Industrial warehouse to hip loft-style rental

[Niles Emerick]

Investment Info:

Other buy & hold investment in Denver.

Purchase price: $159,000
Cash invested: $50,000

Scouted area with favorable existing multi-family zoning on under-utilized lots. Found this small 1500sqft warehouse with 12' clear-height doors, open floor plan, open rafters and unique feel. Spent ~50,000 to add a more functional bathroom and full kitchen to convert the space to a more residential layout. Then lived there for 2yrs before turning to rental. Future plans to redevelop to multi-family or sell as developable.

What made you interested in investing in this type of deal?

Always wanted to live in a loft, but never wanted to pay HOA fees. This lot has favorable use-by-right zoning for multi-family or retail, and has ground level views to Denver skyline.

How did you find this deal and how did you negotiate it?

Driving a neighborhood, came across a sign in the yard for an agent who had not listed on MLS. Property looked overgrown and sad...so I called.

How did you finance this deal?

Private financing. Had a very hard time getting financing on this as I planned to live in it while I renovated. It was deemed not habitable by every lender I approached (even though it did have a bathroom and kitchen). Seller put me in touch with a personal contact of his who had lent him private money previously (HUGE asset as I have used him multiple times). Then used 401(k) loan for 20% downpayment required, and CC for rehab until I refinanced.

How did you add value to the deal?

Added new kitchen and bath, glass garage door to let light in, sealed cement floors, landscaping cleanup.

What was the outcome?

A nearly indestructible rental with cinderblock walls and cement floors, providing a flexible open floor-plan space that can be reconfigured by tenants as needed. It has been featured in local maker publications and is commented on by nearly everyone on its unique appeal.

Lessons learned? Challenges?

Financing some value add deals can be a challenge when the value add doesn't fit any standard "model."
Living through a full remodel without access to functioning kitchen and bathroom and kitchen is TOUGH (was a bachelor then too). Sealing cement floors is a toxic chemical heyday.
Discovered that I could then change the "use" with the city from industrial to residential. This provided a sizable reduction in annual property tax, cost $7 to file paperwork.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Jay Soneff at Jamis Companies