All Forum Posts by: Patrick Allen

Hello local Tucson Investor-Folks! Whether the dead of summer finds you grinding away towards your REI goals in the heat or you find your schedule is jam-packed full of travel plans in search of cooler air, I trust those who have been working their plan of analyzing deals and writing offers have been starting to bear fruit in the form of increased deal flow. If so, and if the idea of actually having to sign a 6-figure purchase contract to purchase real estate sounds intimidating, or the process seems opaque & confusing, the next meetup of the New Investor Subgroup of AZREIA in Tucson is right up your alley!

AZREIA Business Partner and long-time investor-friendly escrow officer extraordinaire Barbi Stewart with Fidelity Nat'l Title will again join us for our August meetup to discuss the Purchase Contract. Barbi will highlight critical terms and conditions in the standard AAR Purchase Contract, using the 10-page document to discuss & clarify several clauses you should consider adding to your own contract to purchase, or to be aware of in the event you find yourself selling an asset on the open market.

The second portion of the evening will dive deeper into the all too critical due diligence period. Truly where the investor "rubber meets the road", we will overview the process and goals of the typical due diligence period for residential real estate transactions and negotiation towards closing the deal. Our topic will focus on what inspection(s) and research is typically done after opening escrow, ways a standard investor-buyer in Arizona can back out of the contract penalty-free, as well as the key contractor partners you'll need to get it done.

Register Here: Registration Link thru AZREIA

As we always do, we will be getting together on the first Monday of the month to talk real estate and learn from one another. The meeting officially runs from 6:00-8:00pm, but folks are encouraged to come earlier or stay later for networking and to share recent success stories.

It's gonna be great, hope to see you there!

Quote from @Andre Vasquez:

She just wants to have her dream home first, which is understandable. 

I will *politely* push back on this one: it is not reasonable nor usually feasible to buy one's Dream Home as their first purchase. As a millennial myself, I think our entire generation needs to get out of the mindset that we deserve a home as nice or better as the home we grew up in: usually a median-priced move-up home our parent's bought 10-20 years into their working careers.

Between being a poor tenant and owning one's dream home includes the Starter Home, a number of move-up purchases over several decades of raising a family, and THEN you get to buy your dream home with the equity and cash flow you've accumulated owning assets & working to generate active income at your job or business you own.

Doing a house hack on a MF property is a fantastic starter home move, probably the mathematically best option, but the least comfortable. You could also do a live-in flip: buy a fixer upper with a low down payment & do much of the work yourself, then sell after 2 years in such as way that is tax-advantaged.
It also counts to buy a more traditional SFR which would work as a rental and makes the wife happy for now... Live in it for 12 months, then you buy your next starter home/future rental with another FHA loan in 2023. Now your 2022 purchase becomes your first true rental, already underwritten to make sense as a buy & hold.

Or just buy the home your wife likes for now and help introduce her to the community in other ways... better luck next year! 

Greetings to those of you year-rounders here in Tucson! While the baking heat of the mid summer may be in full swing, we find ourselves witnessing our market shifting before our very eyes: presenting new challenges and offering novel opportunities to help further your progress towards your investing goals for 2022. 

Immediately following your 4th of July activities, the next meetup of the New Investor Subgroup of AZREIA in Tucson is set for Tuesday, July 5th from 6-8pm. Different day this month, but we'll be meeting up at same time, same place, and providing you the same high quality investing content.

Topic #1 will be "How to Analyze Deals on Fix & Flip Properties," where we will discuss common strategies and considerations when analyzing value-add deals.

After analyzing a few deals as a group, Topic #2 will feature a guest speaker: my good friend Chad Casper with Pillar to Post Home Inspectors will be on hand once again to talk through what *not* to do when rehabbing a property. Drawing upon his day-to-day experiences as a local general property inspector, Chad will share the biggest red flags that blow up the budgets of the less experienced rehabbers... happening right here in Tucson!

Pre-Register here: registration link through AZREIA

Get yourself signed up today, and we will see you at the meeting!

Happy Summertime BiggerPockets. As we march towards June and 100* temperatures start to become the norm, we once again find ourselves in the teeth of another peak selling season in real estate. It also means we are just a few weeks away from the next meetup of the New Investors Subgroup of AZREIA in Tucson, so you're a rookie investor in Tucson you may consider this your personal invitation!

Having completely covered the foundation of your investing journey (niche/strategy, financing & how to find deals) we now turn our attention to the most actionable part of real estate: how to analyze deals on Buy & Hold properties. 

June's meetup will dive deep into key financial metrics like cap rates, cash flow and price-to-rent ratio, as well as the economic underpinnings of each to help explain why many successful B&H investors end up being spreadsheet wizards. While the raw ROI metrics are helpful in deciding how to best focus your attention as an investor, this meeting will also be packed full of actionable tips and time-tested wisdom to get your REI goals off the ground and hurtling forward.

Pre-Register here: registration link through AZREIA

The in-person portion will be held at the Keller Williams building near River/Campbell. As we always do, we will begin promptly at 6:00pm & run until somewhere in the 7:30-8:00pm timeframe. There will also be a virtual streaming of the meetup via Zoom, so if you'd prefer to stay home you may feel encouraged to dial in.

See you at the meeting!

Quote from @Chris B.:

Does anyone have any advice on this decision?  Maybe factors I'm missing, or a strategy I haven't thought of yet?  what do you think will be the best investment 10 years from now?  Thanks in advance!

I will borrow from David Greene's logic here and pose 2 questions:
1) Is Tucson a market where you want to have continued exposure? 

If the answer is "yes" due to the fundamentals of the market, I think that makes a lot of sense. 

If the answer is "no" because of the distance to drive down here is inconvenient, or because you think you can get a higher return on "hassle factor" investing in your home market, I think that makes a lot of sense as well.

If you don't like the market: lean towards selling. If you do, towards refinancing

2) Is this still a home you would want to own in 10 years?

If it's in a cool area, has a history of being easy to manage or you simply have an emotional attachment to the property and would hate to give it up: lean towards refinancing. So many podcast guests over the years have said they regret every property they've ever sold...

If the property is kind of annoying to manage, or as you say the primary motivation is the maximum possible market appreciation, then sell it and move your equity elsewhere. 

One final thought though: high appreciation markets tend to be more volatile ones. Phoenix probably will appreciate faster than Tucson, and it will probably crash harder and more often for the same reasons.

To piggyback on @Emily And Eric Erickson's comments:

When the mass exodus out of California, Illinois, et al started happening in 2020, Arizona was not the *fastest* growing state in the country, but it was certainly one of the fastest-growing.

Tucson is not the *largest* city in Arizona, but it is the 2nd largest... and it's an attractive place to invest, and to live, for the same reasons.

Tucson absolutely has Phoenix beat when it comes to cycling, hiking and outdoor activities in general. You would be surprised to know how many professional cyclists & triathletes call Tucson their home for half of the year due to great weather, rich cycling history and very high prevalence of dedicated cycling lanes making it one of the safest cities to ride bikes on the road. Not to mention Mt. Lemmon is consistently mentioned as one of the 10 best hill climbs in the USA: people visit from all over the world to ride up Catalina Hwy.

I heard reported in a class on the city's growth recently that Arizona is known to produce 60+% of the country's copper, and the nearby copper mines surrounding metro Tucson offer opportunities for synergy in industries like construction (see Caterpillar, Bobcat, Bombardier Aircraft) and military & defense contracting (Raytheon, the Air Force Base...). Tucson is also the only major city linking shipping ports in Southern California with the entire state of Texas, which is why we've been seeing expansion from companies like Amazon and Homegoods.

As to its investment prospects, I find there to be greater inventory of non-commercial multi-family properties (2-4 units) in above average or even luxury areas downtown, or in well-established neighborhoods adjacent to the University. It is common in many cities for investors to get pinned into having to decide between the income stability of MF and the ability to buy in a great area zoned only for SF, but I would argue that in Tucson you truly can have both. And it can still make sense as a cash-flow play due to Arizona's very friendly treatment of short-term rental properties coupled with a big tourism draw.

Way more dog-friendly too: I walk my dog off leash every single day. Can't do that in a concrete jungle.

Happy Spring fellow local investors! Hopefully you all made it through allergy season in one piece and are ready to start ramping up your Real Estate activities towards finding your first (or next) deal. If so, you might also consider joining us for the May meetup of the Tucson New Investors Subgroup of AZREIA: we're about to dive deep into the nitty gritty of making off-market real estate transactions happen. 

Our first topic of discussion for the May meetup will be "How to Find Leads in your Target Market", where we will spend some time exploring the use of direct prospecting efforts and supplemental marketing channels to help get your lead generation strategy off the ground... and the phone ringing with motivated sellers looking for a solution. 

After a short networking break, we will welcome up Mark Ross (or his partner Wendy Reuter) from our local partner Good Steward Lending to discuss our second topic of the evening: "How to Fund the Deal (using creative & traditional strategies)". Come with any financing-related questions you've ever had about investing in real estate and soak up the wealth of knowledge Good Steward brings to the AZREIA group as our preferred, local financing partner.

Pre-Register here: registration link through AZREIA

The in-person portion will be held at the Keller Williams building near River/Campbell. As we always do, we will begin promptly at 6:00pm & run until somewhere in the 7:30-8:00pm timeframe. There will also be a virtual streaming of the meetup via Zoom, so if you'd prefer to stay home you may feel encouraged to dial in.

Hello again, local BP Family! I hope this post finds you doing well & enjoying the sensational Southern AZ Springtime, as well as the self-satisfaction of knowing we didn't have to change our clocks for Daylight Savings Time a couple weeks ago. #winning

With April just around the corner, it's again time for me to extend to you a personal invitation to attend the next meetup of the New Investor Subgroup of AZREIA in Tucson... and this time we're going hyper-local! 

Having covered the foundation of your investing journey (by establishing your buying niche & strategy) we now turn our attention to the next BIG QUESTION which stops newbie investors in their tracks: which area(s) should I be looking at?

If you are new to the Tucson area, unsure what type of investing strategy is most effective to use in a given area of town, or are simply interested to hear how a real estate agent might categorize every area of Tucson (segmented by zip codes) to an investor client, this meetup is for you!

Building on last month's topic, we will spend the first 20-30 minutes breaking down the top 25 zip codes in the Tucson Metro area most relevant to investors, as well as demographic and economic data to help you better understand your end buyer/tenant's spending power and motivations.

After a short networking break where we will practice our investor "elevator pitch" (in-person only) we will dive into the Elephant In The Room for far too many newer investors: the discipline of follow up. We'll explore why continuous follow-up is necessary in today's investing market, why a real estate CRM (client resource management) application is a must-have for anyone looking to build off-market lead flow, as well as several foundational marketing principles to keep in mind when marking directly to motivated sellers.

Pre-Register here: registration link through AZREIA

Hope to see several of you at the meeting in person!

By contrast, Tucson and pretty much all of Arizona is very short-term rental friendly. There are a few locations (Scottsdale) that have rolled out their own regulations over the last few years but generally it's pretty landlord-friendly in the 48th State.

Feel free to DM me if you have further questions: I operate my own AirBnB unit as well as being an agent here in town.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Tucson.

Purchase price: $411,000
Cash invested: $75,000

House Hack #2 in the books... just 6 years after my first purchase! Bought a triplex with an FHA loan, securing a 2.5% interest rate and moving out of the apartment (for the last time). Property is arranged as a detached 1 bed/bath unit (occupied by inherited tenant) and a duplex: 2 bed/bath owner's unit & a vacant mirror unit.

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

I wanted this deal to not only cover its own expenses, but be an active income generator due to Tucson's unique location being very favorable to short-term rentals. Combined with my 8 years' experience in Tucson's great road cycling scene and local real estate knowledge, my goal was to create a highly lucrative lifestyle business, in a great area that I love living in, where all company assets are centrally located.

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

On MLS: was the first/only property for sale once loan pre-qualification was finalized. I was highly specific in my goal area, wanting to remain very close to the Rillito Bike Path, a great bar (Tucson Hop Shop on Dodge) and a great dog park (Brandi Fenton).

Submitted over-asking priced offer with $10,000 in earnest money, which is considered high for an offer of this price. Offer was rejected, but seller contractually agreed to accept my offer in back-up position, contingent upon cancellation of the first offer. First buyer backed out after inspections, and I took it as-is.

How did you finance this deal?

FHA loan.

Due to limited rental comparable data in the area, the FHA self-sufficiency test was triggered: market rents (in as-is condition) were not high enough to justify the mortgage payment. Appraiser would not make a market-reflective upward adjustment in rental rate due to poor cosmetic condition of interior. However the lender was able to keep the deal alive, by buying down the interest rate and decreasing the monthly home insurance premium (by increasing the deductible)... which was able to drop the mortgage expense just low enough to meet the self-sufficiency requirement.

That same appraiser gave the property an as-is value of $456,000, so all told I walked into nearly $50k in equity.

How did you add value to the deal?

My sweat equity as a real estate agent earned me a 3% commission on the sales price, which I was able to contribute towards my 3.5% down payment due at closing.

After securing a HELOC against a second investment property, I hired a GC to completely renovate the interior of the other half of the duplex: replaced both bathrooms & kitchen, new lighting and paint throughout.

Labor: $30,000
Materials: $25,000
Furnishings & Finishes: $9,000

What was the outcome?

Rehab of unit 1 began in Nov '21, and was highly affected by pandemic-related supply chain issues with appliances, cabinets, countertops and bedding, as well as delays due to the holiday season and an exposure to COVID, etc. Project was finished in 12-13 weeks, not including a couple more weeks to furnish for short term rental.

Unit is currently listed. Check it out: airbnb.com/h/rillitopath

Gross income on unit 1 is sufficient to accomplish "Lean FI" not including the cost of the rehab, so the remainder of the Spring will be paying off credit accounts. Soon enough I will have access to 100% of my salary as a real estate agent to deploy towards future assets, working my way towards "Fat FI" and greater time freedom in my 40s & beyond.

Lessons learned? Challenges?

One of my biggest take-aways from BPCon 2021 came from one of the luncheons with fellow investors: as it concerns your first rehab, the advice I needed was to "Just Do It". Education comes through experience, and is multiplied when you're deploying your own capital!

Another key lesson: give grace to those who work hard to make your financial dreams come true. Especially in today's real estate environment.

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

Lender: Jonathan Haas & Chris Valenzuela - Movement Mortgage
HELOC lender: National Bank of Arizona - Wilmot Branch
GC: Lance Ross - LR Properties, LLC
Home Inspector: Chad Casper - Pillar To Post Home Inspections

Rockstar Investor-friendly Real Estate Agent: that's all me, baby ;-)