This deal analysis profiles a relatively new investor, Alex Sadeghi, who moved to Denver almost 2 years ago. Shortly after the move, he bought his first property (also his primary residence), a condo in Capitol Hill. This sparked his interest in Denver real estate, and he got hooked on the Denver Real Estate Investing podcast as well as all The BiggerPockets guides and forums.
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.
- Listen to the podcast “#25: Deal Analysis – Super Turnkey Single Family Home Near Fort Carson in Colorado Springs” on the Colorado Springs Real Estate Investing Podcast
- Watch the YouTube video (at the bottom.)
- Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.
- 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.
I don’t spend too much time thinking about specifics like exactly what age I want to retire at. Who knows where I’ll be at in the future in terms of family, life and work. I just know I want to make smart decisions now to set myself up for as much financial flexibility in the future as possible.— REAL ESTATE INVESTOR ALEX S.
Strategy for Achieving Goals
- Strike a balance between enjoying life and make sure I’m stashing a lot away while not acquiring any unnecessary debts.
I have quite a bit invested in cryptocurrencies as well as sports collectibles, but real estate has quickly become by far my favorite investment vehicle.— ALEX S.
Investment Property Details
- 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
Colorado Springs has been appreciating like crazy. With the growth and strong business coming to the city, I don’t see it slowing down. Just in terms of my own experience at work where I work for a large tech company and being from San Francisco, I’ve already started to see remote work becoming more integrated into our daily lives. Many people are packing up from the big cities and choosing places more centered around nature.— Alex S.
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.
- 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
- 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.
- Extreme sellers’ market: This was the 6th 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
- 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.
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.
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.
Alex still intends to accomplish his goal of acquiring another property this year – – a cash flowing 3Br 2 Bath condo in Denver. After that….
Beyond that a little up in the air. I just elected to stay fully remote after offices open up. So will be taking advantage and moving to New York for 3 months in August. Definitely still plan on being an active Real Estate investor, but will most likely hold off on any future plans until I see how it goes in the big apple!— Alex S.