Deal Analysis – Using Creative Financing to Build a Portfolio

Our guest this week is Garrett Dilley, an investor who started investing late 2020, and is making great strides towards reaching his real estate goals by building his rental portfolio in Colorado Springs. I helped him find a single family home that fit his criteria, and he was able to make a competitive, all cash offer while still being able to utilize leverage by employing delayed financing. Now, he’s one step closer to his ultimate goal of building wealth so he can spend more time with his family and mountain biking.

Investor Profile

Garrett Dilley is just getting started on building his rental portfolio in Colorado Springs.  He’s been interested in saving and wealth building for a long time, and started listening to real estate podcasts to learn more.  He began investing in real estate a few years ago as a silent partner for a friend who started a house flipping business in Denver.  When he bought a new home, he decided to keep his previous residence and rent it out.  Since then, he’s acquired two additional single family homes in Colorado Springs. 

Long Term Real Estate Investing Goals

His long term goals are simple: build wealth and enjoy life.  

Strategy for Achieving Goals

He plans to achieve these goals through a mix of investing in real estate, equities, and bonds.  

Investment Property Details

This property is a 3 bedroom, 1 bathroom single family home in central Colorado Springs. 

Deal Overview

Appealing Features of the Property

The home was well-maintained, turnkey, and located near development projects.  The neighborhood itself is less expensive, though it’s sandwiched between more expensive neighborhoods. 

Investment Business Plan

He is going to keep this home as a long term rental as he acquires more rental properties in the area.

Sourcing

I found this property for him on the MLS.  Since his previous rental property was more hands on, Garrett was looking for a property that was turnkey and provided a decent return from day 1.  He did not limit his search by property type (meaning single family, townhome, multifamily), and kept his options open and acted quickly when the right property came along.  

Property Contract Details

Inspection Issues

There were no major issues that came up during the inspection.  There were a few questionable items, such as potential rot in the siding and hairline cracks in the foundation, but Garrett brought in some professionals to assess them during the inspection process and was told everything was fine.  

General Notes

The list price of the property was $250K.  Garrett initially made an all cash offer of $257K.  After speaking with the listing agent, I was told that in order to the get the house, he would need to offer $263K in cash.   

Property Financing Details

Stabilization

Plan v Reality

Garrett decided to do a few things to spruce up the home, such as adding a washer and dryer, replacing some blinds, and fixing the fence.  It took exactly a month from the close date to get a tenant moved in.  The main reason for this delay was because the listing agent failed to remove the property from the MLS, which caused Garrett’s ads to be removed.  Within two days of getting this corrected, he found a renter.  

Initially, Garrett wanted to rent out the property for between $1425-$1450 a month, but he was able to rent it out at $1500.  This was great, especially since the purchase price of the house was a little higher than anticipated.   

Interesting Points

To be more competitive, Garrett made an all cash offer and used delayed financing.  This allowed him to pay for the home in cash and then go through his lender to refinance.  Usually with delayed financing, the buyer has to make a down payment of 25%, but in Garrett’s case he only had to put down 23% because the house appraised at $270K, higher than he paid.  

For more information on using delayed financing, check out our podcast episode with Joe Massey.

Spreadsheet Analysis

Property Operating Expenses

First Year Returns

The cashflow for this property is a little over $100 a month.  While this isn’t life changing money, it’s a good return for the area.  And because of how quickly properties are appreciating in Colorado Springs, the home is likely worth $280K now, giving him more options for later.  

Immediate Goals and Plans for the Property

He is going to hold the house as a mid to long term rental.  

Exit Strategy/ Long Term Plan

Garrett plans to hold onto this property and shop the market for his next deal.  In the next two years, he’d like to build a portfolio of long term rentals.  His objective is to enjoy life, spend more time with his family and mountain biking, as well as learning as much as he can about real estate investing and building wealth.  Depending on how this plays out, he is considering land development, but that is far from a plan at this point.  Overall, he’s excited and curious for what the future holds in real estate!

Connect With Guest Garrett Dilley

If you’d like to contact Garrett, you can reach him via email at garrettjdilley@gmail.com or LinkedIn.  The pandemic put a damper on his ability to network, so he’s looking forward to connecting with other investors.

How to Get Started Building Your Own Rental Portfolio

If you’d like more information on the Colorado Springs market in general, you can schedule a free real estate investment consultation. For information on how to get started investing in Colorado Springs, check out our free 2021 Colorado Springs Real Estate Investing Guide.

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