23 Unit Multifamily Real Estate Investment Property Deal Analysis & Tour | Real Estate Ride Along

TL;DR

A comprehensive tour and analysis of a 23-unit multifamily property in Denver.

Transcript

all right today we're going to walk a 23 unit apartment building in a very hot part of denver called the lower highlands so there's lots of new build classes all around here so it's a 23 apartment building with a duplex slot another lot next to it that terence got over two years ago and he's just wrapping up the project let's get you out the detail... Read More

Key Insights

• The property is a 23-unit apartment building in a trendy Denver neighborhood, acquired through a direct relationship with the seller.
• The renovation focused on cost-saving measures like omitting shower doors and using industrial aesthetics to compete with new builds.
• Challenges included dealing with outdated electrical codes and boiler systems, requiring creative solutions to meet modern standards.
• The property aims to attract young professionals by incorporating features like Murphy beds and high-end finishes.
• The team used a strategy of zero-scaping with astroturf to reduce long-term irrigation costs, enhancing the property's sustainability.
• A mural was added to the building to increase street appeal and community engagement, which also serves as a marketing tool.
• The financial analysis revealed a potential $1.12 million profit, with a refinance strategy to leverage long-term cash flow.
• The project faced delays and budget overruns, but the long-term cash flow and learning experiences were deemed valuable.

Questions & Answers

Q: What were the main challenges faced during the renovation?

The main challenges included dealing with outdated electrical systems that were not up to current codes, requiring downgrades in appliances, and managing a boiler system that needed replacing. These issues led to delays and increased costs, but creative solutions like using high-end stovetops and maintaining the existing boiler system helped mitigate the impact.

Q: How did the team plan to attract tenants to the property?

The team aimed to attract young professionals by incorporating high-end finishes and features like Murphy beds in the studios. The property was designed with an industrial aesthetic to compete with new builds, and cost-saving measures were implemented to offer competitive rents. Additionally, a mural was added to enhance street appeal and community engagement.

Q: What financial strategies were used to ensure the project's success?

The financial strategy included a construction loan covering 75% of total costs, with plans to refinance into a non-recourse agency loan. The project aimed to double the average rent from $850 to $1,350, leveraging the property's upgrades and location. Despite delays, the long-term cash flow and appreciation potential were expected to yield significant returns.

Q: Why was zero-scaping chosen for the property?

Zero-scaping with astroturf was chosen to reduce long-term irrigation costs in Denver's dry climate. This approach was expected to save thousands of dollars over the years by eliminating the need for regular watering and maintenance, while also providing a clean, attractive appearance that complements the property's overall aesthetic.

Q: How did the team handle the building's outdated electrical system?

The outdated electrical system was a significant challenge, as it did not meet current codes. The team opted to downgrade appliances, such as replacing electric ranges with stovetops, to comply with the building's power limitations. This decision was made to avoid the costly and time-consuming process of upgrading the entire electrical system.

Q: What role did the mural play in the property's renovation?

The mural added visual appeal and helped the property stand out in the neighborhood. It served as a marketing tool by attracting attention from passersby and enhancing the building's street presence. The mural also aimed to foster community engagement and create a positive impression of the property.

Q: What were the cost-saving measures implemented during the renovation?

Cost-saving measures included omitting shower doors, using industrial aesthetics, and incorporating features like accent walls made from plywood. The team also selected flooring and fixtures that provided a high-end look at a lower cost. These strategies were designed to keep renovation expenses within budget while still offering competitive amenities.

Q: How did the team plan to manage the property's long-term expenses?

Long-term expense management included zero-scaping to reduce irrigation costs, using durable materials to minimize maintenance, and implementing energy-efficient systems. The property was also designed to minimize utility expenses, with plans to bill back water and sewer costs to tenants. These strategies aimed to enhance the property's profitability over time.

Summary & Key Takeaways

• The walkthrough of a 23-unit apartment building in Denver highlighted the property's renovation challenges and design choices aimed at attracting young professionals. The team focused on cost-effective upgrades to compete with new builds.

• Creative solutions were employed to meet modern building codes, such as using high-end stovetops due to electrical constraints. The property also features cost-saving measures like zero-scaping and energy-efficient systems.

• Financial analysis showed a potential profit of over $1 million, with a refinance strategy in place to maximize long-term returns. The project experienced delays but provided valuable lessons in multifamily investments.