All Forum Posts by: Andrew Wydra

I would list exactly what it will be used for and possible put it on the closing statement as a Seller Credit for deferred maintenance. You may have to increase the purchase price $10k to make it all foot out. We did this and the bank made us keep an account open with them and present receipts when we needed the money. 

Good Luck!

 All very true Bill. My comments are framed toward the initial post where appreciation would be the strategy in Denver. To comment on your points:

1) Per the ARA Q4 2014 report, there are a total of 18,698 units under construction in Denver downtown and metro as of Dec 31st, 2014. But the total units proposed is 5,885. The data is showing pull back from larger developers since, as you point out, it takes 2-3 years for these units to hit the market. 

2/3) Yes, I'm one of those people but at some point, the market is going to price me out. 

Again, I think the market will continue to be hot with great appreciation over the next 2-3 years. As with any market- it will balance itself out. I would want to take my profit by 2018 and see what happens after that. 

I would also suggest putting an entire lender package together. This will give the banker everything they need to make a decision, shows that you have done your homework, but also reconfirms to you that this is a good deal to move forward with. I basically put a business case together - takes time but it's a must. 

Here are some categories I include in my feasibility studies:

• Property Overview: includes property characteristics (SF, Type, Year Built, Condition, etc.)
• Rent Analysis: pull rents from the area to justify what you are going to collect in revenue. I use google engine pro to map these as well. Great visual.
• Sales Comps: I pull sales comps for the area. I show what this type of product has been selling for in the area to show I'm getting a fair or good deal. Again, I map on google engine pro to create a visual. 
• Pro Forma: develop a pro forma for the properties. Make sure to triple check your rents and its even more important to understand all your expenses. For example, call the tax assessor and understand what the taxes are currently and how they will adjust based on the purchase. You don't want to be caught off guard.

In doing this, you will confirm your decision to invest in the properties as well as covering all doubts a lender would have. If any of the above categories do not support your investment, step back and reconsider. An just one last tip- never include appreciation in your strategy. It should work and make financial sense day one. Appreciation is icing on the cake. 

Best of luck. If you want me to send you a copy of something I've put together just email me at ajwydra@gmail. I don't mind sharing this stuff if it helps. 

You are right- it all depends on the lender. A bank will take a first position on the property and they should have some comfort in the fact that their loan is at a 50%-60% LTV. Another metric a bank relies on is the Debt Coverage Ratio. Banks have different thresholds but the higher, the better. A DCRS of 1 means you are just covering your debt service. The last deal I put together was 2.1 which is very good. In the past 1.2 was as low as you'd want to go.

DCRS = NOI / Total Debt Service

Also wanted to mention- Denver is experiencing great growth and I do think it will continue to appreciate over the next 2-3 years. A colleague of mine purchased a home in the Highlands area in 2013 and just sold for a $100k profit. Days on market is ridiculously low. Denver's population has increased 124+% since 2000. That is all good news for appreciation but developers are bringing housing to the market in huge numbers so at some point 

1) inventory will catch up with demand

2) prices will soften with the increased inventory

If I was going to buy in Denver and it was even possible, my strategy would be to source an investment at least 20% below market value with the intention to sell in short term. Easily said but very hard in a market like this. 

I support all those that say Don't Rely on Appreciation. Denver is on fire and you may indeed make a great return down the line for appreciation BUT that is a risky investment strategy, especially if you are just starting out. I'm my feasibility analysis, I never include appreciation. The investment has to work day one and if you do get an appreciation factor, wonderful! 

Go to the city's assessor or tax website. Some municipalities post a ton of data online which you can sort and extract for mailings. I've also worked with cities that do not provide much info. In that case, I was able to work with the records department. They made me a report based on my criteria from their internal systems. Their fee was only $50. 

Best of luck!

It is doable but you need to find the right investment - most of the time it will need to be an off market deal directly with the owner. At 25%+ return is doable but uncommon.

Here are details on an acquisition I'm working to get financing approved. 

17 Unit Portfolio (numbers below are rounded)

• Cash investment (with 10k in day one work): $79,000
• Total Income (with 7% vacancy): $119k
• Total Expense(includes property manager and capital reserves) : $66k
• NOI: $53k
• Loan Pmt: $22k
• Before Tax Cash Flow: $30k

This is a 40% cash on cash return. Again, it is not the norm by any stretch but I was able to find the right seller who wants to get out of the properties after 20 years. 

Plan for the worst and hope for the best. The numbers Sean put together don't look appealing but you honestly need to find out more info. Ask for 2013 and 2014 rent roles and expenses. Also- are there any value add aspects on the property (ie garages that aren't be rented or the ability to create more cash flow with laundry facility)?

Its good that you are looking at both products (SF and Duplex) to create your strategy. My question: is the duplex livable now? Can you rent it out? What is stopping you from keeping it for cash flow? Or fixing it up to product higher rent and then selling it for a profit?