Deal Analysis – Nine Unit Apartment Near The Anschutz Medical Complex

This property is a 9 unit apartment building in Aurora near the Anschutz medical complex. Originally it was a 6 unit,  but a previous owner converted it to a 9 unit which was approved by the city. The seller bought this one year before as an apartment flip. The previous owner was in over his head. There were major management and property issues. The current seller rehabbed eight out of the nine units, stabilized rents, and handled utility issues from the six to nine-unit conversion.

Unfortunately, this deal terminated due to COVID-19 issues. We still did the deal analysis to discuss it, because it was a very good deal!

Investor Profile

• Looking for long term rental assets for retirement planning.
• Investors wanted a turnkey property to focus on family and careers.
• Realistic expectations for returns in the Denver market.

Deal Quadrant: Networking

Read about the deal quadrant and finding Denver rental properties.

Investment Property Details

• Type: Multiunit
• 9 Units
  • 2 – 2 bedroom,  1 bathroom
  • 5 – 1 bedroom, 1 bathroom
  • 2 – Studios
• Location: North Aurora near Anschutz Medical Campus
• List Price: $1,390,000
• Purchase Price: Transaction Terminated, but had it at $1,350,000 with a $20k seller credit
• Why we liked it:
  • Location, w/ long term potential upside
  • Walking distance to medical campus
  • Turnkey and updated
  • Near Opportunity Zone

Property Contract Details

• Finding the property: Client wanted to buy multifamily that met his criteria. Once we had criteria nailed down, we started hunting the MLS and reaching out to our network. Our network responded!
• Under contract:  Secret sauce and relationship.
• Inspection Concerns:
  • Punch list items from rehab and new tenants reporting issues.
  • The 2019 property tax assessment almost tripled!
• Inspection negotiation outcome:
  • Majority (90%+) of punch list items fixed.
  • Seller engaged lawyer to fight tax bill and gave a $20,000 credit.

Property Financing Details

• Lender: Local credit union
• Loan Type: 5/1 ARM w/ 30 year amortization
• Appraisal: At value, no issues.
• Seller Concessions: $20,000 for property taxes.
• PMI: No
• Interest Rate Buy Down?: No

Spreadsheet Analysis

Property Operating Expenses

First Year Returns

Conclusion

Originally we underwrote the property in the high 5 cap rate range. The new property tax assessment knocked it down to 5.5. The lawyer is confident in contesting the property tax bill for future years. Rising tax bills are common around the Denver metro. When you’re analyzing properties, make sure you’re looking at the most recent tax assessment.

Video: Deal Analysis – Nine Unit in Aurora