Fix and Flip vs Long Term Rental: Landlord Shares His Biggest Mistakes

Today, I’m talking to Colorado investor Rick Staael, who owns properties along the Front Range.  We discussed what he learned from investing, and why he chooses different investing strategies for different markets.  Rick is an engineer by day who self-manages all of his properties.  Currently, he owns seven properties that total nine doors. 

Below, I’m highlighting three of his properties and the biggest takeaways he learned from them.  Listen to the podcast to hear the full conversation.

Property #1: Longmont Townhouse Long Term Rental

This was Rick’s former primary residence and first investment property.  In 2007, he and his wife were ready for a bigger home, but selling the property during the market crash meant losing $10K.  Instead, he decided to scrape together the funds to buy a house and converted the townhome into a rental property. 

They were lucky to find great tenants and the property out-performed his best-case scenario.  He still owns the townhome today and recently paid it off. 

As we enter a new phase of market uncertainty, many investors worry about buying rental properties right now.  As Rick’s first investment shows, if you buy a well-constructed property in a desirable location and hang onto it for a while, you’re more than likely to come out ahead.

Property #2: Colorado Springs Single Family Home with Potential for ADU

In 2018, Rick purchased this single family home in Colorado Springs through an estate sale.  This is a great property that is zoned for four lots and has fantastic views of Pikes Peak.  The owner was showing the house herself and he made a good impression. 

After reading the book Never Split the Difference, he took the advice to stick with the number he had in mind and didn’t play games.  The owner came down $16K from the list price and he was able to purchase the home for $163K. 

The house had structural issues that required remediation and he needed to quickly learn what the problems meant so he could properly vet contractors.  After receiving quotes that ranged from $10K-$100K, he found a contractor who could fix the issues for $30K. 

He’s currently in the process of trying to get the property replatted so that it will only be zoned for one unit and an Accessory Dwelling Unit (ADU).  It’s been difficult to get details from the city on the steps that need to be taken, but he was lucky to find a handyman who is also a builder and knows the requirements.  While he’s still working through the process, he’s hopeful to start building soon.

 For an 850sqft building, he’s anticipating spending $160K total to build the ADU.  Once it’s ready to rent, he expects to get between $1500-1600 a month in rent.  Given the current rents in Colorado Springs, this is a conservative estimate. 

Property #3: Fix and Flip in Pueblo

Rick partnered with the co-host of his podcast to buy a fix and flip in Pueblo.  They focused on this area because it’s more affordable than the Springs or Denver.  They’re hoping this will be the first in a series of flips. 

Their plan was to find a property for $70K-$80K, put in $40-$50K of work, and sell the property for $180K.  Their goal was to make $30K on the flip. 

Now, they’re coming up on five months of owning the home and the work still isn’t complete.  While their contractors are doing good work, the progress has been slow for an 800sqft 2 bedroom/1 bathroom house.  Costs are up for materials, so their original budget is no longer accurate. 

At this point, they think they’ll make $10K-$15K in profit on the house.  While this was disappointing for them, a common rule of thumb for beginner flippers is that not losing money on the first flip is a success.  Now, they have a better understanding of the process and what it will take to complete a flip in this area. 

Key Lessons Learned as a Real Estate Investor

Rick’s outlook is that if he doesn’t take good care of his properties, then his tenants won’t have any incentive to, either.  He’s learned that it’s really important to screen tenants ahead of time and have an open line of communication once they move in.  He’s learned the hard way that not screening tenants can lead to endless headaches, and now he performs a background and credit check on applicants.

Through the rehab work he’s done on his properties, he’s also learned the importance of hiring good contractors.  Ill-prepared and slow moving contractors end up costing a lot of money, so making sure they can get the job done on schedule is key. 

Learn More about Rick

If you want to learn more about Rick’s strategies and investing philosophy, check out his podcast, Secret Sauce for Success and his book of the same name. 

You can also connect with him directly at 720-429-3303.Are you thinking about buying your own rental property in the Springs or Pueblo?  Reach out to us for a free consultation.

YouTube Video

Landlord Shares His Biggest Mistakes