He started working with Envision Advisors to find his first rental, a 3Br 2Ba cash flowing condo in East Denver in October 2020.   He decided that his 2021 goals were to get another cash-flowing condo in Denver as well as expanding and diversifying his portfolio into the Springs. Many parts of this blog post are in Alex’s own words.

Investor Profile

• Owns 2 Colorado properties in addition to his primary residence, one in Denver and another (the focus of this Deal Analysis) in Colorado Springs.
• Moved to Denver in 2019 and began buying properties after that.

Long Term Real Estate Investing Goals

• Acquire assets
• Build as much passive income as possible. 

Strategy for Achieving Goals

• Invest! 
• Strike a balance between enjoying life and make sure I’m stashing a lot away while not acquiring any unnecessary debts.

Investment Property Details

Deal Overview

• 5BR/2 Bath, 2 level detached single family home
• 10 minutes from Fort Carson in Colorado Springs

Appealing Features of the Property

• Super turnkey with less than $1k repairs.  Home repairs/construction is not in my skillset, so for now I’m looking for turnkey properties.
• Area being near Fort Carson pretty much guarantees a stable tenant base (as evident by 1 week turnaround).
• Diversification: I currently own 2 condos in Denver, so the opportunity to diversify in terms of property type as well as location was very appealing.
• Opportunity for appreciation

Investment Business Plan

• We were pretty aggressive on setting rent and it paid off.  We were able to raise the rent $200 from the previous tenant.  My early plan is to hold for 3-5 years and then re-evaluate to see if selling or cash-out refinance makes sense.

Sourcing

• My agent, Jenny Bayless, found this property on the MLS
• Jenny and I were in a good grove for a month of pretty much first thing in the morning having a quick chat about the properties we both found mutually interesting

Property Contract Details

Inspection Issues

• Went pretty smooth; all pretty much minor items.  The two bedrooms downstairs had windows that technically weren’t to code in terms of size (they were original from when the home was built in 1968).  We decided to object and see if the seller would remedy the situation.  They declined but ended up taking $5k off the sales price. 

General Notes

• Extreme sellers’ market: This was the 6^th property I put an offer on, so we knew we had to come in with a strong package.
• Ended up offering limited inspection objection, 10 day close, $2k appraisal gap, and $20k over listing (was lowered $5k after inspection objection)

Property Financing Details

Rental Analysis

Stabilization

• Plan vs reality
  • Initially was preparing for 20% down 3BR single family home (SFH) up to $300k. 
  • A couple important things changed:
    • I found out through my lender that I qualified for 15% down on a SFH.
    • Sellers’ market to the extreme, especially in the 3BR and price point I was looking at.  Sellers were expecting crazy appraisal gaps (I think my agent Jenny said she saw one up to 50k). I did not feel comfortable with this.
  • 5 offers rejected, all 2/3Br SFHs
  • We decided to try to level up the price point (expanded to $400k) to see if sellers would be more flexible especially on the appraisal gap. It worked! However, this backed me into 15% ( I did not have enough cash on hand for 20% at this price point).
  • Because I put less down, I am negative cash flowing by about $1500 a year.  However, I am not too concerned for two reasons:
    • My first rental is cash flowing very well, and I can more than offset the negative cash flow here with the positive cash flow of that rental.
    • On a property that’s expected to appreciate a lot, the benefits of leverage are making my expected return on investment even greater.  

Interesting Points

Because I bought the property as a rental at 15% down, there was roughly an extra 3% fee in loan costs (~$8k).  Something to keep in mind if thinking about going with this strategy.

Spreadsheet Analysis

Property Operating Expenses

First Year Returns

Immediate Goals and Plans for the Property

• Rent it out and let it appreciate! 
• One of the draws to Colorado Springs is the stable base, especially close to the military bases, and this property backed that up.  We were able to get a tenant in there 6 days after closing.

Exit Strategy / Long Term Plan

• Not set in stone, but as of now I approach the property as if I am either going to sell or cash-out refinance in the next 3-5 years.
• Because of this, I did not buy down the interest rate. I may break even in 3 years at which point I might be looking to sell or cash-out refinance anyway (assuming interest rate will be higher, so I’d most likely wipe out the bought down rate anyways), so it made sense to keep the capital.
• Decided not to buy PMI for the same reason; if I cash-out refinance, PMI would most likely go away. Same with selling.

Conclusion

Alex still intends to accomplish his goal of acquiring another property this year – – a cash flowing 3Br 2 Bath condo in Denver. After that….

Contact Information for Alex

• [email protected]
• Instagram: amsadeghi

Have questions about buying rental properties in Colorado Springs, reach out to Envision Advisors agent, Jenny Bayless, our Colorado Springs real estate expert.

YouTube Video: Super Turnkey Single Family Home Near Fort Carson in Colorado Springs

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