I'd be curious for people's feedback regarding acceptable cash flow on a single family home in the Fort Collins area, given that our home values are generally trending upwards and on the higher side. I'm going to be turning my current residence into a rental and depending on how much cash I pull out (refinance) I'll be looking at anywhere from $280 - $330 Cash Flow (Yes, after I've factored in PITI, Maintenance, Vacancy, Cap Ex). Currently I owe $155K before refinance, current value is probably in the $310-$320 range. Does this seem OK? I know it's not a ton of extra income and I hear stories about people raking in much more per SFH ($700-$900 range). Perhaps they bought during the downturn? What is everybody else netting on similar homes (just in general)?
Thanks for your Help!
Hey @Levi Bjork , congrats on being able to invest in the Fort Collins market. I think that is a great strategy. Have you calculated your cap rate? I can't do that for you without knowing your gross rent, but I'd guess it would be over 4% based on the information you gave.
I have a property that does quite well $800 net a month that a bought when the market wasn't quite as hot and another that I bought a couple years back that I only make about $150 per month on. Lucky for me, it all evens out. We are fortunate in Fort Collins to have the appreciation as well.
Hope that helps, if you need help finding a Realtor in the area and aren't already working with one, I'd be happy to help.
"Generally trending upwards" is an understatement. +30% in the past two years is common. Because of that it is VERY difficult if not impossible to cash flow on a SFH with conventional 80/20 financing. If you're willing to put more cash in then you may cash flow $100-$200 monthly. I presume anyone cash-flowing $700-$900 per month bought in more than five years ago or put down a hefty % for down payment. Also be cautious that nearly a thousand apartments and condos are coming online within this and next year. Expect rents to flatten or drop. Good luck!
I'd have to agree with @Mike D. on this. Since our market has been so incredibly hot over the past few years, it is extremely hard to find a SFH that cashflows well. To be honest, your $280-$330 would be one of the better cash flowing properties that I've seen in quite a while. We are going to start seeing a lot of apartments and condos hit the market in the near future, so be sure to factor that in. With the recent work done to repeal the construction defect law, I only foresee even more multi family properties being built in the future.
@Jeremy Clarke , hard to calculate cape rate but if I assume that my "purchase price" on my current home would be the loan amount after I refi (call it $215,000), it would be 8.2%. If I go off of the current value of $310,000, it's 5.7%. To be honest, I am not all that knowledgeable about cap rate, but there it is.
@Mike D. Thank you both for the insight regarding future multi-families. I'll need to keep that in mind as I move forward. It sounds like I might be OK with about $300 cash flow to (hopefully) weather a dip in rental rates.
I agree with @Bob Vollmer & @Mike D. on rents flattening. But that may be 1,2 or more years out. Take advantage of what they are today, get a tenant in there locked in a lease for 1-2 years and reap the benefits. While rents might flatten, the property is likely to continue to appreciate. The simply can't build as fast as the demand is happening in Northern Colorado. Specifically in Fort Collins, there isn't much more space. If it were me, i'd get it while i still can. Especially if the property cash flows.
Okay not too bad. Don't get too caught up in the cap rate calculation. It is a good measuring stick to use as a benchmark. Just be sure you are prudent to continue to factor in potential maintenance, vacancy, increase in taxes, etc. Sounds like you are pretty prudent already.
I'm not an expert by any means but have been interested in investing for awhile and finally got our feet we last year. My wife and I bought all of our properties between May 2016-Dec 2016 and we cash flow $600+ on all of them. We did the conventional route 20% down.