All Forum Posts by: Eric Van Deman

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Arvada.

Purchase price: $465,000
Cash invested: $116,250
Sale price: $610,000

3rd Buy & Hold - More challenging neighborhood

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

After having great tenants in our first couple rentals, I envisioned it continuing to be easy to find great tenants and manage more properties. The building looked great with brick construction and the rent to list price ratio looked like it would result in some positive cash flow with opportunity for appreciation in a suburban Denver neighborhood.

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

Listed on the MLS

How did you finance this deal?

Conforming 25% investment property financing with down payment funds coming via 1031 on a condo that we had operated as a rental for a number of years.

How did you add value to the deal?

We got lucky with appreciation as this was most challenging deal I've ever been involved with.

What was the outcome?

Ultimately, we sold the property within a little less than 4 years from our original purchase while generating a substantial IRR. However, the investment was not without numerous challenges. The landlord for the property next door passed away shortly after we purchased this property. The fourplex next door went through a lengthy foreclosure process (before ultimately being renovated by a different investor) and became a home for squatters, suspected drug use, and many other challenges.

Lessons learned? Challenges?

In addition to the property next door, we also had multiple issues with non-paying tenants, a sub-par live-in manager, an eviction, and lots of work on an aging property. Lessons learned include:
- Lower income housing is not for me
- Don't overlook inspection findings or be afraid to terminate a deal
- Thoroughly vet any property management help. Use entrepreneurial property managers
- Don't buy buildings with flat roofs (very expensive replacement)
- Cash for keys can work

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Arvada.

Purchase price: $465,000
Cash invested: $116,250
Sale price: $610,000

3rd Buy & Hold - More challenging neighborhood

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

After having great tenants in our first couple rentals, I envisioned it continuing to be easy to find great tenants and manage more properties. The building looked great with brick construction and the rent to list price ratio looked like it would result in some positive cash flow with opportunity for appreciation in a suburban Denver neighborhood.

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

Listed on the MLS

How did you finance this deal?

Conforming 25% investment property financing with down payment funds coming via 1031 on a condo that we had operated as a rental for a number of years.

How did you add value to the deal?

We got lucky with appreciation as this was most challenging deal I've ever been involved with.

What was the outcome?

Ultimately, we sold the property within a little less than 4 years from our original purchase while generating a substantial IRR. However, the investment was not without numerous challenges. The landlord for the property next door passed away shortly after we purchased this property. The fourplex next door went through a lengthy foreclosure process (before ultimately being renovated by a different investor) and became a home for squatters, suspected drug use, and many other challenges.

Lessons learned? Challenges?

In addition to the property next door, we also had multiple issues with non-paying tenants, a sub-par live-in manager, an eviction, and lots of work on an aging property. Lessons learned include:
- Lower income housing is not for me
- Don't overlook inspection findings or be afraid to terminate a deal
- Thoroughly vet any property management help. Use entrepreneurial property managers
- Don't buy buildings with flat roofs (very expensive replacement)
- Cash for keys can be a good alternative

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Arvada.

Purchase price: $465,000
Cash invested: $116,250
Sale price: $610,000

3rd Buy & Hold - More challenging neighborhood

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

After having great tenants in our first couple rentals, I envisioned it continuing to be easy to find great tenants and manage more properties. The building looked great with brick construction and the rent to list price ratio looked like it would result in some positive cash flow with opportunity for appreciation in a suburban Denver neighborhood.

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

Listed on the MLS

How did you finance this deal?

Conforming 25% investment property financing with down payment funds coming via 1031 on a condo that we had operated as a rental for a number of years.

How did you add value to the deal?

We got lucky with appreciation as this was most challenging deal I've ever been involved with.

What was the outcome?

Ultimately, we sold the property within a little less than 4 years from our original purchase while generating a substantial IRR. However, the investment was not without numerous challenges. The landlord for the property next door passed away shortly after we purchased this property. The fourplex next door went through a lengthy foreclosure process (before ultimately being renovated by a different investor) and became a home for squatters, suspected drug use, and many other challenges.

Lessons learned? Challenges?

In addition to the property next door, we also had multiple issues with non-paying tenants, a sub-par live-in manager, an eviction, and lots of work on an aging property. Lessons learned include:
- Lower income housing is not for me
- Don't overlook inspection findings or be afraid to terminate a deal
- Thoroughly vet any property management help. Use entrepreneurial property managers.
- Don't buy buildings with flat roofs (very expensive replacement)
- Cash for keys can be a good alternative

Thanks @John Koster.  We were definitely a little nervous about the lawsuit, but felt even with a massive special assessment, the deal was going to work.

Thanks @Aaron Millis

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $280,000
Cash invested: $10,000
Sale price: $588,000

2nd Investment property - Utilizing private money on a difficult to finance condo

We purchased the condo as part of a buy & hold strategy to take advantage of a market downturn and wait for appreciation.

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

- Massive upside potential. We purchased in 2008 from a bank for $280,000. At the height of the market the property had sold for ~$700,000 and again for around ~$800,000 between 2003 and 2005. The building was involved in a lawsuit against its developer, which resulted in the building failing to qualify for traditional lending causing unit prices to plummet further in addition to the macro real estate issues dragging down the market at the time.

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

The unit was listed on the MLS. There were a number of similar bank-owned foreclosures in the building at the time. We offered on multiple properties within the building and were rejected by multiple banks until finally finding one ready to make a deal.

How did you finance this deal?

Found a private money lender willing to fund the deal who provided an interest rate that was half the market rate at the time in exchange for 50% of the appreciation upon sale.

How did you add value to the deal?

-We knew the lawsuit would either be resolved via a settlement with the developer or a special assessment by the HOA. We built the potential assessment into our math on the deal, and still believed it to be a winner.
- We completed minor cosmetic items as the building was only a few years old including paint and carpets. The largest project was installing ~1,200 square feet of bamboo flooring.

What was the outcome?

The lawsuit was settled with the developers and extensive repairs were completed by the HOA at no incremental cost to the residents. Following conclusion of the lawsuit, purchasers were able to obtain financing within the building and prices recovered along with the greater market economics. We ended up living in the condo for a few years, so we were able to take the homeowners exemption from a tax perspective to roll the proceeds from our investment into a 16-unit apartment complex.

Lessons learned? Challenges?

- The resolution of the lawsuit and building repairs took a little longer than planned.
- We paid a lot of appreciation to the lender, but without his help we wouldn't have been able to close the deal.
- We should've found a way to buy more units in the building.

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

Sylvia Theissen - central Denver realtor

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $425,000
Cash invested: $12,750
Sale price: $520,000

Summary of our 1st investment - 4-unit property in Denver. We bought with FHA mortgage to live in one unit and rent the others. Eventually rented out all four units and sold via a 1031 exchange to acquire 7 units in beach communities near Tampa, Florida.

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

-Obtaining FHA financing with very limited money down
-Neighborhood was up and coming, so there was a path to appreciation
-Rent from other units would result in very low living costs

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

Deal was listed on the MLS

How did you finance this deal?

3% down FHA financing

How did you add value to the deal?

This was our first investment property. As we were strapped for cash, I did my fair share of the maintenance, cleaning, painting, etc.

What was the outcome?

Completed a 1031 exchange into a couple small multi-family properties totaling 7 units in beach communities near Tampa.

Lessons learned? Challenges?

- Looking back, it was prime for some massive value add through interior renovations but as a cash-strapped, uninformed newbie investor, we didn't capitalize on that.
- We definitely overpaid for the property at the time as we were trying to strike a balance between somewhere we wanted to live and investment returns. If we had been looking solely to optimize cash flow and appreciation, we would've picked another property.

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

Sylvia Theissen is a good central Denver realtor, and you won't find a better residential broker for conforming loans than Matthew Hibler with Cherry Creek Mortgage.