Arizona 15 unit Deal - 1st Out of State

5 Replies

Hello BP,

I have spent hours combing through old posts learning the world of commercial real estate investing.

It has always been my dream to buy a small to mid size apt complex.

However, I live in Seattle, and I quickly realized I was priced out of the market. I also determined the CAP Rates and Cash on Cash return was minimal- 5% or less on most deals. And I would be extremely leveraged to get into such expensive buildings. Looking at those factors, I felt more comfortable leaving my cash in the stock market- growing it slowly until i found a deal that would cash flow better.

I finally decided to look out of state. I became frustrated with the entire Seattle market. I determined Arizona was the best place to buy. Low property tax rate- friendly landlord laws- and steady job and population growth around the major cities. I contacted all the local multifamily brokers and told them what I was looking for.

I ran the numbers on 15 to 20 different properties. We made offers on 3 different deals over the course of a month. Finally one was accepted: a 16 unit low rise in North Tucson. Conservative calculations put the CAP rate at 8.5% with C on C of 19%. Much more appealing than the Seattle area!

Very excited about this big step- but also very nervous. Being out of state scares me.

I have a few questions I hope the BP community can help with:

  • Any recommendations on Tucson Property Management Companies?
  • Any contractors you recommend in the Tucson area? - Property will likely need a new roof
  • Any other advice you would give to a first time out of state AZ investor?

Thanks for all the help. I enjoy reading the BP forum and plan to document the entire process to help the next investor avoid some of the mistakes I will undoubtedly make!

If you haven't read it already, I'd recommend David Greene's book on long distance real estate investing.  I recently finished it and can say that it is slammed full of awesome tips for people looking to invest in zip codes outside of their own.  Good luck on your journey!

Theres a couple of certification agencies that are national. irem.org and there's a swecond that escapes me. I would start there or check loopnet and see which brokers are really active, especially in the 20 unit range you're in and call them for a referral. You should be able to put a list together and you can then start calling and start your interview/vetting process.

A couple different ways to go about it. 

Congrats on your first deal!

I'm just starting my REI journey also, but if you need any help with boots on the ground here in Tucson, Az message me.

Originally posted by @Zach Richtor :

Hello BP,

I have spent hours combing through old posts learning the world of commercial real estate investing.

It has always been my dream to buy a small to mid size apt complex.

However, I live in Seattle, and I quickly realized I was priced out of the market. I also determined the CAP Rates and Cash on Cash return was minimal- 5% or less on most deals. And I would be extremely leveraged to get into such expensive buildings. Looking at those factors, I felt more comfortable leaving my cash in the stock market- growing it slowly until i found a deal that would cash flow better.

I finally decided to look out of state. I became frustrated with the entire Seattle market. I determined Arizona was the best place to buy. Low property tax rate- friendly landlord laws- and steady job and population growth around the major cities. I contacted all the local multifamily brokers and told them what I was looking for.

I ran the numbers on 15 to 20 different properties. We made offers on 3 different deals over the course of a month. Finally one was accepted: a 16 unit low rise in North Tucson. Conservative calculations put the CAP rate at 8.5% with C on C of 19%. Much more appealing than the Seattle area!

Very excited about this big step- but also very nervous. Being out of state scares me.

I have a few questions I hope the BP community can help with:

  • Any recommendations on Tucson Property Management Companies?
  • Any contractors you recommend in the Tucson area? - Property will likely need a new roof
  • Any other advice you would give to a first time out of state AZ investor?

Thanks for all the help. I enjoy reading the BP forum and plan to document the entire process to help the next investor avoid some of the mistakes I will undoubtedly make!

As a fellow Seattle-ite, I certainly feel your pain! I've been looking into Pierce and Snohomish counties for small MFR and SFR for cash flow deals.

Besides what you mentioned for looking into AZ, what made you choose the Tucson market?  I've been looking into Florida and have experience living in West Palm Beach but looking to determine what the best market is.  

Karl-

I did lots of research. There were a few top markets/cities that I found. I ultimately went with Arizona because I thought I would rather visit AZ twice a year than Oklahoma, Ohio, or Illinois.

Phoenix and Tucson were equally good choices- but there were a few other cities I also really liked.

I looked for any city/community with consistent job, population, and wage growth. However, I needed the cost of living to be at or below national the national average. This immediately weeded out many of the bigger cities and left me with emerging markets at higher cap rates.

From there I started looking for low property tax rates,favorable Landlord Tenant Laws, etc.

In my opinion there are lots of cities in FL that are set up well to appreciate and cash flow. For me living in Seattle, itwas cheaper, easier, and quicker to travel to AZ.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.