Denver Rental Deal Analysis - Cash Flow < Appreciation

[Zachary Gilula]

I'm evaluating a rental deal in Denver and I'm struggling to balance my emotions and the numbers. Looking for guidance!

Deal:

1 bed, 2 bath, 698sf

Price: $375,000

Rent: $1,650-$1,750/mo

Property Tax Est: $166/mo

Home Insurance: $131/mo

Management Fees (No HOA): $75/mo

Goal: Long term hold, rental property. This is my first property that I would personally be managing. 2 minute drive away from my house.

I've been looking to get my first rental property and I live in an extremely desirable area in Denver. This townhome is in my neighborhood, on a great commercial/residential strip that I believe will continue to experience a ton of growth well into the future. I know the area very well. 

My initial models show that I would basically be breaking even on the cash flow, so this is a play on appreciation and my belief in the area.

It is also a new build with a 1-year warranty.

I'm struggling to overcome everything I've read about the 1% rent to home value rule of thumb vs. my personal belief in the long-term potential for this property.

I'm trying to balance the risk and long-term potential. What am I not considering? 

Thanks in advance!