Colorado Springs Real Estate Investing Podcast

Today, I’m talking to Colorado investor Rick Staael, who owns properties along the Front Range.  We discussed what he learned from investing, and why he chooses different investing strategies for different markets.  Rick is an engineer by day who self-manages all of his properties.  Currently, he owns seven properties that total nine doors. 

Below, I’m highlighting three of his properties and the biggest takeaways he learned from them.  Listen to the podcast to hear the full conversation.

This was Rick’s former primary residence and first investment property.  In 2007, he and his wife were ready for a bigger home, but selling the property during the market crash meant losing $10K.  Instead, he decided to scrape together the funds to buy a house and converted the townhome into a rental property. 

They were lucky to find great tenants and the property out-performed his best-case scenario.  He still owns the townhome today and recently paid it off. 

As we enter a new phase of market uncertainty, many investors worry about buying rental properties right now.  As Rick’s first investment shows, if you buy a well-constructed property in a desirable location and hang onto it for a while, you’re more than likely to come out ahead.

In 2018, Rick purchased this single family home in Colorado Springs through an estate sale.  This is a great property that is zoned for four lots and has fantastic views of Pikes Peak.  The owner was showing the house herself and he made a good impression. 

After reading the book Never Split the Difference, he took the advice to stick with the number he had in mind and didn’t play games.  The owner came down $16K from the list price and he was able to purchase the home for $163K. 

The house had structural issues that required remediation and he needed to quickly learn what the problems meant so he could properly vet contractors.  After receiving quotes that ranged from $10K-$100K, he found a contractor who could fix the issues for $30K. 

He’s currently in the process of trying to get the property replatted so that it will only be zoned for one unit and an Accessory Dwelling Unit (ADU).  It’s been difficult to get details from the city on the steps that need to be taken, but he was lucky to find a handyman who is also a builder and knows the requirements.  While he’s still working through the process, he’s hopeful to start building soon.

 For an 850sqft building, he’s anticipating spending $160K total to build the ADU.  Once it’s ready to rent, he expects to get between $1500-1600 a month in rent.  Given the current rents in Colorado Springs, this is a conservative estimate. 

Rick partnered with the co-host of his podcast to buy a fix and flip in Pueblo.  They focused on this area because it’s more affordable than the Springs or Denver.  They’re hoping this will be the first in a series of flips. 

Their plan was to find a property for $70K-$80K, put in $40-$50K of work, and sell the property for $180K.  Their goal was to make $30K on the flip. 

Now, they’re coming up on five months of owning the home and the work still isn’t complete.  While their contractors are doing good work, the progress has been slow for an 800sqft 2 bedroom/1 bathroom house.  Costs are up for materials, so their original budget is no longer accurate. 

At this point, they think they’ll make $10K-$15K in profit on the house.  While this was disappointing for them, a common rule of thumb for beginner flippers is that not losing money on the first flip is a success.  Now, they have a better understanding of the process and what it will take to complete a flip in this area. 

Rick’s outlook is that if he doesn’t take good care of his properties, then his tenants won’t have any incentive to, either.  He’s learned that it’s really important to screen tenants ahead of time and have an open line of communication once they move in.  He’s learned the hard way that not screening tenants can lead to endless headaches, and now he performs a background and credit check on applicants.

Through the rehab work he’s done on his properties, he’s also learned the importance of hiring good contractors.  Ill-prepared and slow moving contractors end up costing a lot of money, so making sure they can get the job done on schedule is key. 

If you want to learn more about Rick’s strategies and investing philosophy, check out his podcast, Secret Sauce for Success and his book of the same name. 

You can also connect with him directly at 720-429-3303. Are you thinking about buying your own rental property in the Springs or Pueblo?  Reach out to us for a free consultation.

Cost segregation is a little understood but extremely valuable tool that all real estate investors should know about.  Essentially, it’s a way to frontload depreciation and get the tax benefits all at once. 

Bonnie Griffin Kaake of Cost Segregation Services, Inc joined me to explain what cost segregation is and some of its important nuances.

Depreciation is the process used to deduct the costs associated with the reduced useful life of the improvements (structure) of a rental property.  It’s one of the four ways you earn a return in real estate.

The IRS requires owners to take depreciation on their taxes every year.  It’s measured over 27.5 years for residential properties and 39 years for commercial properties.  Depreciation is typically calculated by looking at the structure because the land itself doesn’t depreciate.  Each year, owners can more or less take 1/27 or 1/39 of the depreciation out of their taxes.

With cost segregation, you can get the bulk of the depreciation upfront, usually 25%-30% of what you paid for the property, depending on what the cost engineer finds in your property. 

A cost segregation study looks at the building and figures out how to separate out various components within the structure that can depreciate on an accelerated schedule than the overall schedule of the building itself (e.g. appliances, flooring, etc.)   

In certain tax years as defined by the Tax Cuts and Jobs Act, the investor can depreciate the entire amount of the identified accelerated schedule components due to bonus depreciation, and can be taken in the first year.  This results in a significant front loading of depreciation.

An example of the outcome of a cost segregation illustrates the potential savings.  A property without the land is valued at $500K.  A cost segregation study determines that 30% of the value can be depreciated upfront, giving you $150K.  If your tax rate is 30%, that means you’re saving $45K in taxes this year.  If you were to take normal depreciation, you would only save $18K.

Bonnie recommends using a reputable company like Cost Segregation Services to perform the study so that you don’t trigger an IRS audit.

There are many nuances to cost depreciation that can be easy to miss:

Many investors worry that if they deduct a larger depreciation amount now, it will hurt them in the future.  However, most investors will find that the overall difference is only a few thousand dollars in subsequent years. 

It’s important to keep in mind that getting the money upfront allows you to invest more now, which will generate its own returns over the long run. 

If you want to learn more about how cost segregation can help you, connect with Bonnie:

Need help figuring out your overall investment strategy?  Reach out to me for a free investment consultation.

Note: We originally published this episode on November 11, 2020.

We often hear a lot about real estate success stories, but I don’t often hear much about being on the defensive to ensure that your hard work of acquiring a substantial real estate portfolio does not get lost during turbulent financial times.

I felt as though it is important to highlight the ways to strengthen the protection of your real estate holdings to ensure your properties are preserved for generations to come. This episode aims to provide some insight into some of the safeguarding techniques I implement against my portfolio.

When starting off investing, landlords typically have worries at what I would consider the micro level (What if I get 2am calls for clogged toilets? What if a tenant destroys the property?). Worries tend to evolve to a macro level as your portfolio grows, and those prior worries are just realized as part of the business (What if there is a market crash? What if there is a surplus of rental units on the market?).

Now that we have created a sizable portfolio, these are my top worries.  As such, I have developed a three-tiered approach to diminish my uneasiness that I will discuss:

We’ve been in a period of growth for the past decade, and it is easy to get caught up in the idea that real estate is infallible.

This presentation will address how I am able to counteract these worries so that I do not lose sleep over this (I can lose sleep on other things instead!)

Want help figuring out your next move? Reach out to us for a free investment consultation.

Our deal analysis today looks at a house hacker who moved from Denver to Colorado Springs to take advantage of the lower price point.  He found a house that’s the perfect setup for room by room rentals and is poised to perform very well when he moves out.  In the meantime, he gets to live for only $300 a month!

This client currently lives in Denver, where he owns a townhouse that he house hacks.  He’s ready to move onto his next investment property, so he reached out to Leah. 

He was looking to move from Denver to Colorado Springs because he prefers the price point down here.  Fortunately, he works from home, so he has the flexibility to change locations. 

He plans on renting out his townhouse to a long term tenant.

This is a single family home in the Briargate area of Colorado Springs.

Briargate is on the north end of the Springs, which is a very desirable area with easy access to Denver.  It has great views of Pikes Peak and is popular with renters. 

The house has 5 bedrooms/3 bathrooms plus great yard space.  Overall, it’s the perfect setup for room by room rental house hacking.

The house was listed at $440K.  While the market is still competitive, it’s cooling down some.  This gave Leah the ability to strategize more with the offer. 

Leah was told by the listing agent that there was another, slightly over asking price offer on the table.  The client wanted to install AC in the house, so Leah suggested he offer $10K over list price while asking for $6K in concessions.  In total, that put their offer $4k over list and would give him the cash to install the AC.

Although this was pretty close to the other offer, the seller accepted the offer from Leah’s client.

I’m excited to hear that sellers are once again open to offers with concessions.  Several years ago, it was pretty typical to ask for concessions in offers.  But as the market shifted heavily towards sellers, they stopped accepting those offers.

Although the roof was only six year old, it had significant hail damage.  The seller arranged for the roof to be replaced before closing, which was great for the client.

I used the Rental Property Spreadsheet to run the numbers on this house hack.

The client was able to take advantage of owner-occupied financing and make a 5% down payment.  His interest rate is 4.875%, which is high compared to the past couple of years, but numbers still work out here.

While he lives in the property, he’s staying in the primary bedroom with a private bathroom and using one of the two garage spaces.  He’s renting out two of the bedrooms for $700 a month, and one for $750 because that tenant is using the other garage space.

When the client moves out, he’ll rent out the primary for $800, conservatively.

He plans on self-managing the property for now, which cuts down on his operating expenses.  Because the house is in good shape with a new roof, newer appliances, and clear sewer scope, he’s budgeting 5% for reserves and maintenance. 

We’re noticing that insurance rates for everyone are going up.  I reached out to my agent and he explained that this increase is mostly due to the higher cost of rebuilding. 

When we run the numbers while he’s living in the property, his cash flow is negative $3500 a year.  This means that he’s only paying $300 per month to live in a nice home with beautiful mountain views.  Plus, he’s still reaping all of the benefits of home ownership, such as appreciation, depreciation, and debt paydown.

Once he moves out and rents his bedroom, his cash flow jumps to positive $5300 a year (assuming he still self-manages).  He’ll also have a cap rate of 7.1% and a cash on cash return of 14%. 

This client plans on moving out after the year occupancy requirement so he can buy another house hack.  He wants to stay in the Springs and continue to build his house hack stack there.  We’re very excited to see his next move.

If you’re interested in house hacking in the Springs, reach out to us for a free investment consultation.  Leah loves working with house hackers and helping them refine their strategy.  

The August 2022 market stats are out, and we’re back with another roundtable to discuss what they mean. As inventory increases in both Denver and Colorado Springs, we’re seeing a slight shift in power back towards buyers. We still have a long way to go to reach a balanced market, but the trends are consistent.

Rising interest rates may cause some homeowners to stay where they are in the short and medium term, which can affect inventory. These rates are also making it harder to cash flow, so investors might want to try different strategies and examine their overall portfolio to figure out their next move.

To hear the full discussion with Envision Advisors agents Jenny Bayless and Preston Newberry, lenders Joe Massey of Castle & Cooke Mortgage, and Travis Sperr of Renovo Financial, and me, listen to the podcast or watch the YouTube video.

Note: The above Executive Summary is from Lon Welsh of Your Castle Real Estate.

If you have questions about your strategy in a shifting market or want help investing in rental properties, reach out to us.  We want to help you navigate the market to find the right strategy to achieve your goals. 

Investor friendly realtor Leah Keeling joined me to talk about a fourplex she recently helped a client purchase.  This is his second investment property and his first multifamily unit.  Despite a high interest rate, he’s getting strong returns thanks to self-managing and is making a great dent in his investing goals.

This buyer is a repeat Envision Advisors client.  He purchased his first house hack with us in December of last year and reached out when he was ready to buy another property.  When this fourplex came on the market, he jumped on it. 

This is a townhouse-style fourplex in Southeast Colorado Springs.

Townhouse-style units are popular with tenants because they allow everyone to have their own outdoor space. The units are also a good size at 1125 sqft.  The property was in the process of being remodeled, leaving the client with brand new units that are all vacant.  

Located just off Powers Corridor, this is a popular area for shopping and restaurants and is conveniently located near Peterson Air Force Base.

The property was listed at $877K, and they were competing against one other offer.  Leah and her client came in at $5K above list and threw in a limited inspection objection.  The client used delayed financing, which allowed him to make an all-cash offer. 

Their limited inspection meant they would only object to issues with major systems.  They were confident that there weren’t any big problems because the units were being renovated.  As expected, the inspection went really well. There were some minor issues, such as damaged yard gates and screen doors, and the client decided to invest $10K to make the property look amazing.

I used the Rental Property Spreadsheet to run the numbers on this fourplex.

The client paid in cash and then put a loan on the property within 30 days of closing.  He decided to leave 30% in the property.  His interest rate was 6.625% for a 30-year fixed term.  He’s happy with this interest rate because the returns on the property are solid, and if he refinances at a lower rate, the returns will only be stronger.

Since all of the units are identical and were vacant, he only needed to create one listing.  He was able to lease out the property quickly, with all leases starting at the same time.  Each unit rents for $1300 a month. 

He’s only setting aside 6% for monthly reserves because the units were just renovated and he put additional funds into them for the finishing touches.

He’s using a utility bill back for electricity, gas, and water.  Since each tenant has their own yard, he only needs to spend $300 a year on snow removal. 

This property is a self-manager’s dream.  It’s in great condition and every unit is uniform.  It’s also conveniently located just a few minutes away from his house hack. 

Even though he has a 6.625% interest rate, he’s still breaking even on cash flow.  If rates ever drop, he’ll be able to do a refinance and boost his cash flow.  This is why it’s so important to analyze properties before buying so you can find one that works now and in the long term.

His 5.5% cap rate is impressive for the area.  We don’t see a lot of cap rates above 5% in Colorado Springs, and self-managing is really working in his favor here.  This is one of the better performing fourplexes we’ve seen in quite some time.

The client is so happy with this fourplex that he’s redeploying his cash from the delayed financing to purchase a second one.  That property is located just a few minutes away, so he’ll be able to easily self-manage that one, too. 

We’re excited to see this client add to his portfolio and get closer to achieving his long term goals.  If you have any questions about creating your own strategy or finding an investment property, reach out to us for a free consultation.

House hacking is a great way to start building your real estate portfolio, and it’s never too early to get started.  My guest today took that idea to heart. Miller started his investing journey while still in college and is already settling into his first house hack in Colorado Springs.

Growing up in Mississippi, Miller’s parents owned a couple of rental properties.  He’s been around real estate his whole life, and the seed was planted early to start investing as soon as possible.  In high school, his personal finance teacher showed them Dave Ramsey videos, and he learned a lot about how to invest. 

By his senior year of college, Miller and his now-wife were brainstorming where they wanted to live after college in Tennessee.  They had majors that would allow them to move anywhere, so they decided to figure out where they wanted to live first and then find jobs. 

They settled on Colorado because of general housing costs, and when they came out to visit, loved the beauty of Colorado Springs and how easy it is to navigate.  Once they decided to make the Springs their home, they reached out to Envision Advisors to start looking for a house hack.

They started their housing search in January 2022, even though they weren’t graduating until May.  This gave them time to talk to me and lender Bill Rodriguez to figure out the best course of action while looking at homes simultaneously. 

Because they didn’t have jobs yet when they started looking, it was crucial to talk to the lender early on to see what was possible.  Bill told them he could pre-approve them once they got offer letters.  Once they got the letters, he started the process and was able to get them a rate lock for 90 days with a $2K fee.  That gave Miller and his wife time to start their jobs and then allowed Bill to offload the loan. 

They looked at houses remotely, with investor friendly realtor Leah giving them virtual tours.  Her honest assessment of the properties gave them confidence that she was more interested in finding them the right home rather than just getting a sale. 

They found a single family home that has a great layout for a room by room rental strategy.  It’s located in the popular 80910 area code and has 5 bedrooms/3 bathrooms.  The main level has 3 bedrooms/2 bathrooms, while the basement has 2 bedrooms/1 bathroom. 

This house is in great shape.  They found some minor issues, such as a missing handrail and outlets that don’t work, but the total cost to fix everything is about $1K.  

The basement is located right by the garage, so they were able to install a door off the kitchen to create a separate entrance.  Miller and his wife decided to take the basement so they can have a private living space. 

The house was listed at $425K, while Miller and his wife were pre-approved for $460K.  There was one other private buyer competing, along with a rent-to-own company that made an all-cash offer.  With Leah’s help, they crafted a strong offer—$460K, limited inspection objection, and a 15 day close.  The seller really liked that Bill could close so fast, so they accepted the offer. 

They got a 4.8% interest rate that was guaranteed thanks to the rate lock.  By the time of their appraisal, rates were already up to 5.3%. 

Two of the upstairs bedrooms rent for $800 per month, while the third rents for $750. 

Currently, their expenses break down to:

To give everyone privacy, they installed electronic locks on the basement door and all of the bedrooms.  The laundry is located in the basement, so Miller worked with the tenants to pick a three hour window for laundry each week.  During that time, the tenants’ pin will work on the basement door, allowing them access to the laundry.  This gives Miller and his wife advance knowledge that the tenants will be in their space. 

Miller and his wife pay for utilities and internet while also providing basics such as trash bags and dishwashing soap.  Having lived with roommates in college, they knew it would be easier to just supply these things rather than open the door for tenants to bicker with each other.

They plan to house hack this property for a year and then move onto the second one.  When they move out, they intend to furnish the downstairs units since it would be difficult for tenants to move furniture in and out.  They may be able to charge more for those units, but Miller is mostly interested in how a furnished room will affect demand. 

Miller wants to house hack every year, ideally getting up to eight properties.  After that, he plans on switching to a Nomad strategy.  His hope is to have enough cash flow to replace their living expenses between years six and eight. 

Once they reach that point, they want to step back from their day jobs and focus on apartment investing.  In the meantime, they’re networking with other investors. 

I think Miller is doing a great job implementing his strategy and look forward to having him back on the show after he moves out.  In the meantime, get in touch with Miller to learn more about his investing plans and strategy. Send him a DM on Instagram @MillerMcSwain.

 If you want help formulating your own investing strategy, reach out to me for a free consultation.

The July market stats are out, and our roundtable panel is back to discuss what they mean.  Across Denver, Colorado Springs, and Pueblo we’re seeing seasonality return to the market. After a couple of years where there was consistently low inventory and buyers had to make multiple, above-list offers, they finally have some breathing room. They can look at a few houses, take some time to make a decision, and then submit an offer.

With interest rates bumping would-be buyers back into the rental pool, investors have a unique opportunity to keep buying property and take advantage of rising rents and an increased demand.

To hear the full discussion with Envision Advisors agents Jenny Bayless and Preston Newberry, lenders Joe Massey of Castle & Cooke Mortgage, and Travis Sperr of Renovo Financial, and me, listen to the podcast or watch the YouTube video.

Inventories are up a lot from last year, which is wonderful to see.

Note: The above Executive Summary is from Lon Welsh of Your Castle Real Estate.

If you have questions about your strategy in a shifting market or want help investing in rental properties, reach out to us.  We want to help you navigate the market to find the right strategy to achieve your goals. 

We’ve got a fun case study today about a Denver area investor who went to Pueblo, bought a single family home, and executed a BRRRR with great results.  Eric, an investor based out of Lakewood, joined Chris and me to share his story and explain how he was able to successfully BRRRR in today’s market. 

Eric is pretty new to real estate investing—he bought his first property in September 2019 in Lakewood.  At the time, he was living in California and his wife was living with her grandmother in Evergreen.  They did what he called a hybrid flip model—performing major work on the house while they weren’t living in it, then continuing to make improvements after moving in. 

They saw the appreciation they were getting from the house and wanted to use the equity to invest.  The stock market didn’t have the returns they were looking for, so Eric started listening to podcasts on real estate investing and reading books like Rich Dad Poor Dad.  He learned about the BRRRR method but wasn’t sure if it would work in today’s market. 

The BRRRR method stands for: Buy, Rehab, Refinance, Rent, Repeat.  Typically, people use cash, a Home Equity Line of Credit (HELOC), or a hard money lender to buy a property in cash so there’s no permanent financing on the home.  Then, they do the rehab and get the property rented out, and find take out financing.  This is a great strategy to build wealth over time through real estate, but it’s tough to execute in an extreme seller’s market. 

Eric looked at markets with a lower cost of entry all over the country but ultimately decided he wanted to be able to put sweat equity into the property.  They settled on Pueblo, which is about a two hour drive from his home and cheaper to start investing in than Denver or Colorado Springs. 

He found a house originally listed for $140K that had some price cuts after sitting on the market.  After looking at some comps and talking to lenders to figure out the After Repair Value (ARV), he was confident a BRRRR on the property was feasible.  As long as he could get to $168K ARV, he’d be able to pull off the BRRRR.   He worked with investor friendly realtor Leah and they closed at $111K.  

There are two major lending components for a BRRRR: the initial lending to purchase the property and the take out financing when it’s refinanced.  A lot of people focus on the first one and forget about the second, which can hurt them on the backend. 

To purchase the house, Eric had three lending options: hard money from his dad, a HELOC on his Lakewood home, and a third party lender.  He went through all of his options and ultimately decided to use hard money from his dad. 

He got a loan of $135K, enough to cover the price of the house with some cash left over to pay for the rehab. They documented the loan on a deed of trust and a promissory note.

After he finished the rehab, he had the option of waiting for the seasoning period or refinancing immediately.  Due to the pace that interest rates were climbing, he opted to use a rate and term refinance.  This isn’t a cash out refinance, but he only needed to pay out as much as the $135K promissory note.

The home needed some major work in order to be ready to rent out.  The biggest issue was that the entire roof needed to be replaced.  It wasn’t up to code in its current state, and Eric couldn’t even get it insured in that condition.  Eric contracted out the roof and ended up going with a local company who could replace it for $11K.

In addition to the roof, they also replaced the boiler, windows, and did some minor upgrades like new paint and carpeting.  The windows ended up being the biggest hassle because supply chain issues prevented the windows from arriving for four months.  Eric and his dad did the rest of the work themselves and ended up spending $27K in total, under their $30K budget. 

He put the home on the market in mid-February with the help of a local property manager.  They started the rent at $1400 but had issues with people qualifying, so they dropped it to $1295.  They soon found a tenant who moved in at the end of March. 

Having a property manager is an adjustment for Eric.  He prefers to fix problems quickly, so when he gets a notification of an issue, his instinct is to drive down and take care of it himself.  He has to remember that he has someone managing these things for him, and that a two hour drive to fix a small problem isn’t worth the time or gas money.  As he shifts his mindset, he’s learning to appreciate a more hands off approach. 

Eric’s overall goal is to achieve financial freedom.  To get there, he hopes to purchase 10 properties in 10 years, with 20 properties by the time he’s 40.  With all of the changes happening in the real estate market, though, he thinks it’s more important to find ways to take advantage of opportunities rather than strictly stick to his goals.  He’s willing to change those goals in order to keep growing.

By implementing a BRRRR strategy now, Eric is giving himself more flexibility in the future by having equity in the property.  He may use a 1031 exchange to trade up in the future, or try another BRRRR if he can find the right deal.  Now that he understands the process, he has a sense of relief and isn’t in a hurry. 

If you want to get in touch with Eric to learn more about the BRRRR process or being a landlord in Pueblo, email him at [email protected].

If you have any questions about your own investing strategy, reach out to me for a free consultation.  

Our guest today is Michael, an Envision Advisors client who recently bought his first house hack in Colorado Springs.  He moved from San Francisco to the Springs specifically to invest in real estate as part of his long-term wealth building strategy. 

He joined Chris, Ben, and me in the studio to discuss why he made this move, what his goals are, and how he uses his background in both software engineering and stocks and bonds to formulate his investing plans.  Check out the podcast or YouTube video for the nuanced conversation. 

Michael was born and raised in San Francisco but found that investing in real estate there is tricky because of the amount of capital needed.  He looked at other places in California, but found that the level of taxation made it unfeasible for him to invest. 

Instead, he looked at Arizona, where he has family.  While cash flow is higher in Arizona, he wanted to focus on appreciation.  He did some research on BiggerPockets and learned that Colorado appreciates more than Arizona. 

While looking into Colorado markets, he decided against investing in Denver.  He sees Denver as the major market, and he’s looking for the next big market.  He also wants more leverage for his dollars, so he settled on Colorado Springs.

Colorado Springs has a lower price point, attractive market, and is featured on many lists for top growing areas and best places to live.  

In San Francisco, many people live with roommates because of the high cost of living there.  Continuing to live with roommates in the Springs felt familiar.  

Plus, Michael’s background is in software engineering, so he values efficiency and the ratio of time and money.  To him, it makes sense to live on a property and rent out the other bedrooms.  He’s a minimalist who doesn’t like empty space and is always trying to downsize his belongings. 

House hacking in the Springs is a natural extension of his experiences and personal outlook.

Originally, he wanted a duplex that would come with two separate entrances.  The duplex market in the Springs is very competitive, and he got outbid by other eager investors who wanted to set up Airbnb’s. 

Instead, he ended up with a two-story single family home that also has a private basement suite.  There are three bedrooms on the upper level, one bedroom in the basement, and four bathrooms (two upstairs, one in the basement, and a half bath on the main floor).

The house was originally listed at $450K, and he offered $460K to ensure he could close on the property.  It was on the market for a week, which was quite a while at the time he was looking. 

He put 5% down and has a 3.25% interest rate on a fixed 30-year term.  He budgets 5% maintenance since the house was built in 2000, and pays $774 in taxes and $1711 in insurance yearly. 

His utilities run:

He collects $2100 a month in gross rent and pays between $500-600 a month to live there, depending on utilities.

At first, Michael expected to share the living space with the tenants, but his basement suite affords him an attractive amount of privacy. 

Along with a bedroom and bathroom, he has a living area with space for an office.  He bought a decently sized minifridge and double burner hot place in order to make meals in his space, and since the bathroom has a double vanity, he uses one for kitchen things and one for the bathroom. 

Essentially, he has his own bachelor pad within the house. 

He rents out two of the bedrooms for $650 a month and the primary bedroom for $800.  If he were to move out of his basement suite, he would rent it out for $1200 a month.

Coming from a background where everything is efficient and organized, Michael had to learn how to navigate the art of building relationships with lenders.  He expected to find terms listed on websites and to pick the best one.  Instead, he had to call lenders to find out their terms.

He’s learning that good relationships with lenders are key to his real estate investing journey.  That’s where he’ll find good deals and creative financing strategies that will allow him to build his portfolio.  The key to success building relationships and finding microtrends. 

Usually, real estate investors grow their wealth by trading up into bigger properties.  They go from a single family home to a multifamily property, like a fourplex.  Michael intends to do the opposite. 

He’s starting out with a bigger asset—a fourplex that he purchased in cash.  His plan is to follow a waterfall investing strategy in which he pulls cash out of the property and redeploys it into smaller assets like duplexes. 

Paying for real estate in cash isn’t a good use of equity, and utilizing leverage brings better returns.   

Michael says the specific strategy will depend on the individual’s personality and values.  Personally, Michael is a grinder, and he moved out to Colorado Springs specifically to start investing in real estate.  He wasn’t looking for nightlife or city living, just a change of pace that was a good fit for his needs. 

He encourages other investors to look at the long-term and anticipate how various markets will change.  Where is the best place to put your money?  Currently, he doesn’t feel great about the stock market.  Real estate is one of the few major moves that most people can make.  That’s why he bought this house hack and recently closed on a fourplex.

We’re excited to see how Michael’s investing strategy plays out and progresses as the market shifts.  If you want to learn more about his strategy or the new platform he’s building to automate investing, email him at [email protected] or find him on LinkedIn.

 To find your own house hack, reach out to us for a free investment consultation.