Remotely Managing a 15-Unit in Tucson

[Sean Malone]

Hello! First post on here ... I'd like to ask for your advice. I live in the Seattle area. I have a 15-unit in Tucson under contract, and need to make a call on this in the next few days. The property has lower-income tenants, and rents are just a bit below market, but not much. The inspection has been done and is generally in good condition.

To make this deal have great cash flow, I'm trying to find creative ways to actively manage expenses in three categories: management, maintenance, and utilities. At the current price, the default option (full-service management at 10%, maintenance done through independent vendors, and water + sewer + garbage paid by the owner), the cap rate works out to about 7.5%. Not horrible, but nothing to get too excited about.

Here's the "creative" approach that I'm considering:

1. Put in place an efficient property management system, and tune it over time:

• https://www.rentecdirect.com/ or similar, for ~ $50 / month. 
• That platform facilitates advertisements, online applications, background checks, leases, rent payments, utility billing, work orders, accounting, etc.
• I'm responsible for the business elements of management - making sure I have good screening criteria & lease agreements, contracting with vendors for larger repairs, and similar.

2. A local manager's assistant / handyman handles everything on-site:

• Clean, inspect, and maintain units between tenants
• Meet with tenants to show the units
• Manage paper documents for tenants who can't do it online for some reason
• Collect rent checks from any tenants who can't pay online; provide notice to and check up in person on tenants who are late
• Work orders go directly to the handyman via the software platform
• Handle any maintenance items expected to take less than two hours (bill me for actual material costs)
• Read sub-meters as applicable (see #3)
• Collect & deposit cash from laundry units and ensure they are in working order

3. Sub-meter the water, and bill water + sewer costs back to the tenants:

• New tenants pay 100% of actual usage
• Would likely have existing tenants (on MTM leases) gradually pay more over a year until they're paying 100% of their actual usage
• The property currently has a waiting list for vacancies, so I'm not too worried about a bit of turnover.

I've found someone local with experience handling the items in (2) above, who charges $33.33 per month per unit, when occupied. This works out to about 6% of gross rents. By my calculations, if this approach saves me 4% management, $2000 in maintenance labor, and reduces my utility bill by 75%, this takes me from 7.5% to just over 10% cap rate - now this is looking good.

Here are my questions:

1. What's wrong with this plan? Am I insane for thinking this could work well? 
   
2. For what the local "man on the ground" is doing, does this look like a fair price?
3. In this situation (assuming that all significant maintenance items are addressed before close), how much would you budget for supplies, repairs, and other contract services above and beyond labor provided by the handyman?

Thank you in advance for your advice!