46 min

Deal Analysis – Timber Ridge 40-Unit Property Denver Investment Real Estate

    • Investing

Timber Ridge Property is comprised of three 12-unit building and one 4-unit structures.







Check out the podcast episode (at the bottom) as we join Chris Lopez to discuss the details of this deal. Feel free to reach out with any questions and ways to improve this analysis.









Three Learning Options! * Listen to the podcast "#252: Deal Analysis - Timber Ridge 40-Unit Property" on the Denver Real Estate Investing Podcast* Watch the YouTube video (at the bottom.) * Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.







Motivated Seller + Increasing Vacancy + Heavy Deferred Maintenance = Deal Opportunity







This property consists of 34x 1 bedroom apartments, 4x studio apartments, and 2x 2-bedroom apartments. A significant portion of the units were being leased to veterans through the Department of Veterans Affairs (VA) which, similar to other government programs, provides landlords with certain rent payment protections. I first had an opportunity to walk this property in late August 2020 after hearing about it from a commercial real estate agent with whom I had a relationship. At that time, the seller was asking $5.5M. 







Over the course of the next several weeks, the building was subjected to and failed multiple VA inspections which ultimately cost the current owner their contract with the VA. The inspection failures, along with some health issues and a desire for liquidity, ultimately led the seller to reach back out to me with a reduced asking price of $5M. At that point, we decided it was a deal worth pursuing and put the property under contract with an inspection contingency. 







Our findings during the inspection were concerning as the building had significant issues involving the boilers, plumbing, roof, electrical, bed bugs, etc. The verdict was a far more extensive rehab budget than we originally planned and the sales price would have to come down if the deal was going to close. We ultimately notified the seller we would need a price concession of over $500K in order to proceed with the sale. To legitimize our request, we provided the seller with a copy of the inspection report and the bids obtained to perform the construction. 







In the end, we were able to reach an agreement with the seller at a final purchase price of $4.45M. The deal closed in early November under a shorter time horizon than our typical Denver multifamily closing of 6-10 months.        







Penciling Out the Deal By Working Backwards







Aside from the inspection revealing significant renovations, rent assumptions following the stabilization of the property were particularly difficult to come by. Twin Lakes is not an area we had purchased in before and our due diligence revealed no other comparable sized multifamily buildings within an 8-block radius and nothing of a comparable condition to the expected finished. Additionally, given the current condition of the units, and the high vacancy, the current owners’ financials were of little value. 







We ultimately worked backward in our financial modeling, starting with a number we felt most comfortable with; the final disposition price per unit. Knowing that most multi-family units in Denver are selling for between $170K to $210K per door, we used $170K and multiplied that by the total number of units to arrive at a total disposition price.

Timber Ridge Property is comprised of three 12-unit building and one 4-unit structures.







Check out the podcast episode (at the bottom) as we join Chris Lopez to discuss the details of this deal. Feel free to reach out with any questions and ways to improve this analysis.









Three Learning Options! * Listen to the podcast "#252: Deal Analysis - Timber Ridge 40-Unit Property" on the Denver Real Estate Investing Podcast* Watch the YouTube video (at the bottom.) * Read the blog post. Note, the blog is an executive summary. Get the in-depth breakdown from the podcast or video.







Motivated Seller + Increasing Vacancy + Heavy Deferred Maintenance = Deal Opportunity







This property consists of 34x 1 bedroom apartments, 4x studio apartments, and 2x 2-bedroom apartments. A significant portion of the units were being leased to veterans through the Department of Veterans Affairs (VA) which, similar to other government programs, provides landlords with certain rent payment protections. I first had an opportunity to walk this property in late August 2020 after hearing about it from a commercial real estate agent with whom I had a relationship. At that time, the seller was asking $5.5M. 







Over the course of the next several weeks, the building was subjected to and failed multiple VA inspections which ultimately cost the current owner their contract with the VA. The inspection failures, along with some health issues and a desire for liquidity, ultimately led the seller to reach back out to me with a reduced asking price of $5M. At that point, we decided it was a deal worth pursuing and put the property under contract with an inspection contingency. 







Our findings during the inspection were concerning as the building had significant issues involving the boilers, plumbing, roof, electrical, bed bugs, etc. The verdict was a far more extensive rehab budget than we originally planned and the sales price would have to come down if the deal was going to close. We ultimately notified the seller we would need a price concession of over $500K in order to proceed with the sale. To legitimize our request, we provided the seller with a copy of the inspection report and the bids obtained to perform the construction. 







In the end, we were able to reach an agreement with the seller at a final purchase price of $4.45M. The deal closed in early November under a shorter time horizon than our typical Denver multifamily closing of 6-10 months.        







Penciling Out the Deal By Working Backwards







Aside from the inspection revealing significant renovations, rent assumptions following the stabilization of the property were particularly difficult to come by. Twin Lakes is not an area we had purchased in before and our due diligence revealed no other comparable sized multifamily buildings within an 8-block radius and nothing of a comparable condition to the expected finished. Additionally, given the current condition of the units, and the high vacancy, the current owners’ financials were of little value. 







We ultimately worked backward in our financial modeling, starting with a number we felt most comfortable with; the final disposition price per unit. Knowing that most multi-family units in Denver are selling for between $170K to $210K per door, we used $170K and multiplied that by the total number of units to arrive at a total disposition price.

46 min