Investors Greg and Heather joined me to discuss a fourplex investor-friendly agent Leah Keeling recently helped them purchase. They’re taking a unique approach to renting it out by listing two of the units as short term rentals and the other two as medium term.
We talked about how they decided on these strategies, and how they renovated the units.
- Listen to the podcast “#111: Can You Boost Cash Flow by Mixing Rental Strategies?” on the Colorado Springs 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.
The clients are Greg and Heather, based out of Colorado Springs. Greg was on a previous episode of Ask an Investor where he sought advice on how to buy a multifamily property in a competitive market.
At the time, he was stationed overseas with the military. Now, he and his wife are back in the Springs and ready to get serious about reaching their investing goals.
Investment Property Details
This is a fourplex located in the Woodman/Academy area in northern Colorado Springs.
Appealing Features of the Property
The fourplex was built in the 1980s and features 2 bedroom/1 bathroom units. While the building is in good shape structurally, the units need some cosmetic updates.
Sourcing the Deal
This property was under contract, but the buyer backed out. Leah inquired about why the deal fell through and found out it was due to inspection issues. Greg and Heather weren’t deterred and wanted to put in an offer.
Surprisingly, no major issues were found during the inspection.
Property Financing Details
They purchased the property for $780K with an interest rate of 6.875%. Renovations to the first unit cost just over $23K, and they plan to follow the same model for the next 3 units.
One unit was vacant when they closed, and they anticipated two more units would be vacant within 30-60 days, while the last unit would become vacant in about 8 months. This would allow them to stagger renovations on a unit by unit basis.
In reality, two of the tenants broke their lease early, so they suddenly had 3 vacant units to get up and running as quickly as possible.
Renovating the Units
Heather took the lead on renovating the first unit, using a contractor Leah recommended. She spent a lot of time finding deals on appliances and furniture, helping the renovation come in just under their $25K budget.
She recommends building relationships with local vendors, as well as finding deals at Goodwill and other discount stores.
Obtaining a Coveted Short Term Rental License
Short term rental licenses in Colorado Springs are hard to come by as the rules are very strict. Properties can be rented out on a short term basis only if they are zoned appropriately and there isn’t another short term rental within 500 feet.
After closing on the fourplex, they checked to see if any other nearby properties had short term rental licenses. While there are some medium term rentals (which don’t have the same requirements), none were short term rentals.
They snagged a rental license and now have the option to list any of the units as short term rentals.
Combining Short and Medium Term Rental Strategies
They plan on renting two units as short term rentals while renting the other two on a medium term basis. Their estimated monthly income is:
- Short Term (B): $3,500
- Short Term (A): $3,500
- Mid Term (C): $2,900
- Mid Term (D): $2,900
Estimated Total Income: $12,800
They just started renting the first unit as a short term rental and are using local property management company Hostē to list the unit and oversee the day to day details. Hostē offers PM services for both short and medium term rentals, so they plan on using them for all of the units.
Heather and Greg are in the process of renovating two of the units and hope to get them listed as soon as possible. They know they’re going into the slower winter season and are adjusting their expectations accordingly.
The great thing about combining short and long term rental strategies is they have options to experiment and see what works best over the long term. I’m excited to see how their fourplex performs once all of the units are renovated and having them back on the show for updates.
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