All Forum Posts by: Patrick Allen

Investment Info:

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

Purchase price: $411,000
Cash invested: $125,000

A secondary update about my 2nd House Hack, now that we have both rental units stabilized as short-term rentals.

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 and a duplex: 2 bed/bath owner's unit & a vacant mirror unit.

Rehab #1 was the other half of the duplex: 2 bed | 2 bath, 1,180 sq ft
Rehab #2 was the detached SFR: 1 bed | 1 bath, 900 sq ft

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

Goals for this deal:
- secure precisely 3 units within 1 mile of Rillito Bike Path @ Dodge Blvd: easy to access all major Tucson road cycling routes
- property layout functional for STR: adequate parking, separate backyard spaces, etc
- walking distance to Brandi Fenton Dog Park & Tucson Hop Shop (best bar in Tucson)
- pay house cleaner & landscaper to periodically clean primary residence out of AirBnB income (still working towards that!)

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

Purchased off MLS in May 2021. Multiple offers received in <2 days on market.

Despite a high earnest money deposit and appraisal gap coverage, the seller chose a different buyer initially... so this deal was won off of a backup contract.

How did you finance this deal?

FHA loan, traditional House Hack financing.

Earnest money: $10,000
Used 3% Realtor Commission to contribute towards FHA down payment; cash due at closing: $1,200

Rehab #1 was financed via a HELOC against House Hack #1 (purchased a SFR in Dec 2015)
Materials were funded by multiple credit card accounts: a stressful way to do it...
Rehab #2 including materials were ultimately reimbursed by HELOC against subject triplex, after Rehab #2 completion

How did you add value to the deal?

Rehab #1: 2 bed | 2 bath, 1,180 sq ft
Updated kitchen and both bathrooms; new lighting and paint throughout.
10 week rehab, plus another 2-3 weeks to furnish for STR.

Labor: $30k
Materials: $25k
Furnishings & Finishes: $12k

Rehab #2 was the detached SFR: 1 bed | 1 bath, 900 sq ft
Updated flooring, paint & lighting throughout; added washer/dryer; rearranged floor plan; replaced broken water main line
Labor: $28k
Materials: $13k
Furnishings & Finishes: $5.5k

What was the outcome?

Despite being less work overall rehab #2 was plagued with funding issues, supply chain problems & an all-around slowly moving market of summer 2022, capped off with an appraisal which came in $100k lower than anticipated

Was able to pull out enough to pay off GC & all outstanding credit cards
Plan is to now pay off both HELOCs w/ agent commissions, having achieved financial freedom via STR income

Listings:
2/2: https://airbnb.com/h/rillitopath2
1/1: https://airbnb.com/h/rillitopath1

Lessons learned? Challenges?

So many lessons learned! Biggest lesson is that I need to buy another home next year: no staying put for too long. Need to get the next house hack financed ASAP

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

Reach out to me directly for access to my Core 4!

Investment Info:

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

Purchase price: $411,000
Cash invested: $125,000

A secondary update about my 2nd House Hack, now that we have both rental units stabilized as short-term rentals.

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 and a duplex: 2 bed/bath owner's unit & a vacant mirror unit.

Rehab #1 was the other half of the duplex: 2 bed | 2 bath, 1,180 sq ft
Rehab #2 was the detached SFR: 1 bed | 1 bath, 900 sq ft

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

Goals for this deal:
- secure precisely 3 units within 1 mile of Rillito Bike Path @ Dodge Blvd: easy to access all major Tucson road cycling routes
- property layout functional for STR: adequate parking, separate backyard spaces, etc
- walking distance to Brandi Fenton Dog Park & Tucson Hop Shop (best bar in Tucson)
- pay house cleaner & landscaper to periodically clean primary residence out of AirBnB income (still working towards that!)

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

Purchased off MLS in May 2021. Multiple offers received in <2 days on market.

Despite a high earnest money deposit and appraisal gap coverage, the seller chose a different buyer initially... so this deal was won off of a backup contract.

How did you finance this deal?

FHA loan, traditional House Hack financing.

Earnest money: $10,000
Used 3% Realtor Commission to contribute towards FHA down payment; cash due at closing: $1,200

Rehab #1 was financed via a HELOC against House Hack #1 (purchased a SFR in Dec 2015)
Materials were funded by multiple credit card accounts: a stressful way to do it...
Rehab #2 including materials were ultimately reimbursed by HELOC against subject triplex, after Rehab #2 completion

How did you add value to the deal?

Rehab #1: 2 bed | 2 bath, 1,180 sq ft
Updated kitchen and both bathrooms; new lighting and paint throughout.
10 week rehab, plus another 2-3 weeks to furnish for STR.

Labor: $30k
Materials: $25k
Furnishings & Finishes: $12k

Rehab #2 was the detached SFR: 1 bed | 1 bath, 900 sq ft
Updated flooring, paint & lighting throughout; added washer/dryer; rearranged floor plan; replaced broken water main line
Labor: $28k
Materials: $13k
Furnishings & Finishes: $5.5k

What was the outcome?

Despite being less work overall rehab #2 was plagued with funding issues, supply chain problems & an all-around slowly moving market of summer 2022... capped off with an appraisal which came in $100k lower than anticipated.

Was able to pull out enough to pay off GC & all outstanding credit cards
Plan is to now pay off both HELOCs w/ agent commissions, having achieved financial freedom via STR income

Listings:
2/2: https://airbnb.com/h/rillitopath 2
1/1: https://airbnb.com/h/rillitopath 1

Lessons learned? Challenges?

So many lessons learned! Biggest lesson is that I need to buy another home next year: no staying put for too long. Need to get the next house hack financed ASAP

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

Reach out to me directly for access to my Core 4!

Investment Info:

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

Purchase price: $411,000
Cash invested: $125,000

A secondary update about my 2nd House Hack, now that we have both rental units stabilized as short-term rentals.

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 and a duplex: 2 bed/bath owner's unit & a vacant mirror unit.

Rehab #1 was the other half of the duplex: 2 bed | 2 bath, 1,180 sq ft
Rehab #2 was the detached SFR: 1 bed | 1 bath, 900 sq ft

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

Goals for this deal:
- secure precisely 3 units within 1 mile of Rillito Bike Path @ Dodge Blvd: easy to access all major Tucson road cycling routes
- property layout functional for STR: adequate parking, separate backyard spaces, etc
- walking distance to Brandi Fenton Dog Park & Tucson Hop Shop (best bar in Tucson)
- pay house cleaner & landscaper to periodically clean primary residence out of AirBnB income (still working towards that!)

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

Purchased off MLS in May 2021. Multiple offers received in <2 days on market.

Despite a high earnest money deposit and appraisal gap coverage, the seller chose a different buyer initially... so this deal was won off of a backup contract.

How did you finance this deal?

FHA loan, traditional House Hack financing.

Earnest money: $10,000
Used 3% Realtor Commission to contribute towards FHA down payment; cash due at closing: $1,200

Rehab #1 was financed via a HELOC against House Hack #1 (purchased a SFR in Dec 2015)
Materials were funded by multiple credit card accounts: a stressful way to do it...
Rehab #2 including materials were ultimately reimbursed by HELOC against subject triplex, after Rehab #2 completion

How did you add value to the deal?

Rehab #1: 2 bed | 2 bath, 1,180 sq ft
Updated kitchen and both bathrooms; new lighting and paint throughout.
10 week rehab, plus another 2-3 weeks to furnish for STR.

Labor: $30k
Materials: $25k
Furnishings & Finishes: $12k

Rehab #2 was the detached SFR: 1 bed | 1 bath, 900 sq ft
Updated flooring, paint & lighting throughout; added washer/dryer; rearranged floor plan; replaced broken water main line
Labor: $28k
Materials: $13k
Furnishings & Finishes: $5.5k

What was the outcome?

Despite being less work overall rehab #2 was plagued with funding issues, supply chain problems & an all-around slowly moving market of summer 2022... capped off with an appraisal which came in $100k lower than anticipated.

Was able to pull out enough to pay off GC & all outstanding credit cards.
Plan is to now pay off both HELOCs w/ agent commissions, having achieved financial freedom via STR income.

Listings:
2/2: https://airbnb.com/h/rillitopath 2
1/1: https://airbnb.com/h/rillitopath 1

Lessons learned? Challenges?

So many lessons learned! Biggest lesson is that I need to buy another home next year: no staying put for too long. Need to get the next house hack financed ASAP

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

Reach out to me directly for access to my Core 4!

Greeting BP community... it's that time of the year again! If you are a rookie real estate investor based in Tucson, AZ and are unfamiliar with AZREIA: the Arizona Real Estate Investors Association... this is the perfect opportunity to join us for some amazing content on how to get start investing right here in the Old Pueblo.

This month we are returning to basics: why it makes sense to get started investing now (even in today's crazy housing market) and how to develop your investing niche (what you buy) and strategy (how you buy it). We will lay out an argument in favor of beginning your real estate investing journey no matter your goals or current skillset, as well as to overview several different strategies/ideas to get you started. Even if you're already decided on your investing strategy for 2023, I hope you will find this month's content accessible and motivating to go out and crush it.

Register here via AZREIA's Event Calendar

As we always do, we will be meeting in-person the Keller Williams Office near River/Campbell as well as simulcasting via Zoom. Please pre-register online to ensure you have the correct login information for the online link. 

If you've ever want to get started investing in Tucson but "don't know what you don't know", or if you've looking for a mindset shift to shock you out of Analysis Paralysis, consider spending your evening with us: it'll change your life!

Greetings Tucson locals & investor-wannabes alike!

Over the last 6 months, the New Investor Subgroup of AZREIA has once again completed a "full curriculum" of how to get started investing in REI: those who have been attending have a much stronger foundation in how to find the deal, how to secure financing, how to run the numbers and write offers to purchase real estate. While education might not be your biggest limiter to getting started investing in Tucson, it may now be empowerment to take the next step, or lack of a compelling vision as to where you want your investing to lead you in years to come.

If you find yourself in that camp, make sure you get yourself back home after Labor Day to make sure you can attend our Local "Seasoned Investor Panel" (in person, or on Zoom)! An "experienced" investor is always a relative term, and to the newbie investor even having 2 or 3 successful deals done seems incredibly daunting. If you aren't sure: 

- how to scale your portfolio after doing your first deal

- what are the mistakes & lessons learned by other investors, so you know to avoid them in your own journey

- how local investors are able to make deals happen in the Tucson market, each using unique strategies in accordance with their own background & long-term goals

- how to network with other, more seasoned investors to increase your own skillset & create more opportunities

... we will be packing the Keller Williams training room with 3 inspiring and experienced local investors to answer all of those questions and more! AZREIA will welcome 1) Dean Leonard: AZREIA Sponsor & local agent/investor

2) Colby Fryar: Multifamily syndication & BP local meetup host (Tucson MultiFamily Meetup), and

3) Daniel Clevenger: AZREIA member with multiple investments across several asset classes

Each will discuss how they got started investing in Tucson, AZ, which real estate strategies they have seen the most success with, and practical, hard-won advice on how to safely & intelligently buy your first (or next) deal

Pre-Register here: registration link through AZREIA

As we always do, we will be getting together on the first Monday of the month at the Keller William Building near River/Campbell 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.

See you there!

Echoing what @Scott E. mentioned above, and hundreds of investors have mentioned over the years of the podcast: house hacking is almost always the best REI approach for anybody willing to do it. Of the many benefits of house hacking, a few which are noteworthy:

a) the low (no?) down payment requirement considerably lowers the barrier to entry for anyone who lacks capital to "get into the game."

b) due to the low initial outlay of cash to acquire the deal, there is no pressure to immediately add value & subsequently refinance to "lock in" that high ROI. So you can get away with less... sophisication... in what deals work for your buy box.

c) because there are strategies to do a house hack once per year (talk to your favorite lender), the biggest wealth-building strategy is to minimize the length of time between house hack #1 and house hack #2: if you can find something that works for your goals & close by 9/30/22, you stand to be in a great position to buy your next property before the end of 2023, again without having to put much cash into the deal.

d) also pointed out by Scott & worth reiterating: house hacking is "landlording on training wheels". Enough exposure to the LL industry to know whether you'd choose to continue to self-manage or to outsource the job as your portfolio scales... with the added benefit that you live on property and thus can instantly get over to your rental unit to assess and/or handle any issues. Compare that to buying a STR out of state, which presents logistical challenges that is the stuff which keeps investors up at night.

And even if you totally screw up the purchase and buy a property you end up not wanting to own as it's a constant headache for you to manage, you can elect to sell it in a few years & move the equity into a different purchase that produces far better returns... as now you have years of experience and better know what to look for.

PM'd you in case you have further questions about our market down here in Tucson!

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!