Multifamily investing in Colorado Springs

6 Replies

How are people finding multi-family deals in Colorado Springs. I know it may not be the best method but I have been using a realtor and the MLS and everything I analyze seems extremely overpriced. Very low cap-rates (<5%)and NOI, High GRM, nothing gets close to the 1% rule (maybe .5%) and some are running at a cash negative yet they seem to be flying off the market. Am I missing something or is the new norm. Are people just buying hoping they can juristically increase rents or hoping that the market will continue to go up in this town? Any insight or advice is greatly appreciated.
@Daniel Wolcott I've been systematically contacted key folks in the market... brokers, lenders, property managers, appraisers etc. I am also narrowing down my property profile target to make the deal review process streamlined. Let's connect and discuss further! Cheers - Mike

I live in LA and I'm in Colorado Springs right now visiting my sister in law who is in the Air Force. I think I've got her sold on house hacking a 4plex with her VA loan. I'll be able to assist since I invest in 4plexes in Kansas City.

I also noticed a lack of inventory when looking for 4plexes. I only found one on market and we drove by. I’ll probably be doing some networking on her behalf to help her find a 4plex. 

Tight market but it does seem like the long term prospects are good! 

People are paying stupid prices right now.. Maybe they are using cash to purchase or large down payments to cash flow. The multis selling in Denver and the Springs make little sense. 

I owned two 4 plexes there and in about a year we gained 6 figures in appreciation (some was forced through reposition) and cashed out. 

If you want off market, pull lists of multi owners in Springs and mail or cold call. Thats your best bet to finding something that will work numbers wise. 

Hey Daniel, 

I wrestle with this question daily ;)

CAP rates are certainly compressed across the entire country. Fortunately, the going CAP rate is not particularly relevant if you choose the right business strategy. I would recommend that you conservatively map out your cash flows and compute a projected IRR. I typically take the timeframe to be the life of the loan.

The CAP rate is useful to help you predict the value of the property when you sell (which will be included in the cash flows). I agree completely that you should be conservative with CAP rates here. It is very likely that CAPs will rise with time. This will have an impact on the overall valuation of the investment.

What you will find is that for value add opportunities, it is possible to bid at a lower cap and still have a well performing investment. A value add strategy inherently carries more risk, so it is important to include this in your analysis. Make sure you have conservative assumptions supported by market data. 

Let us know how it goes in your search. 

- JA

Hi @Daniel Wolcott Have you considered becoming completely passive with real estate investing? Real estate syndication's are a great way to earn solid returns (cash-flow) while not having to actively do anything. I have participated in multifamily deals in Colorado with success. If you have any questions, feel free to message me. I am more than happy to help.