Just closed on an 8 plex

[Bill S.]

Closed on a 8 unit here in Denver, Colorado. Actually it's in Wheat Ridge but only local folks will know where that is. 

Here is the skinny. Found the seller via my direct mail campaign. I was going to try and wholesale it at first. At the time, he wanted $800,000 for it but had to transfer it to an charitable trust first and then I had to purchase it from the trust. There was so many moving parts that I was concerned I wouldn't be able to get the deal done as a whole sale. I also was concerned that I couldn't find a cash buyer in that price point. I knew the price was discounted but was scared there wasn't enough room to get the deal done. I short I was too timid.

Fast forward about 5 months, I sold a property and after realizing the amount of capital gains tax I would owe I decided to do a 1031 at the last minute. I called the guy up again and he said he wanted $850,000 but I got him to agree to do $825,000 with me taking a commission of $25,000 so the actual sale price was $850,000. 

I had to get a loan because I only had 20% down. I found a local bank via a referral by @Travis Sperr who did the deal. The appraisal for the loan valued the property at $925,000. So I landed some instant equity as well as my commission.

It's a great building with a townhouse style layout around a corner. Three 3 bed units, three 2 bed units and 2 units with either extra large bedroom or a spare room. Each unit has 1 and 1/2 baths. The current owner owned the property for 36 years and kept it immaculate. Great curb appeal and nice brick construction. The same building around the corner was turned into condos and sold individually. They are valued at about $150,000 each. Current rents are at $6,400 per month. It is way below market. I figure market rents are about $9,400 per month. We will be going there a little bit at a time over the next two years. The units are in great condition except for one unit that needs updating. Expenses are low because tenants pay their own utilities except for water and trash. The only down side is that it sits on the edge of the 100 year flood plain. The contour goes through the property but floor elevation was above the ground. Based on my previous experience I figured I could get it exempted from flood insurance but after looking into it further I found out that the elevation they now use is the ground in the crawl space. That is about 3 feet below the existing ground so I'm going to be paying flood insurance.

I also learned some things about 1031 exchange. I timed the closing so I would get credit for the months rent and not have to make a payment until next month so was expecting the get some cash at closing. My 1031 agent nixed that. No cash out when 1031 funds are involved. Had I known that ahead of time, I would have worked the closing so that those funds were paid to me outside of the closing. 

Here is a street view of the property.