Investment Guidance on Denver Colorado

[Sunny Basu]

Would really appreciate some feedback on the below specific scenario from Denver experts.

I will be in Denver for maybe another year max before moving out to another city/state (due to the nature of my job which keeps me moving every 2-3 years). 

I am planning to invest in a house in Denver as looks like the property prices would keep on appreciating and the city itself is growing.I will be the end user for the 1st year or so before renting out.

I am very familiar with the Southeast Aurora area ( The Farm, Siena, Wheatlands, Tallyn's Reach, Beacon Point etc) and would like to invest there.

What is the price point I should look at which would have the maximum possibility of cash flow from rental income ? I see a few homes in this area between 400-450K. my target rental audience would be family with kids due to CCSD and some highly rated schools in this area.

Questions:

***** Am going to give around 5% downpayment , hence would have to pay MI. I am able to see the "asking price" for rental properties in this area in Zillow, padmapper but not sure how much they actually rent for. 

Any idea on rentals of SFH in this area ?

***** What is the price point I should look at which would have the maximum possibility of cash flow from rental income ? 

For example: with 5% down -- a $425,000 home would come to $2500 per month mortgage ( as per zillow mortgage calculator)

***** If a slowdown happens and rental prices drop, how much of a drop (worst case) can be expected. I can absorb $200-300 every month for 2 years ( Rental minus Mortgage(+MI+Taxes) ) 

***** When i move out of state -- i may have to hire a Property Manager -- so I  have to factor in that cost as well.

Within 3 years I plan to put some extra money into the Mortgage and get rid of the PMI, so that should take out the $250 per month extra payment.

[Travis Sperr]

@Sunny Basu This is a tough on because you intend to live in the property before moving (meaning you may need a better neighborhood than a straight investment purchase). It has been my experience that it is difficult to make money on single family properties with a value above about $250-300k. The mortgage amount is so high and the rents only increase marginally after about $2,200 per month. I am not sure what you are seeing for rents in that area? 

Does your zillow calculator include taxes and insurance? Toss a property manager, vacancy and repairs in the mix and it gets tight.

Not saying it cant happen but I would really encourage you to run your numbers and see if the cash flow makes sense. You might find that a smaller purchase price with 3 or 4 beds would yield a better return.

Last thought is if the property doesn't perform well it could make it difficult to finance a purchase where you are moving to.

Good Luck!