After an exhaustive year long property search, Radford Investments and a private investor purchased a 9-unit apartment building in the Mayfair neighborhood of Denver in December 2004. The property was purchased for $563,000 ($62,556 per unit) using all cash. The seller was willing to take a discount on the price because they had to resolve IRS problems.
Renovation & Conversion
Initially, this 1941 property operated as an apartment building. In the summer of 2005, we began the process of renovation. The scale of work was significant because the property had not seen capital improvements for many years. A detailed review of competing condo projects in the area determined what types of improvements & finishes would best sell in the market. The scope of the in-unit work was fairly limited and included renovating kitchens, bathrooms, and refinishing the existing hardwood floors. As the existing tenants leases expired, work began on unit interiors. Exterior and common area improvements included roof repairs, extensive landscaping/sprinkler system, carpet, and a new laundry room.
To develop a marketing plan for the unit sales we consulted with the top-selling condominium broker in Capital Hill, visited competing condo conversion projects in the area, and met with investors who had recently completed the sales process. We determined the target price range of the condos needed to be around $110k. The neighborhood lends itself to first-time home buyers, and at the time financing was readily available. The marketing plan was implemented in the spring of 2006. All units were sold within seven months. The average price was $112,324 per unit slightly better than our projected price per unit of $111,000 per unit.
In general, the Ash Street Condos investment was a success. It represents the execution of the “change of use” concept. Because of it's desirable location and the targeted property improvements, people were willing to pay more as individual condominium units than we could have sold it for as a “for rent” multifamily building. The investment produced excellent financial returns and also substantial positive tax effects which were of particular benefit to the investor.