How lenders read Arizona apartment income

Arizona multifamily underwriting on this note means apartments of five or more units that an investor owns for income. It does not mean a house, a fourplex held as a consumer loan, or a hotel. Lenders start with the rent roll and the trailing twelve months of income and expenses. In Arizona, one line in that trailing twelve changed its meaning at the end of 2024, and the change is a tax classification, not a cap rate. This note is general information. It is not tax advice, not legal advice, and not an environmental or engineering opinion. A CPA, an attorney, or the licensed professional named in the report decides how the rule applies to a given property.

The Arizona Department of Revenue's residential rental guidelines describe residential rental as the rental of real property for 30 or more consecutive days for residential purposes, and they say that classification is not commercial. The page says that starting January 1, 2025, owners should no longer collect or remit city transaction privilege tax on that long-term lodging, citing Laws 2023, Chapter 204, and A.R.S. § 42-6004(H). It also says there is no state or county transaction privilege tax on residential rentals, so cities cannot impose one from and after December 31, 2024. Hotels and motels renting for fewer than 30 days still collect transient lodging tax. Owners still register with the county assessor. Publication 645, dated January 2025, repeats that from and after December 31, 2024 there is no city privilege tax on residential rentals. Those are the department's sentences. They are not a percentage to subtract from every Arizona apartment.

What a trailing twelve that straddles the change is actually showing

A trailing twelve dated in 2025 or 2026 may include months when the owner was still collecting city tax and months when that collection stopped. A lender who treats the entire year as if the tax were still an expense will misread the income. A lender who removes the tax from months when it was legally collected will misread it the other way. The normalization is the CPA's work and the property's returns. This note does not publish a haircut. The rent-roll mechanics, separate from the Arizona tax change, are on rent roll and trailing twelve.

Other lines move for ordinary reasons and still do not get a benchmark here. Property-tax bills can be reassessed. Insurance premiums change. Utility expenses change. Concessions and free rent show up when a building is leasing. None of those is given a trend number on this page, because no series was opened that this note is willing to treat as a rule. Ask for the bills. Do not ask this page for a statewide expense ratio.

Agency debt is arranged, and a bridge is a different loan

If the apartments are stabilized, the permanent conversation may be Fannie Mae or Freddie Mac through an approved lender, or a life company, or HUD when the program fits. Capital Market Funds is not a Fannie Mae DUS lender. It is not a Freddie Mac Optigo lender. The statewide notes are Fannie Mae and Freddie Mac. A loan that sits behind an existing agency mortgage, after seasoning, is a supplemental, not a new first mortgage. A property that is not yet a permanent file is Phoenix multifamily bridge, and the cap document on a floating bridge is interest rate caps.

How much cash a buyer must bring is not a ratio on this note either. That question, for commercial property rather than a home, is down payments in Arizona. The property-type pages are Arizona multifamily and Phoenix multifamily. The calculator at DSCR does arithmetic on figures you type. It does not know whether your trailing twelve still contains a city tax that the 2025 rule ended. The office is 7373 E Doubletree Ranch Rd #255, Scottsdale, AZ 85258. The phone is (480) 495-8072. Capital Market Funds, LLC - CBK-2007014 - Commercial Mortgage Banker and NMLS 1445066.