All Forum Posts by: Bobby Hosmer

Hi @Jose Bermudez

In those areas, my criteria is specific to small multi-family properties. There might not be a ton of supply, but they do hit the market every now and again in Tucson.

Of course, there is a larger supply of the styles of properties you mentioned, but I just don't want them in my Tucson portfolio. In my opinion, I'd prefer the SFR over condo or town homes. The reason is that usually these types of units have HOAs, which can have restrictions on things you can do to the home (add bedrooms/bathrooms and other forms of value-add). Some HOAs are even beginning to restrict the ability to rent (short and long term). On the other hand, a SFR offers a bit more flexibility when it comes to your value add construction and rental rules. I've seen SFR homes being flipped in central Tucson, which indicates that BRRRR can work too.

Best,

Bobby

Hi @Natalie Teramoto! Welcome! 
I think it depends on the areas where you've been looking. There are parts of Tucson which do  have high crime rates comparably to other markets; however, there are also parts of Tucson where the crime rates might be pretty average. Also, when looking at crime, I would suggest looking at the "types of crimes". Reports of assault, murder, and burglary/robbery are certainly things to consider and are no bueno. However, every neighborhood will probably have some type of crime, so try to see if they are other non-violent crimes (DUI or Domestic dispute) because it might have less of an impact on the desirability of a neighborhood.

I only focus on a few particular areas, and so others may be able to speak to different zips.But, I like areas around Mid-town, (parts of 85712, 85716, and 85719) and it is where I spend most of my time analyzing/purchasing properties. While I can tell you about certain areas of Tucson in great detail, I have not "analyzed" these other areas enough (regarding price, rents, crime) to give you a good answer. I've worked over the past few years to really narrow my focus.

With that said, there are certainly neighborhoods within those zip codes where I would shy away from looking at this point. Yet, I view the area as a working class environment, developing slowly over the next 10 years. Government projects are expanding roads (Grant Rd expansion) which has already led to the development of higher-class restaurants and businesses (Orange Theory Gym, Poke Restaurants, brunch restaurants and wine bars). In addition, also try to think of your investment strategy. For example, if you were to invest in vacation rentals, you might consider looking at zip codes closer to the UofA, or on the outskirts of town near the Foothills (Catalina or Tucson Mountain area). 

Certainly, there are other areas than the one's I've mentioned. I just don't have the experience in analyzing those types of zip codes since I've narrowed my focus to mid-town and north of the UofA.

@Caleb Rowe Welcome as well! I think BRRRR is a fine strategy for most areas of the Tucson market. A great place to start if you are unfamiliar with Tucson would be to check out the neighborhoods of the zip codes which I listed above. But still, I would encourage you to check out as much of Tucson as you can because I think it does offer great potential as a long term play.

Hope this helps!

Bobby

Hey @Lisa Misuraca! Been a long time! Hope all is well. It’d be great to reconnect with you and Mario! Thanks for the info.

@Ryan G. if you feel like connecting with Lisa or Mario, we’ve both been in Tucson for a long time! I’m sure they can help a ton too. 

Unfortunately, I’ve never done an “as is foreclosure.” But typically means they won’t make any changes pre-closing for you based off the inspection results. i.e. electric is bad, they won’t fix it. However, you still are in your due diligence period, and technically have the upper hand when it comes to deciding to close based on those reported results. Beauty of contingencies.. haha  In the case with dealing with the bank for the foreclosure, they have to agree to the sellers sale price (sounds like that happened already), but it doesn’t mean you don’t have the option of going back to the seller directly and saying, “listen, this electric really isn’t up to code. It’s going to require upgrading the panel and the wiring (etc). I have an electrician who can do this for me after we close the sale for $x dollars, but I already paid 11k over asking from the bank, and I can’t cover this expense after my closing costs. Would you be willing to give me a closing credit of $x dollar amount so I can fix this properly?” (You aren’t swindling the guy.. show him the quote from the electrician). If you are working with a bank officer and not a seller, just use that process with that officer.

If the seller has any say in this foreclosure process, they might say “yes” just to get it off their plate. They also might say “no” and be prepped for that. If they say no, do you proceed? Just have that mindset of the negative outcome.

Too bad about the misrepresentation, but not surprising. In regards to the 3rd bedroom, unless it’s being purchased at a 3bedroom neighborhood comp, this sounds like an opportunity where you can add some value. What I mean by that is that you would have to get a contractor to help you connect the bedroom to the main house, and make it an actual bedroom. And get it documented with the city. And then after the appropriate waiting period on your loan, you can get it reappraised and refinance some of the sweat equity into making it a 3bed from a 2bed. To do that, you’d basically be retroactively permitting a bedroom. Your contractor can help you add the doorway, as well as make sure other things (electric etc) are up to code. Connecting the a/c to that bedroom could get expensive so you can look into a wall unit like a mini split. This still will have an out of pocket cost, but it’s cheaper than a main hvac and sometimes more energy efficient.

If you feel like it’s being comp’d as a 3bed house now, there are still some strategies to employ. It just means your refinance play is going to be different (if that even had been your goal).

Hi @Ryan G.

Congrats on being under contract! Regarding your questions:

1. I do not have a list for you, but a property manager or realtor in the Tucson area might be able to connect you to some contractors if you aren’t able to find one online. Use the team you’ve already built/have around you to see if they have personal recommendations.

2. It depends on the extent of your remodel. In my experience, I’ve had an opportunity to use an architect for an extensive remodel, but decided to not go that route because, yes, they are expensive. Most times, architects and their designs help a ton when it comes to the permit process with the city of Tucson. If the city tells you that your project won’t need a permit, you might be comfortable skipping the step of finding an architect. And even if the project does require a structural permit, the city of Tucson still might tell you what you need. Even to the point where you can just use designs done by a GC. Again it just depends on the remodel.

3. Without knowing the electrical situation, and just that’s “it’s old”, my first instinct would be to do “an electrical inspection”, which will be more in depth than the General house inspection. Local electric companies can do one for you for a couple hundred. If you don’t want to spend the coin on this type of inspection, I would just accept the up front cost, and find a local licensed electrician to upgrade the panel (check wiring and outlets) for you. Old electric panels and wiring can cause fires, and that’s no bueno. On a property I purchased last year, the wiring and panel were both pretty bad. Before the end of the inspection period, I was able to negotiate a “closing credit” from the seller to upgrade the panel. So the cost to me was only the additional electrical inspection!

4. Size of additional unit? Is it plumbed? Does it have a/c? Is it separately metered? If yes to those questions and it’s a decent size, that’s a big win to your monthly cashflow. If not, it’s not the end of the world, however, it’s an opportunity to be mindful on how you’ll use that unit to increase your operating income. Can you plumb it? Can you add a mini-split to add a/c and make the conditions livable for a renter? Do you want to spend money for permitting and a/c to add extra income. To me, it’s calculating costs up front to get an roi in the future.

Hope this helps!

Bobby

Hi @Kelly Beasley

That does seem like a big gap, however both of those rent amounts are not out of the ordinary for the Tucson market. If it has as great amenities as you said, and it’s in a desirable spot, 1200 might not be too far off of current rates.. even if it is on the smaller side. It will just depend on where the property is located, as well as neighborhood rental comps. 

In addition, it’s possible that the market rents may have increased since that rental may have last been available. i.e. maybe long term tenant rented at the same rate for a few years, or the previous owner never did their due diligence and had it rented under market. I’ll send some recommendations over in a PM for you!

Bobby

Hi @Jake Abbatacola

Great to hear you are soaking up info. While you are saving money for a deal (whether it’s your first or 100th) one of the best things you can do right now is to continue to learn. Keep reading and listening to podcasts (can be from other podcasters as well). You’ll be surprised as to how many tips/strategies you might come across as you self-educate. Like tiny little lightbulbs going off.

If you get frustrated with the amount of time it might take to save the money for a down payment, house hacking might be a strategy to consider. @Patrick Pierre brings up a good point with the FHA loan. lower cost of entry to a future rental. Check out The House Hacking Strategy by Craig Curelop.

Another option might be to partner with someone who does have the funds. If you feel like that is too large of an obstacle, check out some YouTube videos by Kyle Marcotte. I think he’s only 21 and he uses a syndication method to invest in large multifamily, but his segment on creating connections to raise capital and partner with no money down will be similar to your current position. Hope this helps!

Hi @Hailey Sexton, welcome! Awesome idea! 

I am also an investor from Tucson, and I own a few rentals near the UofA. Feel free to contact through private message for specific questions!

Also, I recommend picking up a copy of @Craig Curelop’s book, “The House Hacking Strategy” from the BP Store, or audible. It’s an awesome intro into what you’re looking to do. With that said, in regard to a USDA loan, I think Tucson may not qualify. I just learned this from Craig’s book, but those loans are particular about population size, I think 30-35k people, and Tucson has close to half a million. But, definitely worth more research as I haven’t gone the USDA route.

Again, welcome!