Colorado - Rent by the Room

[Brian Wilson]

I've narrowed down my locations to the Thornton & Westminster area of Colorado for rent by the room (RBTR) SFH's. Does anyone here actively invest in these types of properties with the RBTR strategy in Colorado or my selected markets?

I'm wondering what a reasonable Net CoC is. I've heard cap rates of 4.5%, which gives me something to work with. Anyone willing to share what they have found within the last year to be attainable, that would be fantastic. Or any insights/thoughts on this strategy in CO or the markets in question. Trying to develop my excel sheets for deal analysis as I make my market shifts (coming from the Midwest where 1% still works).

Thanks Everyone!

[Tom Wagner]

When you RBTR you are implicitly taking a more hands-on approach in order to juice cash flow and generate a larger return, so if the 4.5% cap rate you mention is the RBTR cap rate then the "true" cap rate is likely closer to 4%. As conventional interest rates push past 4% (or even 4.5% if you're planning to do a 3.5% FHA loan + 1% MIP), it will become clear when you run the numbers in detail that this strategy is risky.

However, I still think it is worth pursuing overall. I would just encourage you to aim a bit higher with your entry cap, perhaps 4.75%+ longterm and 5.25%+ when RBTR.

Good luck!