often are paid by the landlord but from running numbers why landlords would do this doesn't make sense. I've seen rents in $500-600/mth with utilities per unit of $200 per month. How much would it cost (estimating) to meter each unit and who do I call to get estimates? Would you meter units or just increase rents? Would I require permits and do I call the county? What other thoughts or concerns come to mind when thinking of charging tenants back for utilities?

Q: I'm concerned at my ability currently to line up all the resources/people needed to do a thorough due diligence during the typical 30 day window. Can someone please walk me through the process end-to-end, key things to look for, hidden risks, and most importantly detail the team of people I need in place to perform a thorough due diligence?

Q: Given my profession, I quite good at going deep really fast into local demographics of areas and trends. That said, I'd love to hear how the BP community assesses medium to long-term (5-10yr) prospects of apartment rental markets? 

Q: On financing: I've heard on podcasts local lenders are better than traditional banks given your WellsFargos, Chases, etc usual have high loan balance requirements to lend. How do you go about building relationships with local lenders and how far in advance do I need to line up financing? In SFR I know I can get pre-approved given my finances in 48-72 hrs and get the letter to a seller. How do I do it for MFR?

Q: Other favorite educational resources - extra points for audio books since I can digest info faster! - What books would you recommend on MFR due diligence, how to secure financing, and estimating rehab costs when evaluating deals?

Thank you all sincerely!

Colby