Deal Analysis – Taking Advantage of Appreciation in Colorado Springs
This deal analysis profiles a new investor, Braden Sanderson. He started investing in rental properties in his college town in Texas. After purchasing a live-in-flip in Denver, he saw the appreciation of the markets in Colorado and decided to start investing in rental properties in Colorado Springs, too. While the location Braden invests in Texas is a cash flow market, Denver and Colorado Springs are more appreciation-based. He worked with agent Jenny Bayless to find a 3 bedroom 2 bathroom condo in the southeast part of Colorado Springs. Chris and Jenny sat down with Braden to go talk about this deal and how it will fit into his long term goals. Listen to the podcast to hear Chris, Jenny and Braden walk through the deal step by step.
Three Learning Options!
  1. Listen to the podcast “#26: Deal Analysis – Taking Advantage of Appreciation in Colorado Springs” on the Colorado Springs Real Estate Investing Podcast
  2. Watch the YouTube video (at the bottom.)
  3. Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.

Investor Profile

  • Bought a couple of live-in-flips in Denver. 
  • Bought my first rental property in Texas in 2020, and I continue to purchase rentals in both Colorado Springs and out of state.

Long Term Real Estate Investing Goals 

  • Acquire rental properties that generate enough cash flow to cover my family living expenses

Strategy for Achieving Goals 

  • Currently, I use my side business to accumulate enough for a down payment and purchase mostly off the MLS.
  • For my next owner-occupied property, I’m also looking at a house hack or possibly another live-in-flip.

Investment Property Details

Deal Overview

  • 3 bedroom 2 bathroom, 1600sqft condo 
  • Southeast side of Colorado Springs, near Peterson Air Force Base and the airport 
condo rental Colorado Springs
real estate rental property map

Appealing Features of the Property 

  • Priced right: I had hoped to pick up properties with my refi money from my live in flip in Denver.
  • Turnkey: the property had just been purchased a few months earlier and renovated.
  • Lots of development in that part of town makes it a solid investment. 

Investment Business Plan 

  • Long-term buy and hold 

Sourcing 

Deal Quadrant MLS

Property Contract Details

Inspection Issues 

  • The property was recently renovated, but the furnace was original and I planned to object to that during the inspection, since it was having issues.

General Notes 

  • The property was listed at $240K, and I offered $250K with no appraisal gap.
  • The property was appraised at $241K, so we worked out a deal that they would sell it at that price, but I wouldn’t object to the furnace.  Replacing the furnace cost $3580, so I came out ahead.  
  • The property had been under contract once and the deal fell through, so we think that is why they were so amenable to negotiating. 
  • The listing agent liked my financing package, especially the fact that I was pre-approved through a reputable lender

Property Financing Details 

Rental Analysis 

Stabilization 

Plan vs. Reality

  • I was under the assumption that condos and townhomes were the same in terms of financing.  I found out I had to put down 25% instead of the 15-20% I was hoping for.  Ultimately, this works out great in terms of cashflow on the backend.  
  • I planned to list the unit at $1600 a month after running the numbers at $1500 and $1550.  There were two other units in the building that were not as nice as this unit that were renting at those numbers.  I got a good response and was able to rent at $1600 to good tenants within a week.

Interesting Points 

  • This was my first experience with an HOA.  So far, there have been no issues beyond tracking down who to contact. 
  • Currently, I’m self-managing the property.  I’ve only had to go down there 2 or 3 times, about an hour drive each way.  
  • My reserve percentage is 5%; we’ll see how it plays out in the long term because the unit is newly renovated and because it’s a condo, the outside is maintained by the HOA.

Spreadsheet Analysis 

Colorado Springs condo Deal Analysis spreadsheet

Property Operating Expenses

Property Operating Expenses analysis spreadsheet Colorado Springs condo rental

First Year Returns 

First year returns analysis spreadsheet colorado springs rental condo

Photos of Colorado Springs Rental Condo

condo rental interior Colorado Springs
condo rental bedroom Colorado Springs
condo rental living room Colorado Springs

Exit Strategy/Long Term Plan 

  • I plan to hold this property for the long term, or until it makes sense to cash it out or do a 1031 exchange to turn it into something better. 

What’s Next?

I am currently under contract for a smaller 3 bedroom 1 bathroom single family home near Fort Carson in the Springs.  We’re working through some inspection items right now, but I’m hopeful this will work out.  Given the extremely low inventory, I feel very fortunate to be in this position.  

After this, I will most likely go back to targeting properties in Texas for a couple of reasons.  The first is that it’s a little cheaper than Colorado, and the second is that I like to have the option of playing in two markets.  Being able to bounce between a cash flow and an appreciation market allows me to pull out equity from the Springs so that I can invest in the cashflow market in Texas.

Conclusion 

Braden is a contributor to our 2021 Colorado Real Estate Investment Guide due out in May.  If you’d like to connect with Braden to discuss real estate investing, you can reach him here: braden.sanderson@hotmail.com, 575-308-3630, or via LinkedIn.

Interested in checking out more Colorado Springs rental properties? Find more Colorado Springs Rental Property Analyses here.

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: Taking Advantage of Appreciation in Colorado Springs

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Authors
Jenny Bayless
Jenny Bayless is an investor-friendly agent with Envision Advisors, Colorado real estate investor, and the host of the Colorado Springs Real Estate Investing podcast.
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