This deal analysis is for a fourplex in the Ruby Hill neighborhood of Denver. Because I’ve developed a great relationship with the buyers, we were able to execute this deal quickly. This gives them more time to focus on other important things in their lives. Some people may see this deal and think it doesn’t look great, but it’s all about figuring out what fits your lifestyle and long-term goals.
- Listen to the podcast “#323: Denver Turnkey Fourplex for Successful Business Owners” on the Denver Real Estate Investing Podcast
- Watch the YouTube video (at the bottom).
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
These clients are a married couple who run a successful business. They have a lot going on in their lives and are about to welcome a new baby. They just sold some smaller properties and wanted to add another fourplex to their portfolio. Their goal was to find something turnkey in an up-and-coming neighborhood that would appreciate over time.
Appealing Features of the Property
This is a an up/down fourplex in Ruby Hill that has 2 bed/1 bath units. There’s a nice walkway between each unit that was recently replaced with Trex decking. The off-street parking area in the back is repaved, and the units are newly renovated. The property was being sold by an owner who runs a general contracting company and enjoys rehabbing multi family properties as a side gig.
Property Contract Details
The property had recently fallen out of contract. Once I saw it go back on the market, I did a video walkthrough of a vacant unit for my clients and told them I thought it was a good deal. This was enough for them, and we pulled the trigger by writing an offer and getting under contract.
Since the property was recently renovated, there were some punch list items you would expect from a rehab. The furnace needed to be cleaned, some outlets weren’t working, and other minor issues. The seller was really easy to work with and took care of everything.
Investment properties require a 25% down payment, and my clients got a great interest rate at 3.375%. Because of the size of their down payment, they don’t have to pay monthly mortgage insurance.
The units were already leased at $1550, but nearby comps suggest they could get $1675 in rent. Making adjustments to rent, vacancy, and repair costs can significantly alter outcomes. This is why we tell our clients that the spreadsheet gives a range of returns. We don’t have a crystal ball to predict the future, but we can show best and worst-case scenarios so our clients can decide what their level of comfort is for a deal.
Property Operating Expenses
Monthly reserves are always interesting because everyone calculates them differently. If it were me, I’d run reserves at 5%, but my clients ran it at 3%, which is also realistic. They have experience with this type of property and know that the sewer line, electrical work, and water heater have all been recently updated.
There are no common areas to maintain or landscaping, and my tenants plan on implementing a bill-back for utilities, so monthly operating costs are quite low. They could budget $1K or so for miscellaneous expenses, but that won’t move the needle much in either direction.
First Year Returns
Using the higher projected rents, their annual cashflow is nearly $12K and their cap rate is at 4.9%. My clients weren’t concerned with initial cashflow because they’re more focused on the long-term benefits of owning real estate.
Some people might look at this deal and think the returns aren’t great, but it all comes down to the individual client’s profile and ultimate goal. These clients wanted a solid property in which they could put their money and move on. It’s a better use of their time to focus on their growing business and family. As they increase their savings, they can invest in real estate properties that fit their strategy.
There is more to making money in real estate than monthly cash flow, and my clients are focused on the long-term factors. To learn more about this topic, check out our course on underwriting investment properties.
Exit Strategy/ Long Term Plan
My clients plan to hold onto this property and ride the wave of appreciation.
Connect with Preston
If you have questions or are interested in investing, reach out to me. The reason I was able to find and act quickly on this property for my clients is because I take the time to learn their goals and what properties best fit their lifestyle. Meet with me, and we’ll figure out a game plan before we start looking at properties to make sure we can meet your long-term goals.