Buying an Arizona Rental?

Buying an Arizona Rental?

By Michael J. MicGirr | Phocus Law

5 Legal Questions to Ask Before You Make an Offer

1. Are there any hidden risks with this property?

Even if a home looks great, ask about hidden risks you won’t catch on a quick walk‑through. Common issues include title defects (liens, ownership disputes, recording errors), unpaid taxes, boundary or survey problems, unpermitted work, HOA violations, and pending lawsuits. Have your lawyer and title company run a thorough title search, order title insurance, and flag anything that could cloud ownership or reduce value.

If the property is or was rented, ask about leases, deposits, and any tenant claims. Early due diligence lets you fix issues or renegotiate before you’re locked in.

For your own investment math, get realistic estimates: inspection findings, repair and capital expense budgets, insurance, taxes, and HOA fees. Your lawyer can help coordinate the diligence team so you can judge whether the deal still pencils.

2. What does the contract actually say?

In residential deals, focus on the basics: clear title, an inspection period with access to the home and records, and financing/appraisal timelines that match your lender’s needs/requirements. Make sure earnest‑money dates, contingency removal dates, and delivery of disclosures are crystal clear.

Watch for one‑sided terms that shift too much risk to the buyer, like broad “as‑is” language without meaningful disclosures or no ability to cancel after inspections. Confirm who pays for repairs, warranties, and HOA transfer or assessment fees.

Your contract should spell out access rights before closing, required insurance, how disputes are handled, and what happens if either side misses a deadline. Clear terms keep the timeline on track.

3. Is the property zoned for what I want to use it for?

Zoning and neighborhood rules regulate how you can use property. Check city, county, and HOA rules to confirm your plan is allowed—long‑term rentals, short‑term rentals, an ADU, parking, and occupancy limits can all be regulated. Rules can change over time, so verify now and keep monitoring until closing.

4. Should I buy this property through an LLC?

Buying through a Limited Liability Company can help separate business risks from personal assets and make co‑investing easier. Trade‑offs include setup costs, extra filings, and lenders who may still require personal guarantees. Talk with a lawyer and CPA about liability, financing, insurance, and tax goals before you pick a structure or move a property into an LLC.

5. What happens losing?

Before closing, ask your lawyer to map the steps: final title update and insurance, delivery of disclosures, resolution of any repair credits, payoff of liens, and how funds will be handled at closing. After closing, know when you’ll get keys and possession, how to transfer utilities and insurance, and how property taxes will be handled. If you’re using an LLC, confirm any extra documents your lender or title company needs.

This article is for general information for Arizona residential investors and isn’t legal or tax advice. Always consult your attorney and CPA about your specific situation. Phocus Companies would be happy to assist with your legal and accounting needs. Please reach out if we can be of service at [email protected].