Want to become a landlord in Denver? Chilean company has new model to make that goal attainable
BrickOp converting multi-family units into investment opportunities
By Aldo Svaldi The Denver Post
May 26, 2019 at 6:00 am
First-time homebuyers have different programs to help them scrape together the down payment to get into a property, but that isn’t the case for first-time landlords, who typically need 20 percent or more down to get a loan.
A Chilean company has picked Denver to introduce a concept it says can overcome that hurdle.
Over the past five years, Capitalizarme has sold more than 5,400 condos throughout Chile and more recently Lima, Peru. It has launched a Denver-based subsidiary called BrickOp to replicate that model in the United States, where there are a lot more potential investors and capital.
“We are looking for affordable multi-family,” said Gabriel Cid, CEO of BrickOp. “We are looking for good buildings with good tenants.”
He acknowledges that has been a struggle in Denver, where real estate prices have skyrocketed since 2012. Developers have largely focused on luxury apartments and the few condos built, because of the state’s construction defects law, have also been high-end.
High prices make it harder for the math to pencil out, but after two years of looking, the company purchased a small 10-unit condo building called Pecos Flats near 70th Avenue and Pecos Street for its U.S. debut.
“In Chile, they have targeted millennials with higher incomes,” said Alfonso Silva, a partner in Silva-Markham, a Denver-based property manager. “This is mostly for the younger investor who wants to start investing in real estate and has disposable income, but who struggles to get the down payment.”
Breaking into real estate investing can be a challenge for those without deep pockets, especially in expensive markets like metro Denver, where the median price of a home sold in April was $460,000 and the median price of a condo was $305,000.
While lenders have loosened up standards for first-time homebuyers, including reviving zero down mortgages, buying a rental property still requires a good chunk of money down.
Silva, a Chilean immigrant who has invested in BrickOp, said the concept is different than crowdsourcing, where a bunch of investors put up smaller amounts of money to get a fractional share of a property. Owners receive full title.
Cid said his company is offering another alternative for those who haven’t built up savings but have extra cash flow and don’t necessarily want to invest the time and energy into mastering real estate investing.
“This is for the average person,” he said.
How it works
To acquire a unit, an investor commits 5 percent of the price, locking in a value. He or she then covers the rest of the down payment across the next 30 months or a time frame they can manage. Once the 20 percent is covered, the investor takes out a mortgage.
While the down payment is being made, BrickOp collects the rents and is responsible for repairs, including a refurbishment once the tenant moves out. The investor is provided with a freshened up unit, a tenant and a property manager who collects the rents and handles maintenance issue.
Monthly rents are enough to cover all the normal expenses, although Cid recommends the extra amount be kept in reserve to handle repairs and vacancies.
Pecos Flats condos cost $210,000 to $240,000 for a two-story, two-bedroom unit with mountain views. Reserving that unit requires $12,000, followed by another 30 monthly payments of $1,200. When the 20 percent down is reached, the buyer takes out a mortgage, either through BrickOp’s local lending partner, FirstBank Colorado, or through a different lender.
Silva-Markham is managing the units for a 4 percent fee, below the typical cut of 8 to 12 percent that property managers take.
Cid estimates that after insurance, taxes, mortgage payments, and HOA fees, the investor should clear between $100 or $200 a month. As with any investment, there are no guarantees. Rents could go down, vacancies could shoot up, tenants could damage the unit.
Based on recent rates of appreciation, an investor could double their initial investment in about eight years, Silva said. Using more conservative assumptions, the cash-on-cash return will beat most alternatives out there.
“We want to make sure we are buying something where the finances and expenses will be covered by the rent. We need to be very sure of that possibility,” he said.
For a young investor willing to hold for the long haul, that initial capital investment could provide a nice stream of income into retirement after the mortgage is paid off.
For complete article: https://dpo.st/2WkcJCX
Fifteen apartment communities from the Del Norte Neighborhood Development Corporation portfolio were awarded to Silva-Markham Partners for property management. We are delighted to add Del Norte as a new business partner. This new addition of properties shows the need of multifamily owners for reliable, efficient, cost effective, responsive, and professional management companies like SMP. Del Norte portfolio addition places Silva-Markham Partners, as one of the largest and leading property management companies in Colorado! Congratulations to all my partners, and company employees!
HUD Secretary Ben Carson visited Denver October 23, 1017 to gain insight into the affordable housing market. His visit illuminates the administration’s interest in the benefits of making nice joint ventures developments between private developers and public housing agencies, for moderate to low-income individuals through the Section 42 Low Income Tax Credit Housing Program (LIHTC) . During Secretary’s Carson trip to Denver he visited a tax credit community developed by MGL Partners and Solvera Advisors, and managed by Silva-Markham Partners, Lumien at Fitzsimons, in Aurora, Colorado. Secretary Carson shared with Silva-Markham Partners’ President and CEO Alfonso Silva, that the current administration prefers tax credit properties that benefits working people, as opposed to properties that don’t require that residents necessary be employed (Section 8). This philosophy of helping working individuals dovetails with the Apartment Association of Metro Denver’s (AAMD) initiative called Live Denver! Live Denver is being developed by AAMD, Denver Mayor Hancock and Chipotle restaurants. Mr. Silva is an active member of AAMD.
“I am proud to announce that Silva-Markham Partners has been awarded the management of Alden Torch Financial’s Colorado properties. Alden Torch Financial is a leader in the multifamily investment industry with a focus on affordable housing and investments utilizing Low-Income Housing Tax Credits. Since its inception in the fall of 2010, the assets under Alden Torch Financial management have increased, through a combination of portfolio acquisitions and new fund syndications, to $13 billion in value, making Alden Torch Financial the largest Affordable Housing Asset Management Platform in the industry. Congratulations to the Silva-Markham Partners team, and welcome to our new business partner!”
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