14-unit of 1BR & Studios that I purchased after another investor had fully renovated it and leased all units. The property is about 1/2 mile from downtown Phoenix and 15 mins from Sky Harbor Airport. All units have been rented to low-income tenants receiving assistance through voucher programs, and I plan to stick with low-income tenants to help alleviate the low-income housing stock in Phoenix.

What made you interested in investing in this type of deal?

After having success with an 8-unit MF in Florida I was looking for another MF to put cash I had from sales of other properties that could cash flow, and appreciate over time.

How did you find this deal and how did you negotiate it?

While I was living in Florida I came to Arizona to visit family near Phoenix and I figured I'd touch base with a Realtor and see if the Phoenix area had anything to offer. The Realtor found only 2 properties meeting my criteria. The one I was hardly interested in at all from the sheet data and a site visit, but the 2nd was this property that had been newly renovated and the investor was eager to cash out and move to another project. Looked great on paper and showed well.

How did you finance this deal?

I had just sold two single family homes that had been my personal residences long before, and that I had rented out long term after I was reassigned in the Air Force. From the equity in those plus a little bit of savings I was able to put down $236,500, and finance the rest through a conventional mortgage lender.

How did you add value to the deal?

This property was turn key when I purchased it, and the seller stayed on to manage it.

What was the outcome?

The property was producing well at around a 9% Cap rate until late 2019 when my manager got sick and the place started going down hill. I was living in Texas and after two other managers who just continued to let the place deteriorate I was down to 4 out of 14 tenants left, and homeless, squatters, gang members, and people conducting illicit activity overran the place vandalizing units and leading to regular police visits including for a homicide. 2nd half of 2021 is focused on rebuilding.

Lessons learned? Challenges?

- Most property managers are familiar with low-income housing vouchers, but very few have any idea how to work with them, or how to oversee a major renovation.
- When investing out of state it's better to have a larger property management company that has someone available to take over in case the primary manager is unable.
- As soon as a property starts having any trouble get involved and as proactive as possible to turn things around. Things can go downhill fast!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am currently working with Dunlap and Magee who specialize in low income housing in the area, and who have the know how and network to oversee major rehab projects. They have only been on board for a few weeks, but I'm finally optimistic we can turn this around and provide safe, affordable housing to struggling low-income Phoenix residents.