A Fork in the Road

Six-year investor Tom LaRocque was chosen for ICOR’s 2015 Rising Tide Award. The award recognized his purchase of three-unit income property in Englewood, six miles due south of downtown Denver. What distinguished the deal was that it was done with approximately zero net cash out of pocket. Every dollar spent on acquisition and improvements was returned to Tom, thanks to a cash-out refinance of a hard money loan, six months after purchasing the property.

The triplex was run down and mostly vacant in early 2015. Tom I ran into the previous owner at a Realtor meeting. The owner a mortgage lender but not an investor. His family had owned the property for more than 50 years, but they planned to sell within a few months. Tom checked out the property and closed on May 1, 2015.

Having been acted mostly as a rehabber and flipper, he initially viewed the property as a potential flip. With $40,000 in repairs on top of the $260K purchase price, Tom could have sold it for maybe $360,000. It looked like a decent flip for sure, even with hard money and holding costs.

Originally a single-family home, the property was converted to a triplex several decades ago. Each unit has its own entrance, kitchen, electric meter, and garage parking space. With rents soaring in greater Denver, I realized this property might make more sense as a buy-and-hold investment.

So he went for it, renovating all three units at a total cost of $41,500. The finishes were “rental grade,” at least in the two lower-floor units. Used appliances, Home Depot cabinets, and linoleum and carpet on the floors. The upper floor unit was nicer with granite counters, new stainless appliances, and newly refinished hardwood floors. Total rent would be approximately $3,100 after adjusting for certain owner-paid utilities.

With that kind of rental income, the refinance appraiser said the property was worth $450,000. Tom was thrilled. The refi loan would 70 percent of appraisal, or $315,000. It was enough to pay off a $271,000 hard money note, and reimburse virtually every dollar spend on financing and repair. The result is a property now with $135,000 in equity, with more than$1,000 per month in cash flow.

For his good fortune in this deal, Tom credits the investor education he has found through ICOR. Classes in rehabbing, deal analysis, landlording instilled enough confidence to entertain two options—a short-term flip or a long-term income investment. His contact with members, at meetings and through ICOR’s online forum, assured him that other investors are successfully buying and managing rentals all over the Front Range.

Having done dozens of deals, Tom is now into another phase of his investing career—new home development. With a partner, he is about to complete construction of a single-family spec home near Golden, Colo. The real benefit of investor education, he says, is the ability to remain flexible in the face of changing market conditions.

“Six years ago, I’d have been unable to handle this much ambiguity or change,” he said. “Now I follow Yogi Berra’s advice: When you come to a fork in the road, take it!”

Contact Tom LaRocque
Denver House Pros, LLC