Fourplex in Colorado Springs for $619,000

This deal analysis is for a fourplex in Colorado Springs.  This was a great deal for my clients, but it took five months of patience and being in the right place at the right time for them to close on it.  

Investor Profile

These clients had previously worked with Chris Lopez and Preston Newberry to buy a condo up in Denver.  They decided they wanted to look for a multi family property in the Springs to get the most bang for their buck.  

Strategy for Investing

Their key strategy is maximizing leverage by taking advantage of low interest rates.  Fourplexes were on their radar because it would enable them to acquire the greatest number of units for a conventional loan and ride out the low interest rates.  

Investment Property Details

Deal Overview 

This is a fourplex located in Colorado Springs.  Fourplexes are in high demand and don’t often come on the market.  It took my clients about five months until they were able to purchase this property.  

Property Contract Details

Contract

My clients submitted an offer back in March but didn’t get it.  In May, I got a call that the property was falling out of contract and the agent wanted to know if my clients were still interested.  I checked with them and they were, so I got the offer over within an hour.  The agent called other people who had also submitted offers, but because I was able to get ours in so quickly, they went with it.  

Inspection Issues 

There were no major issues that came up during inspection.  The exterior balcony system will need to be replaced, and some other minor exterior maintenance will also need to be addressed.  Since nothing needs to be fixed right now, my clients will wait until something needs to be taken care of and use their reserves budget to pay for it.  

Interesting Points 

The property was listed at $625K and we were able to negotiate it down to $619K.   Originally, it went under contract at $640K, but the appraisal came in at $570K and the initial buyers couldn’t fill the appraisal gap so that first contract terminated.  I mentally prepared my clients that they would need to pay this gap when they went under contract, but our appraisal came in right at $625K.  

The interesting and frustrating thing about appraisals is that both of those are correct; appraising is a lot of art and subjective opinion and I can’t always predict how they will turn out.  I wasn’t surprised at either appraisal since fourplexes are trending up pretty significantly and quickly.  

Property Financing Details

Stabilization 

All four units currently rent for $1000 a month.  The rents could probably be pushed to $1050 as the leases turn, and with some TLC could go for $1100.  One of the leases expired during the contract phase and my clients requested the seller not fill it so that the new property manager could select the next tenant.  

Spreadsheet Analysis

Property Operating Expenses

First Year Returns

This property’s cap rate is just under 6 which is extremely hard to find in the Springs.  Most of the fourplexes we analyzed were all break even.  I’m not sure why anyone would want to buy a fourplex that would only break even, because they involve so much more work than smaller properties.

Conclusion

A lot of clients want to buy a multi family property like this one, but it’s not a frequent occurrence that something like this will come on the market.  My advice if you’re interested is to be patient and wait for the right one to come along.  

If you’re in the market for an investment property, reach out to me via email or fill out the consultation form on our website.

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