[Calc Review] Help me analyze this deal
SF Bay Area · Member since 2018 · 24 posts · 14 votes
[Calc Review] Help me analyze this deal
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Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
6yOriginally posted by @Leanna Mansour:
*This link comes directly from our calculators, based on information input by the member who posted.
Duplex in CO, outside Denver in Longmont. I am told this is an up and coming area with a nice downtown. Management company would charge 10% of monthly rent and realtor told me the rent on each unit will soon be increased from $1200 to $1300/month. Good deal? Thoughts?
I like Longmont and have a few properties there (also looking to buy more). Downtown is definitely undergoing a revitalization with the recent addition of several great restaurants, breweries, coffee shops, etc. I don't even hear the nicknames "Methmont" or "Stabmont" being used much anymore ;)
Not to be a stickler but I wouldn't really call it "outside Denver" as it's 45 minutes away and a distinct town from the metro, not a true burb like Arvada, Westminster, Lakewood, Littleton, Centennial, Highlands Ranch, Aurora, Greenwood Village, Commerce City, Northglenn, Englewood, Glendale, Thornton etc.etc.etc.... Denver has endless burbs but Longmont is well outside of those and a separate market. It's in Boulder County, much closer to Boulder than Denver and halfway between Denver and Fort Collins. So while some residents commute down to Denver or up to the Fort, either way it's a crappy commute and wouldn't be anyone's first choice. A much larger percentage of people commute into Boulder or work in town/the surrounding area.
There is a lot of variation in neighborhood quality within Longmont, with some parts being fully gentrified (SE side which is rapidly approaching Boulder prices), others that are still "transitional" and also some pretty rough hoods that may never be nice (W/NW side). Based on my experience in the market, my suspicion is that a duplex at this price point is probably in a less desirable location or else is in bad physical condition. If your goal is to put some money into it, fix it up and hold for a long time period, it could be a good buy as I think most of Longmont will continue to have good appreciation. I would be surprised if it cash flows anywhere near $618/month initially though. My suspicion is it may be more of a break-even at best type scenario for the first several years due to vacancy/tenant issues and especially deferred maintenance/capex expenses and management costs. I'd calculate management at 15-18% as there are likely going to be a lot more fees to the PM than the base 10% such as leas-up fees (typically 1 month rent), lease renewal fees ($100-1/2 months rent), inspections, maintenance calls, eviction fees, etc. I'd also set vacancy to at least 10% and bump up your repairs by a lot. But that's just going on the age and build quality of the duplexes I've seen listed recently in that price range. It could be a smoking deal on a nicer property in a great neighborhood for all I know, just highly unlikely at that price point. If you want to share the nearest cross streets or the address I can tell you more about the specific building and location.
Regarding rent increases: my buildings are in class C+/B- locations and rent for $1100-1200/unit. I can fill units easily and retain tenants at that rate but any higher than that I'd be competing directly with much newer and nicer buildings that have gyms, pools, granite, etc. so you'll have a hard time fetching any more than $1,200/side on an older duplex IMO. There is a brand new development downtown called South Main that will bring 314 new units online this spring with rents starting at ~$1,400 and amenities that include high-end finishes, a year-round pool, hot tub, community BBQ, covered gazebo, private gym, lounge, pet spa, gear workshop, and co-working space. So that's your competition if you want to push rents. Hope that helps!
9 Replies
- Investor · Indianapolis, IN · Member since 2017 · 145 posts · 158 votes6y
Depends on purchase price among many other things.
OOS REI is perilous, be careful.
>I am told this is an up and coming area
I'll bet you were.
- Kingsland, TX · Member since 2018 · 164 posts · 86 votes6y
3% vacancy seems a little low to me
- Denver, CO · Member since 2016 · 52 posts · 42 votes6y
@Leanna Mansour It seems interesting to me. Is it downtown Longmont or on the outskirts? I used to lived in Boulder for 9 years and went to Longmont a few times. It is far enough away from Boulder, Denver, Fort Collins that I think a good amount of the population live and work there or they commute to the areas listed above for work, but not if they don't have to. If I lived in Longmont, I wouldn't drive to Boulder or Denver to go out at night other than special occasions. Crime is relatively low. Especially compared to the Bay Area. I lived in Oakland and it is a lot different. I'm guessing you could get a better CoC return in the midwest but based on your numbers. Assuming it is in great shape, I would consider it while doing more research on the specifics(rent rates, vacancy, location in Longmont, property management company) as someone who could drive to it and self manage.
- Member since 2019 · 17 posts · 13 votes6y
@Leanna Mansour I moved to Longmont from the Bay Area last year, PM me if you'd like to talk
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes6y
Originally posted by @Leanna Mansour:
*This link comes directly from our calculators, based on information input by the member who posted.
Duplex in CO, outside Denver in Longmont. I am told this is an up and coming area with a nice downtown. Management company would charge 10% of monthly rent and realtor told me the rent on each unit will soon be increased from $1200 to $1300/month. Good deal? Thoughts?I like Longmont and have a few properties there (also looking to buy more). Downtown is definitely undergoing a revitalization with the recent addition of several great restaurants, breweries, coffee shops, etc. I don't even hear the nicknames "Methmont" or "Stabmont" being used much anymore ;)
Not to be a stickler but I wouldn't really call it "outside Denver" as it's 45 minutes away and a distinct town from the metro, not a true burb like Arvada, Westminster, Lakewood, Littleton, Centennial, Highlands Ranch, Aurora, Greenwood Village, Commerce City, Northglenn, Englewood, Glendale, Thornton etc.etc.etc.... Denver has endless burbs but Longmont is well outside of those and a separate market. It's in Boulder County, much closer to Boulder than Denver and halfway between Denver and Fort Collins. So while some residents commute down to Denver or up to the Fort, either way it's a crappy commute and wouldn't be anyone's first choice. A much larger percentage of people commute into Boulder or work in town/the surrounding area.
There is a lot of variation in neighborhood quality within Longmont, with some parts being fully gentrified (SE side which is rapidly approaching Boulder prices), others that are still "transitional" and also some pretty rough hoods that may never be nice (W/NW side). Based on my experience in the market, my suspicion is that a duplex at this price point is probably in a less desirable location or else is in bad physical condition. If your goal is to put some money into it, fix it up and hold for a long time period, it could be a good buy as I think most of Longmont will continue to have good appreciation. I would be surprised if it cash flows anywhere near $618/month initially though. My suspicion is it may be more of a break-even at best type scenario for the first several years due to vacancy/tenant issues and especially deferred maintenance/capex expenses and management costs. I'd calculate management at 15-18% as there are likely going to be a lot more fees to the PM than the base 10% such as leas-up fees (typically 1 month rent), lease renewal fees ($100-1/2 months rent), inspections, maintenance calls, eviction fees, etc. I'd also set vacancy to at least 10% and bump up your repairs by a lot. But that's just going on the age and build quality of the duplexes I've seen listed recently in that price range. It could be a smoking deal on a nicer property in a great neighborhood for all I know, just highly unlikely at that price point. If you want to share the nearest cross streets or the address I can tell you more about the specific building and location.
Regarding rent increases: my buildings are in class C+/B- locations and rent for $1100-1200/unit. I can fill units easily and retain tenants at that rate but any higher than that I'd be competing directly with much newer and nicer buildings that have gyms, pools, granite, etc. so you'll have a hard time fetching any more than $1,200/side on an older duplex IMO. There is a brand new development downtown called South Main that will bring 314 new units online this spring with rents starting at ~$1,400 and amenities that include high-end finishes, a year-round pool, hot tub, community BBQ, covered gazebo, private gym, lounge, pet spa, gear workshop, and co-working space. So that's your competition if you want to push rents. Hope that helps!
- 6yCraig CurelopBusiness MemberReal Estate Agent · Post Falls, ID · Member since 2016 · 1k+ posts · 1k+ votes
@Leanna Mansour - Longmont is a great area. It is basically the mecca of the financial independence community with Pete (Mr. Money Mustache, Mr. and Mrs. 1500, and Ms. Montezuma all up there). Longmont has great schools and is a great town to raise a family. With that being said, there are pockets of Longmont (just East of Main Street) that aren't great! I would definitely advice seeking an agent who knows Longmont. Off the top of my head, I know @Mindy Jensen helps a lot of people out there and also lives there.
Other than that, I don't think you should ever "bank" on rent increases. If the property doesn't work as a rental currently, don't buy it.
- SF Bay Area · Member since 2018 · 24 posts · 14 votes6y
Thank you everyone, seriously great responses. I am going to make a couple adjustments to the calc and I will repost.
@Steve K. - Thanks for the clarification on the area location. I do not know the area well as I am not from there. The PM fees are at 10% as my cousin who is a RE agent will be managing it for me if we end up buying it. It is his deal that he has not yet put on the market. I am going to go ahead and adjust the vacancy and add some money in there for repairs. Maybe about 5-10K. I am waiting on information from him on the health of the property so hopefully I should know more on that soon. Nearest cross streets are 21st Ave/Collyer St - right near Main St.
@Craig Curelop - Thank you Craig! It looks like it is just East of Main Street. Also, thanks for the reference.
@James Beckman - Thank you - I am going to make some adjustments and I will repost my findings. Very helpful.
@Scott Hibbert - Oh awesome that you moved from the Bay! I am hoping to leave this area someday too... Its near Main St. Thanks for the advice.
- Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes6y
Originally posted by @Leanna Mansour:
Thank you everyone, seriously great responses. I am going to make a couple adjustments to the calc and I will repost.
@Steve K. - Thanks for the clarification on the area location. I do not know the area well as I am not from there. The PM fees are at 10% as my cousin who is a RE agent will be managing it for me if we end up buying it. It is his deal that he has not yet put on the market. I am going to go ahead and adjust the vacancy and add some money in there for repairs. Maybe about 5-10K. I am waiting on information from him on the health of the property so hopefully I should know more on that soon. Nearest cross streets are 21st Ave/Collyer St - right near Main St.
@Craig Curelop - Thank you Craig! It looks like it is just East of Main Street. Also, thanks for the reference.
@James Beckman - Thank you - I am going to make some adjustments and I will repost my findings. Very helpful.
@Scott Hibbert - Oh awesome that you moved from the Bay! I am hoping to leave this area someday too... Its near Main St. Thanks for the advice.
We have a quad just on the other side of Lanyon Park that we’ve owned for about 5 years that I self-managed for awhile and still do most of the maintenance/repairs on. It’s definitely improving (10-15 years ago it was basically overrun by meth/gangs). The schools are ranked low and crime is getting better but is still a bit of an issue. For example we’ve had issues with car break-ins, vandalism, and evicting bad tenants. But the tenant base is steadily improving. I’d say it’s transitional but wouldn’t bank on increasing rent above $1100-1200 anytime soon. We’ve had more turnover there than similar properties in other parts of town, so anticipate turnover at 10% min. That’s great your cousin is willing to PM for 10%. I still recommend bumping that up some in your analysis (unless that 10% includes everything of course) because usually the base rate doesn’t include any additional services such as finding tenants (usually a months rent or half a months rent additional for that), renewing leases, managing maintenance/ repairs/ turnovers, performing inspections, evictions etc. so the PM fees actually land closer to 15-18% in my experience (our PM charges 8% base for collecting rent, dealing with tenant complaints and handling small emergeny maintenance calls, anything else is priced a la carte and I usually handle any issues over $250 myself which is the only way we make any positive cash flow). Also don’t forget lawn care/snow removal. Appreciation is possible if not likely although less so in this area than the other side of town. The general character, look and feel, etc. will most likely remain low-income for the immediate future just due to the architecture, layout and demographics. $350k is a decent price for a duplex anywhere in Boulder County, it’s a very entry-level price point. Most buildings in that neighborhood were built in the 60’s-70’s and were run down during the 90’s into the early 2000’s so pay close attention to physical condition. Take a look at google maps and you’ll see that end of Main St. has mostly fast food, dollar stores/goodwill stores, liquor stores and check cashing stores, not trendy coffee shops, breweries or restaurants (yet). That should give you a good picture of the location but if you have any additional specific questions feel free to reach out! As I said I really like Longmont long term as it’s improving, but there’s also a reason it’s still affordable compared to the rest of Boulder County. It would be wise to check the neighborhood out in person before making any decisions (and swing up to Rocky Mountain National Park just up the road while you’re here!). Good luck!
- 6yMindy JensenPro MemberBiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
I really don't have anything to add besides what @Steve K. said so well.
21st & Collyer isn't horrible, but it's definitely not in the path of progress - it'll take a bit before it is. Longmont as a whole is improving, but that area has a ways to go.
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