700 N Colorado Blvd, Suite 277
Denver, CO 80206
720-315-6418
700 N Colorado Blvd, Suite 277
Denver, CO 80206
720-315-6418
Acquisition
Partnering
with a local small business owner, we purchased a 2-unit townhome
property in the City Park Neighborhood in Denver. The property was
purchased for just under $300,000 in 2006 from a financial institution
who had foreclosed on the property. The property was not habitable at
the time of purchase which presented some challenges in obtaining
financing. The investment strategy from the beginning was to renovate
and sell.
Renovations
The property improvements were made
with an eye on future buyers and keeping the costs down. Inspections of
competing properties in the area were made to determine what types of
renovations would give us a competitive advantage. Quality, but not top
of the line finishes were selected based on this analysis. For example
existing floors were refinished instead of installing new, granite tile
instead of slab granite was used for counter tops, and historically
appropriate but not expensive tile was used in the bathroom. The
original property improvement budget was just over $52,000. When all
was said and done, the actual costs amounted to $59,944.
Sales and the Unexpected
The north side of the
duplex was finished and put on the market. After a couple months the
property, the smaller one bedroom unit, sold for $170,000 ($220/sf).
Our projected sale price for this side was $165,000. Renovations to the
the south side unit were completed and put on the market in the summer of 2007. After over six months sitting on the market the property still
had not sold. The market had taken a downturn during this period with
the first signs of the subprime mortgage crisis looming. At this point,
we made the decision to rent the property and wait out the storm. A
combination of a good buy and favorable financing allowed the property
to operate at a positive cash flow. In 2010, we successfully negotiated
a loan modification with the mortgage holder on the property. The
lender wrote down the principal of the loan by over $43,000 and reduced
the interest rate by almost 4 points. The owner is now in the position
of being able to make a good return renting the property and waiting for
the market to improve before contemplating a sale. Because the
flexibility to rent the property was built into our initial strategy, we
were able to deal with a declining market and make money where others
may have been stuck and forced to sell at a loss.
Radford Investment Properties is a Denver-based, privately owned, investment real estate firm. Our brokers specialize in helping investors acquire property investments and increase their value through smart management and renovation.
