Deal Analysis – Investment Condo in Aurora, CO

This is an Aurora rental condo purchased by Chris Lopez. It’s a straightforward rental property that met his criteria and in a complex where we’ve done many transactions. Aurora investment properties are some of the best cash flowing rentals in the current Denver market.

This property closed in Q1 2020.

Investor Profile

• Buy and hold investor with the goal of buying at least one property a year.
• This property met the criteria he was looking for:
  • In the Denver metro
  • Above a 6% cap rate
  • Minimal work needed (about $4,500)
  • Property manager liked it

Deal Quadrant: Networking

Read about the deal quadrant and finding Denver Investment Properties.

Investment Property Details

• Type: Condo
• 3 bedroom, 2 bathroom
• Location: Aurora
• List Price: $195,000
• Purchase Price: $195,000
• Why we liked it:
  • Only cosmetic work was needed
  • Great rental property with strong cash flow numbers
  • A great “base hit” investment
  • Updated electrical panel
  • Newer furnace
  • New windows (except for two sliding doors)
  • In good enough shape for a rental

Property Contract Details

• Finding the property: Our team has closed over 15 transactions in this complex. We know it very well. It hit the market and Chris put in an offer sight unseen. Strong offer + track record + Joe on lending = under contract.
• Under contract:  Above ask and secret sauce
• Inspection Concerns:
  • Did a limited inspection by walking the unit with the property manager. One benefit of knowing the complex.
  • Interior paint needed (hideous current colors)
  • Sliding door wouldn’t lock (a no-no for safety and Section 8 inspections)
  • Minor handyman items
• Inspection negotiation outcome:
  • None. Wrote limited inspection.

Property Financing Details

• Lender: Conventional
• Loan Type: 25% down conventional
• Appraisal: at value, no issues.
• Seller Concessions: 0
• PMI: None
• Interest Rate Buy Down?: Yes

Spreadsheet Rental Analysis

Property Operating Expenses

First Year Returns

Conclusion

A 6.7% cash on cash return is a great return to see in the current marketplace! The numbers shared include the latest tax assessment (increased) and the latest HOA fee after an increase. Chris’s plans are to hold on to this rental, because it provides good cash flow until there is enough equity to do a cash out refinance or sell and utilize a 1031 exchange to trade up into a better rental property. He paid 2 points (2% of the loan balance) to buy the interest rate down to 3.875% which is very low for an investment property! It will take 2.5 years to get the extra cash flow to pay for the point buy down. The numbers make sense to do with a five year minimum hold time before doing a cash out refinance or selling to 1031 exchange.

Video: Deal Analysis – Investment Condo Aurora