While looking for property on Tennyson Street, I came across a “For Sale” sign for two lots totaling 10,000 square feet across the street from Cesar Chavez Park. The owner had multiple properties spread across in Denver. He is a Korean War veteran who sits behind the counter of his store and smokes cigars all day long. When I contacted the owner about his properties, he blasted me for being “a broker who wants to low ball me. Well, that ain’t gonna happen. I want $950,000 and not a penny less.” I called my investor and within 20-minutes I was back in front of the owner with a full price offer. The owner was great at telling war stories and I spent a lot of time with him. Seven months later we had it closed.
The property fronted Cesar Chavez Park and had a view of the mountains that would never be blocked. We signed a contract in April, 2013 and late in that year we closed on the properties.
We hired an architect to design an 11-unit building and 3,000 sf of retail space and five months later and after spending $100,000 with him a neighbor called and said, “Your building will be larger than mine, do you want to buy it?” We said, “Yes” and added 6,250 sf lot which gave us 16,000 total sf. We decided to build 17-unit condo building with 5,000 sf of retail. We paid $1,600,000 for all the land.
The project design was for condos with townhome designs (15 out of 17). Each unit had exterior front doors on a concrete podium that covered the retail space. The townhomes were two-stories with rooftop decks with views of the mountains and downtown Denver. Each unit had parking in the heated garage and a designated storage space.
The architect was excellent. We hired him because he was so detailed oriented. This was important because this project began during the aura of the “condo defects lawsuit” craze in Denver. The design phase lasted for over two years which included a year with the architect fighting with the city. During this design phase the engineer, who had a critical role in the design, died. We then had to find a new engineer for the concrete podium and not many engineers wanted to run the risk of facing a lawsuit over some design defect. In a perfect world the project should have been designed and permitted in 14-months.
The final design was a brick and metal building with 16’ clear height ceiling in the retail space. As we built the project and posted drawings of the final product, neighbors came by and expressed how glad they were to see new retail facilities being built.
The Denver Fire Department had 18-months to object to any design for the control panel for the fire suppression system. They did it in the last three months after all the hard structure was in place. They demanded a new location on the front of the building with a glass enclosure (4-months to purchase). As the completion date (And the Certificate of Occupancy) approached, the Fire Department told us to build a temporary enclosure and our homeowners could move in. We built it. They changed their mind. They demanded that we build a completely new enclosure before they would sign off on the CO.
There was a one-month window to get on their agenda. Altogether it took five months to get approval. The investor incurred $30,000 per month in interest carry cost and $50,000 to move the panel.
Our investor had significant experience in development and great risk tolerance. He trusted me and my contractor to get the project finished. He kept his eye focused on his primary objective and that was to use the residential part of the building to give him a premium retail location for free.
- Don’t build townhome condos. Too much exterior surface area that requires brick and metal which drives up the cost and requires interior stairs in each unit.
- New construction is management heavy and requires attention to detail with an experienced eye on everything.
- Need cash and the ability to get a loan guarantee.
- Your risk tolerance should be significant.
- Return from this type of project will be free money for life.