Denver Area Single Family and Small Multi Family Analysis

5 Replies

Hey Bigger Pockets Forum! My question (and discussion) for everyone out there is this:

I am a new investor looking for my 1st deal. I live in the Denver Market and I would prefer to get my feet wet by purchasing my 1st property locally versus a property in another market that I would not be able to physically drive to. Because the Denver Market is extremely hot and properties are very expensive, I am very curious on what experienced investors are seeing on recent deals (within 2017) for CAP Rates, monthly cash flow, and cash on cash returns?

I am curious to compare my analysis results to what more experienced investors are targeting for their minimum CAP rates, monthly cash flow, and cash on cash returns to determine what a "Good" deal really is besides comparing to the average 7% from the stock market

Thanks and I look forward to hearing from everyone!

@Bryan Henry I'm assuming you're talking about a straight buy and hold rental, correct?

First off, as long as you use leverage,  you'll most likely outperform the stock market. I learned from one of @Charles Roberts classes that a 6% cap rate property with 25% down still still greatly outperform the stock market. He went into some interesting data analysis. 

Condos and townhomes are 7.5 - 8.5 cap. 10-15% cash on cash return. 

Multis are 5 to 6.5

Single-family homes vary depending on location.

If your bench mark is just to beat the S&P 500, don't worry too much about which property type to buy... just buy using leverage!

Welcome to Bigger Pockets Bryan!  Chris must be spot on with the multifamily numbers based on the offers that I have been putting in lately.  About two weeks ago, I offered on a duplex in Denver for what was 7.23% cash-on-cash and a Cap Rate of 6.89% (based on my estimated numbers, not the listing agents).  We were $75K over asking, and still did not get the property.  So if other investors are using the numbers Chris stated around 5 to 6.5, it would make sense why my offers are not getting selected.

@Jim Shonts Wow, a 6.9 cap for a duplex is really good. Was that based on your 75k+ over asking price offer? What were the rest of the numbers like? I did quite a bit of research into multis a couple of months ago. I'll send over you over what I found. It was interesting!

@Bryan Henry - I am house hacking a duplex in June 2017 that is treating me very nicely. I'm happy to share my numbers, though they are a bit inflated. The reason is that I only put 3.5% down (crazy Cash on Cash) and I am AirBnbing out my bedroom (I made a pseudo bedroom out of my living room). 

I highly recommend checking out any of @Charles Roberts classes at Your Castle Real Estate. He's the real deal! Also, @Chris Lopez puts on an awesome podcast alongside Charles which focuses solely on Denver Real estate investing. It's awesome stuff! 

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