Investor friendly realtor Leah Keeling joined me to talk about a fourplex she recently helped a client purchase.  This is his second investment property and his first multifamily unit.  Despite a high interest rate, he’s getting strong returns thanks to self-managing and is making a great dent in his investing goals.

Investor Profile

This buyer is a repeat Envision Advisors client.  He purchased his first house hack with us in December of last year and reached out when he was ready to buy another property.  When this fourplex came on the market, he jumped on it. 

Investment Property Details

This is a townhouse-style fourplex in Southeast Colorado Springs.

Appealing Features of the Property

Townhouse-style units are popular with tenants because they allow everyone to have their own outdoor space. The units are also a good size at 1125 sqft.  The property was in the process of being remodeled, leaving the client with brand new units that are all vacant.  

Located just off Powers Corridor, this is a popular area for shopping and restaurants and is conveniently located near Peterson Air Force Base.

Property Contract Details

Contract

The property was listed at $877K, and they were competing against one other offer.  Leah and her client came in at $5K above list and threw in a limited inspection objection.  The client used delayed financing, which allowed him to make an all-cash offer. 

Inspection Issues

Their limited inspection meant they would only object to issues with major systems.  They were confident that there weren’t any big problems because the units were being renovated.  As expected, the inspection went really well. There were some minor issues, such as damaged yard gates and screen doors, and the client decided to invest $10K to make the property look amazing.

Property Financing Details

I used the Rental Property Spreadsheet to run the numbers on this fourplex.

Property Overview

The client paid in cash and then put a loan on the property within 30 days of closing.  He decided to leave 30% in the property.  His interest rate was 6.625% for a 30-year fixed term.  He’s happy with this interest rate because the returns on the property are solid, and if he refinances at a lower rate, the returns will only be stronger.

Since all of the units are identical and were vacant, he only needed to create one listing.  He was able to lease out the property quickly, with all leases starting at the same time.  Each unit rents for $1300 a month. 

Property Operating Expenses

He’s only setting aside 6% for monthly reserves because the units were just renovated and he put additional funds into them for the finishing touches.

He’s using a utility bill back for electricity, gas, and water.  Since each tenant has their own yard, he only needs to spend $300 a year on snow removal. 

This property is a self-manager’s dream.  It’s in great condition and every unit is uniform.  It’s also conveniently located just a few minutes away from his house hack. 

First Year Returns

Even though he has a 6.625% interest rate, he’s still breaking even on cash flow.  If rates ever drop, he’ll be able to do a refinance and boost his cash flow.  This is why it’s so important to analyze properties before buying so you can find one that works now and in the long term.

His 5.5% cap rate is impressive for the area.  We don’t see a lot of cap rates above 5% in Colorado Springs, and self-managing is really working in his favor here.  This is one of the better performing fourplexes we’ve seen in quite some time.

Conclusion

The client is so happy with this fourplex that he’s redeploying his cash from the delayed financing to purchase a second one.  That property is located just a few minutes away, so he’ll be able to easily self-manage that one, too. 

Connect with Us

We’re excited to see this client add to his portfolio and get closer to achieving his long term goals.  If you have any questions about creating your own strategy or finding an investment property, reach out to us for a free consultation.

YouTube Video

How Self-Managing a fourplex Can Bring Strong Returns Despite a 6.625% Interest Rate

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