Property Deal Analysis Overview

This deal analysis breaks down how intermediate investors purchased a wholesale single family home to build their real estate investment portfolio for retirement and were able to leverage the Buy-Renovate-Rent-Refinance-Repeat (BRRRR) method in order to expedite their ability to scale and acquire more rental properties.

This property closed Q2 2017.

Read about the State of the Market for Colorado Springs real estate Q3 2020.

Investor Profile

• Buy and hold investor couple, owned both in- and out-of-state properties at the time
• Second BRRRR property, third Colorado Springs property
• Able to apply first BRRRR cash-out refinance proceeds to be used towards down payment and rehab costs
• Long term goal is to build a sizeable rental property portfolio for early retirement

Deal Quadrant: Wholesale

Investment Property Colorado Details

• Type: Single Family Rental property, ranch
• 2 bedroom, 1 bathroom, 1 car detached garage
• Location: Stratton Meadows subdivision
• List Price: $113,500
• Purchase Price: $113,500
• Why we liked it:
  • Location!
  • Room for forced appreciation (rehab)
  • No HOA

Property Contract Details

• Finding the property: Received an email from a wholesaler for a property that was located just a few houses down (same road) from investors’ Colorado Springs property #2 (which was purchased turnkey) with the same exact specs, so the ARV was known.  In a lapse of judgement/excitement, investors immediately called the wholesaler and laid claim to the property and put down a non-refundable EMD that same day.
• Under contract:  Went under contract, sight unseen (don’t recommend), at full ask.  However, if they had not done this, they would have missed on this property, because it was an amazing deal.
• Inspection Concerns:
  • No inspection performed (don’t recommend)
• Inspection negotiation outcome:
  • The seller filed an insurance claim due to hail damage to have the roof and a few windows replaced prior to closing

Property Financing Details

• Lender: Hard Money Lender
• Loan Type: 20% down, 3 month balloon, 12% interest rate, 2.5 points
• Appraisal: N/A
• Seller Concessions: $0
• PMI: N/A
• Interest Rate Buy Down?: N/A

BRRRR By the Numbers

• Buy: Purchased for $113,500 (20% down payment of $22,700), loan: $90,800
• Renovate: Full House Rehab of $25,000 (closing fees, holding costs, repairs)
  • All In: $138,500 ($47,700 personal funds- most of which were recycled from a prior BRRRR)
• Rent: Initially Rented at $1180/mo.  Currently Rented at $1300/mo.
• Refinance:  Appraised at $175,000,  New Loan at $131,250 (75%)
  • Received back $40,450 during cash out refinance
  • Total cash in home: $7,250 (4% of appraised home value) 
    • Compared to putting down $35,000 (20%) to purchase a fully renovated home at $175k
• Repeat!

Today, this home is now worth $230,000

Spreadsheet Rental Analysis

Download your own copy of this rental property analysis spreadsheet.

Property Operating Expenses

This is reflective post cash-out refinance

First Year Returns

Conclusion

• Flash Forward:
  • The investors have raised the rent to $1,300/mo, keeping in line with market rent rates
  • Made back the initial investment of $7,250 in the middle of 2019 via cash flow, about 2 years after purchase
  • With recent interest rate improvements, the investor’s rate and term refinanced this property at the beginning of 2020 to 4.25%, 30 yr fixed
  • There is about $100,000 in equity between the existing mortgage and recent appraisal that could have a portion of that tapped into, to reinvest further

This Colorado investment property was a great deal at purchase, despite some of the mistakes made due to the learning curve associated with a complex deal.  Even with the mistakes, thanks to the appreciation of rents and value over time, this property is now a home run!  Further, the house has been completely remodeled from top to bottom, so this should presumably decrease repair expenses in the next few years to come.

Operating Analysis

Let’s see where the actual performance stacks up to the estimates based on the analysis.

Property Rehab

Before/After Photos

Walkthrough of property interior after rehab

Walkthrough of property exterior after rehab

YouTube Video: Colorado Springs Deal Analysis BRRRR

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