However, I should note that this tenant has been late paying rent several times recently, which has added some strain to the landlord-tenant relationship.How would you approach this situation?

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

What approach worked best for you?

What’s intriguing is that he’s doing this entirely with investor money, not using any of his own funds.I’m curious to learn more about this approach.

It’s a move that worked out exceptionally well, especially in a growing market like Phoenix.Here’s how you could approach it:Unlocking Equity:A HELOC is great for flexibility, while a cash-out refinance might be better if you’re aiming to make multiple acquisitions quickly.

The income based approach to valuation is only used for commercial properties, that’s 5 units and up for multifamily.  

Hey Jason - if it's a 1-4 unit, you would need to value it based off the sales comp approach (assuming the buyer is using debt financing).

Can try to reposition to Class B, but neighborhood may impede these efforts.Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.Tenant Pool: majority will have FICO scores of 560-620 (approaching 22% probability of default), many blemishes, but should have no evictions in last 2 years.

I may also be a "necessary" approach if one had an erratic income and no savings.

I want this to become a rental property and would like to begin investing in real estate, I am not sure best approach.