First Condo in Denver Co.

[Nicholas Mitch]

Hi all,

I am new to real estate and looking for my first deal. I am in Denver and want to buy some rental real estate. I think that the Denver market is picking up, but there are still deals to be had. As one example, I was looking at this condo online:

http://www.trulia.com/property/3032210101-520-E-14th-Ave-7-Denver-CO-80203

It is offered at $90K, but the price has been dropping, so maybe it could be had for $80K. It is in Capital Hill, a desirable neighborhood. I understand that rents in the area for comparable apartments are in the $1K-$1,200/month range. So if I put down $16K (20%), mortgage payment would be $410/month, or $4900/year. If I received $12K/year in rent, minus 50% for expenses/vacancy/etc, that would leave me positive by $1K/year.

Would you consider this to be a good first deal? Even if I don't buy this particular apartment, I would be interested in your thoughts on this kind of deal for a first time investor.

Many thanks.
Nick

[Jon Holdman]

Have you researched rents in this area? $1200 for a 1/1, even in this neighborhood, seems very optimistic. Rentometer.com puts median for this area at $725. I find rentometer to be on the high end of actual rents.

Be sure you know what the HOA fees are. HOA fees in this area sometimes include heat because there is one central boiler. That can really eat into your profit.

Denver's a tough market, but you can do much better than this. $90K will buy you a house in some areas, and you'll get much closer to or maybe even hit that $1200 a month.

Your payment looks a little on the low side to me. You need to use rate around 5.5% for a 30 year investor loan, unless you have funding source lined up that will give you a lower rate. Don't use owner occupied rates, you won't get those on a investment property.

With your math you're clearing $1000 a year on a $16,000 investment. Notwithstanding the fact I don't think you can come close to your projected rent, that only a 6% cash on cash return.