Analyzing Deals in Colorado Springs

[Vincent Grossi]

Hello everyone!

I've been orbiting around real estate investing for a few years and I'm finally in a place to use my primary residence home equity to buy my first long-term rental.

I intend to invest in Colorado Springs (where I live) and I'm currently analyzing small multifamily deals.  I am looking to know what you guys are budgeting in your analysis for your variable expenses; maintenance, vacancy, capex, and property management.

I'm currently analyzing at 8% vacancy, 5% capex, 5% maintenance, and 10% property management.  Do these numbers sound good or are they too low?

[James Carlson]

Quote from @Vincent Grossi:

Hello everyone!

I've been orbiting around real estate investing for a few years and I'm finally in a place to use my primary residence home equity to buy my first long-term rental...

I'm sure other Colorado Springs investors will weigh in. These are pretty standard estimates, and you won't feel bad using them, but I personally think the vacancy and property management is a bit conservative.

The 8% vacancy is one month every year. In my opinion, if you've got an entire month open every year, you're not screening properly or are advertising poorly. Rental supply isn't really keeping up with demand in Colorado Springs so if you're advertising with enough lead time, you should be able to plug in someone within a week of another tenant's vacating. Now, you might say what if the previous tenant trashed the place. Hopefully you screened correctly to avoid that. And as a lease term gets closer to ending, get inside to see what might need to be done and start planning any contractors needed. 

Also, I'm seeing more and more quality property management companies in Colorado Springs charge 8% or so for management. 

Again, your estimates will work for you, but be prepared to see flat or negative cash flow. Traditional long term rentals rates just haven't kept pace with home price increases. Now, you can get creative and medium-term rent one or more of the units. Or find one of the rare profits that are eligible for a non-owner occupied short term rental license. (There's a multi unit out there right now that is eligible to run Airbnb rentals in all units.)

And congrats on the big move. I wish you luck!