This deal analysis looks at a duplex my clients closed on a few weeks ago. These are sophisticated, out of state investors who know what they’re looking for and found the right property to add to their portfolio. By using an escalation clause, they were able to beat out other interested buyers. And they paid in cash with the intent to refinance, and are now close to being able to pull out their funds.
- Listen to the podcast “#49: Renovated 1895 Duplex with Unique Utilities in West 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.
Investment Property Details
Sourcing the Deal
This property popped up on the MLS and caught my attention. I immediately sent it to my clients, they liked it, and we acted quickly.
Appealing Features of the Rental Property
This is a duplex on the west side of Colorado Springs. This is a desirable location for investors and renters alike, thanks to its proximity to shopping, restaurants, and the mountains. It’s an up/down duplex with a 2 bedroom/2 bath unit on top, and a 2 bedroom/1 bath unit on the bottom.
Rental Property Contract Details
The list price for this property was $450K, and my clients’ offer included an escalation clause. The seller was overseas and required a 48-hour acceptance deadline, but this offer was so strong they responded the next day. My clients went under contract at 481.1K.
They paid in cash with the intent to refinance and are now close to being able to pull out their funds. This was a great opportunity for them to use cash on hand and quickly re-leverage the property by placing a note on it to pull the cash back out. They hope to keep using this strategy again and again.
The property was built in 1895 but was renovated a couple of years ago. The renovation was well done and looked great cosmetically. The inspector found only minor electrical and plumbing issues and a gutter system that was worse for wear with some cracks and misalignment. We negotiated to repair the gutter system and got a seller credit of $1500. I estimate initial repair costs to be $2K in addition to that.
Rental Property Financing Details
The upstairs unit was recently renovated and looks great. One of the bathrooms even has a rain showerhead. The downstairs unit was also renovated well but looks more like a typical rental. Both units are currently being rented at $1500, but I think my clients have an opportunity to raise the rent on the top unit once there’s turnover.
Property Operating Expenses
You might notice that there’s no utility cost listed in the spreadsheet. That’s because the person who originally set up the lease did a great job of keeping everything simple. Most older units are not separately metered, and this is no exception. The property owner receives a monthly bill from Colorado Springs Utilities and simply cuts it in half and charges both units the same rate.
The expectations are understood by the tenants, and I got a chance to ask them what they thought about this system. They said they had no issues with it and like that it’s simple. Many investors want to separate out the meters to make billing utilities easier, but this is another option that works just as well.
First Year Returns
My clients can expect around $5500 in cashflow annually, with a cash-on-cash return of 4.3% and a 5.4% cap rate. This is a solid property that performs really well, and I’m happy for my clients. With the opportunity to raise rents on the top unit, they have the chance to see even better returns once there’s turnover.
Connect with Us
We closed on this property in August which shows that there are still deals out there. They may be few and far between and take a little longer to find, but with patience and aggressive offers, we can find the right property for our clients.
Not everyone is able to take advantage of cash on hand to pay for a property, but reach out to us and we can analyze the resources you do have and use them to your advantage. We tailor our strategies to each client to help them get closer to achieving their goals.
If you’re interested in creating a strategy or finding a property, reach out to us and we’d be happy to help.
Get Started Building Your Own Colorado Springs Rental Portfolio
For information on how to get started investing in Colorado Springs, check out our free 2021 Colorado Springs Real Estate Investing Guide.
You can also check out our real estate investing toolkit which has free spreadsheets you can download to analyze rental properties.